The barrel of gunpowder lodged firmly under the German legal establishment has finally exploded.
It has been simmering ever since Deringer Tessin Herrmann & Sedemund announced its engagement to Freshfields in February 1998. But, as dates go, September 1999 will be remembered as the month that UK firms finally conquered Germany.
Last weekend, partners at two of the country's leading firms – Puender Volhard Weber & Axster and Deringer – voted to merge with Clifford Chance (CC) and Freshfields respectively.
And, as Legal Week revealed last week, at the end of the month partners at top 10 firm Boesebeck Droste will vote on whether to merge with Lovell White Durrant.
These individual votes are not isolated incidents. They are happening against a backdrop of on-going partner discussions at all the major German firms.
The question on everyone's lips is: 'Do we want to remain lead counsel on big-ticket, cross-border transactions or are we happy just being local counsel and known in the market as a domestic firm?'
The answer for most of Germany's larger firms is that they want to retain the lead counsel role. And to do this they must take on common law expertise.
One of the top tier, Hengeler Mueller Weitzel Wirtz, has secured its future through a 'best friends' policy with Slaughter and May and Wall Street's Davis Polk & Wardwell.
For the rest, mergers with English or US firms is the order of the day.
But the decision to embark on an Anglo-Saxon merger strategy has not been made lightly.
For most of the 1990s the leading German firms invested significant amounts of time and money into building networks of international offices and loose associations of their own in the hope that they could match the internationalisation of the leading UK and US firms.
But it was never to be. As the '90s progressed it became more and more evident that these offices made little or no money and that German law was never going to be able to compete with the dominance of New York and English law in international transactions.
It was Deringer's engagement with Freshfields that created the first spark. This was swiftly followed in July 1998 when Oppenhoff & Raedler succumbed to Linklaters charms and voted to join the five-firm Linklaters & Alliance.
For several months German commentators argued that these moves would be the last for some time as the market took stock of the competitive changes. But the reality was that all the leading firms had been badly shaken by the scale of Linklaters' and Freshfields' operations in their back yard.
The internal pressure on management to decide an appropriate response mounted quickly.
In the coming months, virtually every leading German firm entertained the teams of negotiators dispatched by UK and US firms to discuss a merger. The phrase "everyone is talking to everyone" soon became the stock response to all journalists' merger enquiries.
By June this year, at least three leading firms – Bruckhaus Westrick Heller Loeber, Boesebeck Droste and Puenders – had held merger talks with a number of UK and US firms.
Today Puenders, Deringer and Oppenhoff & Raedler have agreed to merge and if Lovells gets the thumbs up from Boesebecks at the end of September, UK-based firms will dominate the table for the first time (see ranking sidebar, left).
Unfortunately for the management of these UK firms the vote is not the end of the story. The process of assimilating German partnerships into the dominant Anglo-Saxon model will not be easy. Most expect a compromise with a hybrid Anglo-Saxon firm and a hybrid German lawyer emerging from the process. But no one appears to know how long this transformation will take.
The stumbling blocks are many and severe. Conflicting culture is one of the main factors – its influence can be seen in the decisions of firms such as Hengeler Mueller and Bruckhaus to put their unique culture first and remain independent – at least for the time being.
The strength of passion behind the culture-based decision often goes unreported. For instance, one source at a top five UK firm told Legal Week that a senior Bruckhaus partner made his opinion of merging with an Anglo-Saxon firm very clear. "I haven't spent 25 years in this place just to be taken over by ******* Clifford Chance," he is reported to have said.
So far, Bruckhaus has rejected merger proposals from CC and US firm Shearman & Sterling.
Boesebecks is another to have walked away from talks with CC. Sources at the firm say that they feared the dominance of the Anglo-Saxon culture at the new firm and they view a merger with Lovells to be on more equal terms.
But Legal Week understands there is another group within Boesebecks that is not at all keen on a merger with a UK firm.
And some have even voiced their dissatisfaction by walking out. Head of property Claudia Zeibel and capital markets partner Manuel Lorenz have both left to join Baker & McKenzie's respected Frankfurt office.
CC's marriage with Puenders will also see some fall-out of German partners. Legal Week understands that already half-a-dozen equity partners at Puenders are leaving in protest. Sources say that they did not want to practice in an "industrial firm".
But cultural clashes are not the real bugbear of Anglo-German integration. Legal Week's analysis suggests that the fundamental stumbling block is the financial health of these German firms.
The concept of financial heath covers everything from the pure assets versus liabilities of the firms' balance sheet to long-standing structural weaknesses.
To start with Oppenhoff & Raedler, Puenders, Boesebecks and others such as CMS member Hasche Sigle Eschenlohr Peltzer, and national firm Wessing & Berenberg Gossler are all the product of recent mergers.
The relative success of integrating these mergers has been mixed – with the result that these firms are still at the stage where partners are getting to know one another and IT systems are still being harmonised.
Factions that existed at the time of these mergers have not gone away and in general have been made worse by the failure of most firms to break down inter-office barriers.
