We are, it seems, in law firm merger-frenzy territory. Every law firm in town seems plumb-desperate to bag a US suitor before all the good ones disappear!
After a quarter of a century in the legal market, it’s difficult to get that excited about another law firm combination. It’s like trying to pretend to be excited about watching the Cincinnati Sinkholes whupping seven kinds of hell out of the Albuquerque Albatrosses on a Sunday afternoon.
They don’t excite because there’s nothing exciting about them. If the terrifying slide into oblivion of the law firm formerly known as SJ Berwin (needs a squiggle, I think?) wasn’t enough to shock you into the reality that most mergers don’t work, just look in the corporate world. Most mergers simply don’t work. Ask the accountants? They, variously, find that 70%-80% of corporate mergers “fail to deliver shareholder value”. Why should law firms be any different?
Leaving aside awkward cultural mash-ups, many mergers end up being damp squibs because there’s no real business logic to them, and Transatlantic mergers have particular quirks.
As most of the already-merged US-UK firms are finding out, developing real connections across an dispersed international network against a backdrop of an ‘eat-what-you-kill’ (AKA client originations) remuneration system is decidedly more challenging, complex and expensive than it may at first seem.
The nifty get-around for this is, of course, the verein structure adopted by international firms to facilitate merger, which allows, well, anything in point of fact, but – in reality – separate profit pools in each office or jurisdiction.
Leaving aside the delicious existential question of whether it’s a merger or not – some US judges would beg to differ – it doesn’t take a rocket-scientist to work out that the verein arrangement is just as likely to work against co-operation as for it, unless you compel otherwise.
‘Scale’ is often given as a reason for merger, but as the dragon Smaug found out in J R R Tolkein’s ‘The Hobbit’, this is not, in and of itself, enough.
The verein is, to my mind, rather like having three espressos to get through an exam. Oh god, yes, you’ll be through a three-hour paper in an hour so you can go drink in the bar, but there’s an even chance your answers will be genius or drivel.
A number do seem to have worked much better than others, and in my experience this has been where the firm has been very proactive about encouraging partners in London and the US to connect on an individual basis, and providing proper opportunities for partners to mix. It’s an old adage in the law that people buy people, and in order to allow your partners to extend their trust-envelope to people they have been shoehorned into business with, you need to get them to meet those people and give them plenty of excuses to keep in touch.
On top of that, it’s a great idea to mix in some proper business support, identifying shared clients, using some proper market analysis and sharing the information as widely as possibly throughout the firm so that cross-selling becomes at least easy if not natural (the two are not the same).
Otherwise, I hear a lot of unhappiness on the old grapevine from some other shops, a lot of partners wondering why they ever did it. Most just moan, leave, join another one, moan, leave, rinse and repeat.
If I was a UK lawyer with a practice that thrived on an international platform, I’d be delirious at the opportunities offered by a US merger, but the sad truth is that much of the time they don’t, and there isn’t a single US-UK merger I can think of in which the UK style of doing business has remained dominant. Instead, the UK arm slides steadily towards US work-patterns which, frankly, suits some people very well and other people just hate.
The rest just stay and get ground down: the career peaks at equity partner and then slides to income partner to counsel or special counsel or consultant, as their personal revenue generation fails to keep pace with the new targets set by the need to be “internationally-competitive” (ie “we’re just not earning ENOUGH!!!”)
Which rather begs the question of what law firm partnerships are all about, and who’s running the show, and who has decided that a US merger is essential to functioning and who has asked any real questions about it.
Yes, the US is the largest market in the world, and will continue to be the largest Anglo-Saxon one for perpetuity. If you are going to be really international, you need to have it covered, because all your big clients will want that capability.
But does everyone need it? Are your clients really going to leave you if you don’t become a GI bride? I honestly don’t know the answer to that question. The big firms seem to have made their choice, and there is a certain inevitability of a US tie-up thanks to the overwhelming resources available to US firms, but I’m unsure whether this will also mean widespread business failure outside the top tiers.
What I do know is that there is no substitute for actually doing the work before you take the plunge. Failure to ask yourself the hard questions and to get everyone who matters on board before you take the plunge will – market practice and evidence suggests – result in lots of anguish, multiple career-deaths and significant amounts of mess if you get it wrong or even just less-than-half-right, as statistics suggest you will.
Culture is paramount, but gut-feel – masquerading as cultural antennae – is not enough. Think before you leap.