By Reynolds Holding
NEW YORK, Nov 15 (Reuters Breakingviews) - Law firms aren't
immune from the merger risks their clients face. There may be
perfectly sensible reasons for Britain's Norton Rose and
U.S.-based Fulbright & Jaworski to join forces and for SNR
Denton, headquartered in London and Washington, to seek a
three-way tie up with French and Canadian peers. Cross-border
deals can help lawyers serve companies increasingly going
global. But culture, pay and client conflicts are tough to
manage. The danger is sacrificing quality for scale.
Fulbright says it wanted a bigger international presence,
while Norton, with almost 3,000 lawyers worldwide, coveted the
lucrative U.S. market. SNR Denton, meanwhile, sought to extend
an already formidable energy practice into natural-resource rich
Canada and elsewhere. In general, global expansion can help
firms weather economic downturns, lure talented attorneys and
keep multinational clients happy.
Acquisitions are notorious value destroyers and legal
tie-ups can be costly, too. With more offices come increased
chances for conflicts of interest between clients. And according
to a 2012 survey of general counsels by legal consultant Edge
International, many companies that welcome one-stop shopping at
a global firm complain of miscommunications and inconsistent
billing rates among lawyers in disparate locations.
What's more, attorneys accustomed to being compensated based
on the amount of business they bring in may rebel when forced
into a firm that pays partners by seniority. Cultural
differences of style and even quality can also make lawyers, a
notoriously independent lot, more difficult to manage. Prominent
firms like Hogan Lovells and K&L Gates, both the product of
international mergers several years ago, are still working
through such problems, and have lost partners in the process.
It's not surprising, then, that some of the most successful
law firms resist expansion. New York-based Paul, Weiss, Rifkind,
Wharton & Garrison, for instance, has only 50 of 620 lawyers
working outside the United States. It ranked number six last
year among big U.S. firms in profits per partner, according to
the American Lawyer magazine. And Wachtell, Lipton, Rosen & Katz
has just one office, in New York, and ranked number one. A
successful firm that specializes in merger advice but which
eschews a tie-up for itself may be worth contemplating.
CONTEXT NEWS
- Fulbright & Jaworski said on Nov. 14 it would merge with
Britain's Norton Rose to create a 3,800-attorney firm with 55
offices around the world. The deal is scheduled to close by June
2013.
- London and Washington, D.C.-based SNR Denton, France's
Salans and Canada's Fraser Milner Casgrain said on Nov. 8 they
were discussing a three-way merger to create a 2,500-lawyer firm
with 79 offices in 53 countries. A partnership vote is scheduled
for Nov. 30.
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
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