"More law firm mergers have been unsuccessful than successful. On that basis, the odds are against them," says one UK top 50 senior partner of news that CMS UK, Nabarro and Olswang have agreed to merge.

Despite the impressive headline figures – £1bn-plus global revenues, around £450m in UK revenues – the sober analysis is typical of much of the market response to yesterday's confirmation of the three-way merger.

However, despite the undeniable challenges, there is optimism among some senior figures in the market.

Macfarlanes senior partner Charles Martin comments: "It is not uncommon to look at mergers and think: 'will 2+2=4, never mind 5?' This one should be good for all three firms and their clients. Nabarro has renowned real estate capability, Olswang has leading technology credentials, and injecting those into CMS's well-run platform should work all round. So, 3+3=7, possibly."

Gowling WLG's head of international projects, Quentin Poole, agrees, saying: "I entirely see why Nabarro and Olswang want to do this. Arguably, both firms needed to do something to gain market share, so you can see that merging with a much larger firm is a good plan."

Motivations to merge

For Olswang, the merger has been a long time coming. Former CEO David Stewart first approached CMS Cameron McKenna about a possible tie-up in 2014 and the firm has since been linked to a string of UK firms, including Bird & Bird, Simmons & Simmons and Osborne Clarke.

The current management team will be hoping that the merger will bring to an end a period of severe instability that has included the loss of a 50-lawyer team in Berlin to Greenberg Traurig last summer, a steady trickle of partner exits and an 11% contraction in revenue during the 2015-16 financial year.

Current and former partners welcome the deal, with one Olswang partner saying the merger will provide a "great new platform" that will provide the "ability to do bigger transactions" and open the door to more bank panels.

An ex-partner adds: "It's good for Olswang – they needed to do a merger. They were losing partners left, right and centre and it is something they have been trying to do for a while."

For Nabarro, the merger offers an opportunity to diversify its business, which has long been viewed as overly reliant on real estate – a market that, post-Brexit, looks challenging.

And for CMS UK, which has made it clear that the US is a priority for the firm, the tie-up adds scale within the wider CMS network and may make the firm a more appealing prospect for any potential Stateside suitors. As Fieldfisher managing partner Michael Chissick says: "It may make them more attractive to a US merger – there certainly will be no shortage of American firms interested in a firm with £1bn in revenues."

Sectors, synergies and scale

The leaders of the three firms say the new entity will have a focus on six sectors: energy; financial services; infrastructure and projects; life sciences and healthcare; real estate; and technology, media and telecoms (TMT).

Watson Farley & Williams co-managing partner Chris Lowe says the merger is "a good opportunity for each firm" and adds: "I can see the synergies, so it makes sense to me."

One CMS partner comments: "The combination of the TMT and fintech expertise here and at Olswang is interesting and very beneficial, as we didn't have the bench strength in that area. Nabarro's real estate finance expertise, debt funds practice and enhanced corporate client base will be extremely helpful for us."

Others though are more sceptical about the degree to which the three firms are compatible and argue that the tie-up is more about bulking up than anything else.

One UK law firm leader says: "It's about scale, not synergy. If it's about adding strength and depth in certain key areas or strategy alignment, then I am not sure what hangs it together."

Others see it as a move to boost the balance of power between CMS UK's partnership and the network's other European arms, including CMS Bureau Francis Lefebvre in France and CMS Hasche Sigle in Germany, with one senior law firm leader saying there is a "fair degree of tension between CMS UK and Germany".

Winners and losers

As is often the case with major mergers, there is likely to be some fallout, especially given the amount of office duplication across the three firms. Partners in Olswang's continental offices look particularly exposed, with partners in its Paris and Munich offices understood to be examining alternative options to joining the merged firm.

One leader at a rival law firm says: "I am sure there will be casualties. When the headcount is looked at there will be people leaving – lawyers as well as business services staff."

Another adds: "There is clearly a lot of duplication, most obviously in back office but also with practice heads. Inevitably there will be disaffected people, some of whom will move on."

Both Olswang and Nabarro partners have agreed to a lock-in as part of the merger deal, but there are likely to be exits before the merger goes live next May.

"Various bits of Olswang may decide to go their own way… I suspect we might see more of that kind of thing," one ex-partner says.

The challenges of making a success of such an ambitious merger are clear, with partners citing key difficulties including the integration of cultures, systems and offices.

Chissick says: "It is going to be difficult – they are three mid-tier firms with three cultures, three brands, three methods of remuneration and three IT systems. Culture can be the making or breaking of a merger – and how do you create a culture for that size of firm?"

Macfarlanes' Martin adds: "I am sure there will be challenges in executing it – sorting out systems, sorting out real estate, sorting out people and clients will be tricky and time-consuming. Doing two at one time is tough – doing three will be quite an organisational feat."