As the old saying goes, "I had a vision – but then I got arrested."

The decision by Theodore Goddard's (TG) partners not to follow the recommendation of their board and merge with Richards Butler (RB) shows how difficult it is for law firm management, lacking full executive power, to push through its vision.

In this case the vision shared by the two firms – and by Denton Hall until it pulled out last October – was to accelerate dramatically the firms' progress into becoming a top 10 international law firm.

Clients, they argued, were becoming more international, so law firms must expand to meet the clients' needs.

Just before Christmas, partners received three volumes of documentation outlining this vision and what it would take to achieve it.

The partners also received a private document from their executive boards commenting on the package. It provoked much discussion.

At a meeting of TG's 38 equity partners on 9 January, it became clear that the deal was not going to go through easily.

The meeting was reconvened on 11 January, one day before RB was scheduled to hold its own partners' meeting.

TG's partners, Legal Week understands, were ultimately not prepared, having hauled themselves out of the mire after the last recession, to take on the liabilities and exposures the merger would involve, including the cost of an overseas network.

The combined firm would still not give them the corporate and banking strength they needed in London.

The costs and risks involved in buying the vision were too great.

Legal Week understands that, technically, 100% approval was required under TG's partnership deed, although there were ways of pushing a decision through. But, after a straw poll, the executive board chose not to force the issue.

There was no need for the formal vote scheduled for 18 January.

In the corporate world, the failure would have been seen as just one deal that went wrong. But in the legal world it is not so simple.

The immediate priority for management is to ensure that the firm's performance for the 1998-99 financial year does not falter.

In the longer term, one of the principal dangers is the market perception that one or both of the firms have lost their way. TG, in particular, will have to resolve the strategic direction of the firm.

Merger is still an option. TG's managing partner Peter Kavanagh told Legal Week that the firm would still be open to a merger, if it gives the necessary added value. He added that he had already received approaches from City firms, US firms and accountants.

But can he and TG's board, and indeed any prospective merger partner, approach fresh merger negotiations with any confidence that a proposal would be backed?

The alternative to merger is to stay, like Macfarlanes, as a profitable, corporate-dominated practice, boosted by lateral hires.

TG's board, however, will be acutely aware of the threat that fat chequebooks may be waved at their best lawyers – particularly at a time when the first £1m partnership offer is being touted.

Kavanagh is confident that
the firm can withstand that threat, thanks to a combination of improving financial performance, market strength and the culture
of the firm.

Meanwhile, at Beaufort House, RB's partners are entitled to feel bemused and not a little peeved.
After all, it was TG that approached them in late 1996. And when Dentons pulled out, TG – in the face of offers from both RB and Dentons – decided to carry on negotiating with RB.

Chris Schulten, RB's chief executive, told Legal Week that the firm would take a sensible period to assess the situation, but he added that he imagined the original commercial analysis would remain valid.

With its international network of offices, the firm would obviously benefit from the greater investment resources that having a much larger London office would provide.

A merger in the medium term is therefore still on the cards.
The negotiations have at least clarified the relationship between RB's London and Hong Kong offices, the two main engines of the firm.

When the tripartite talks with Dentons were revealed, many City lawyers sniffed. A desperate measure, they said.

However, all three firms were quick to say that the merger, if it went ahead, was not a defensive tactic – pointing out, not unnaturally, that all three firms were coming off record years in turnover and profitability.

It was instead a positive approach to the way the market is heading.
But vision is one thing. Making it a reality is another.