With these factions hindering the integration of the domestic German practice, integration along international lines is obviously even more hazardous.
The domestic mergers have also meant firms could put off the difficult issue of how to manage those senior partners that can remain in the equity into their late 70s.
In general this group is the most unproductive section of the partnership and German sources say that they are also the most reluctant to agree to reforms.
They have also largely succeeded in frustrating the attempts of younger partners in their late 30s and early 40s to make individual partner earnings more transparent.
This brings in another factor. German firms have grown so rapidly in the last few decades that the priority has been to elect new partners. In some cases this has been at the expense of quality.
Sources report that partnership profits at firms such as Oppenhoff & Raedler and Puenders are suffering because they are not exerting a strong enough grip on the performance of their partners.
Freshfields may escape this problem with Deringer, as the German firm's partnership is small and, unlike other German firms, it has a partner to assistant ratio similar to UK firms.
Its profits reflect this working practice. Sources indicate that partners on average took home dm1.3m (£420,000) last year and plan to hit dm1.5m (£485,000) for this financial year.
In terms of the larger German firms, Hengeler Mueller is perhaps the only other firm to match Deringer's profitability.
The situation is complicated further by different partnership structures. For instance, Oppenhoff & Raedler places partners on a trial period before letting them into the equity.
Puenders takes this one stage further. It employs as many as half of its partners as salaried partners to help manage its rapid growth and to protect the profits of the senior equity partners.
But this in itself has not solved the firm's profitability problems and obviously adds the problem of managing the salaried partners' equity aspirations.
Linklaters & Alliance realised early that it would need to address the financial health of Oppenhoff & Raedler. The central management team of CEO Terence Kyle and secretary general Marc Bartel, alongside Oppenhoff & Raedler's senior partner and joint chair of the alliance, Michael Oppenhoff, immediately introduced reforms at the German firm.
The firm now has a new management structure and firm-wide practice groups, both of which have much greater responsibility than before. A new managing partner, Markus Hartung, has been installed in Berlin to keep an eye on the day-to-day running of the firm and a finance director has been recruited to analyse the balance sheets and recommend improvements.
Michael Oppenhoff says he is satisfied with the achievements so far. "Obviously, when you bring so many firms together, you have some hurdles to overcome," he says.
Sources close to the firm report that Linklaters' on-going analysis of individual partner profitability has some Oppenhoff & Raedler partners running scared. Those with domestic practices are understood to fear being sidelined as the English firm promotes the rainmakers in the international practice groups.
But Michael Oppenhoff insists no separation of partners is taking place at his firm.
He says: "Obviously, there are partners that have more international practices and others with more regional. But we have to satisfy the requirements of both groups."
Despite these reforms there is no way that Linklaters and Oppenhoff & Raedler could merge into a single lockstep in the near future as the two firms still have vastly differing profitability.
CC will face a similar uphill struggle with Puenders. The tough January 1 merger deadline has many people asking how the two firms will integrate financially so quickly. Puenders' two-tier partnership structure may help, but it is still a challenge and any half-baked compromise will return to haunt CC.
The integration of the German partnerships joining up with CC, Linklaters, Freshfields and Lovells during the next year or so promises to be a painful progress. But the struggle of these firms to integrate will run alongside the further consolidation of the European legal market as those German firms waiting in the wings strike deals.
The juiciest is the country's largest firm Bruckhaus. As things stand there is an on-going debate within the firm as to the merits of merging – with differing opinions voiced between the more international and more domestic-oriented practices and between the senior and junior partners.
Burkhard Bastuck, a senior partner at the firm, says it has identified a need to offer common law expertise in particular transactions, but has yet to decide how best to go about acquiring such expertise.
Bastuck admits that the firm as a whole has noticed a drop off in referrals from traditional sources in the City such as Freshfields, CC and Linklaters as they extend their own German law capability. But he insists that the firm is still some way from a merger.
Alongside Bruckhaus as potential merger partners in the top ranks are firms such as Gleiss Lutz, Gaedertz, Wessing, Beiten Burkhardt Mittl & Wegener, Noerr Stiefenhofer & Lutz and Federsen Laule Scherzberg Ohle Hansen Ewerwahn Finkelnburg & Clemm.
Of these firms, Federsen already appears to operate closely with Simmons & Simmons, while unattached Wessing and Beiten Burkhardt are the most advanced in their search for the right common law companion (see sidebar, below).
And so the scene is set for the next year. The management of UK and US firms will continue to clog up the business class seats of Lufthansa, BA and Virgin flights to the major German cities.
The knock-on effect of these negotiations will be felt across Europe. Not only will previously stable families be pushed to breaking point as German sausage replaces the grapefruit at the breakfast table, but the very nature of how professional legal services are delivered in Europe will change forever.
As Deringer's Ludwig Leyendecker argues: "We believe we will have a magic circle in Europe very shortly. And what German firms need to consider is that you need to cluster around one of the UK's magic circle firms to qualify."