Senior lawyers are expecting a slew of transatlantic tie-ups following Hogan Lovells and SNR Denton but remain unconvinced of the benefits. Friederike Heine reports

Senior lawyers are expecting more mergers between US and UK law firms in the wake of the creation of Hogan Lovells and SNR Denton, but many remain sceptical of the tangible benefits of such tie-ups, according to Legal Week's latest Big Question survey.

Ninety-two percent of respondents to the survey felt that the two recent high-profile deals are likely to lead to an upturn in merger activity between large US and UK practices, including 13% who said such tie-ups are 'much more likely'.

Hogan Lovells senior partner John Young commented: "I am certain that a lot of firms will follow suit in the wake of the merger between Hogan & Hartson and Lovells. However, it is not the willingness to merge but the process of finding a compatible partner that is difficult."

However, despite the expectation of more transatlantic mergers from the majority of respondents, many partners remain unconvinced about the actual benefits of such deals, especially with regards to Denton Wilde Sapte's decision last month to merge with US firm Sonnenschein Nath & Rosenthal, a tie-up set to create a new firm comprising 1,250 lawyers with offices on four continents.

Partners were divided when asked whether the merger would be good for both firms. A minority stated 'very much so' (3%), while only one in five (21%) replied 'to a certain extent'. On the other hand, 15% stated that the merger will make no difference at all to the success of both firms, while a further 9% said it would be a damaging move that could actually hurt both firms.

More than half of respondents (58%) were unsure of the potential benefits, stating that the success of the deal would depend on other factors.

Baker & McKenzie London managing partner Gary Senior commented: "It is important that firms are clear about what they want to achieve. Either you are a domestic player, or a truly international firm. Any half-hearted attempts are bound to fail."

Nabarro corporate partner Iain Newman argued: "US/UK mergers can be a benefit to the firms involved and their clients but there needs to be a common culture and an enlarged practice which has some sense in terms of practice area and sector coverage and clients served. Without the common culture and cohesive purpose, they can struggle until the dominant partner effectively imposes its culture and purpose."

Thirty-six percent of respondents said that the merger will make SNR Denton a significantly stronger proposition for large clients than the legacy firms in isolation, while 37% said it would have a minor effect. However, 28% said it would have no benefit for clients of either Dentons or Sonnenschein.

The decision by both Hogan Lovells and SNR Denton to maintain separate profit centres rather than push for full financial integration met with scepticism from many partners about the true validity of the tie-ups, with 84% of respondents saying that they do not regard the two-profit centre model as a true merger.

Shearman & Sterling London office head Anthony Ward said: "Maintaining separate profit pools is to my mind dodging one of the major issues of any merger and deferring this very difficult process can be damaging. The usual way of dealing with differing levels of profitability is to have a step system which rewards partners who are more profitable, but implementing such a system can create resentment within the firm."

Despite the uncertainty about the specific benefits of transatlantic tie-ups, the majority of respondents did consider cross-border consolidation between US and the UK firms a necessary development, with 53% saying that it is necessary 'to a considerable extent' and 8% saying that it is 'very' necessary, while only 4% said that it is not.

Responding partners were divided over the question of whether such cross-border consolidation would benefit clients. 57% said that it would, including 12% that stated 'very much so'. On the other hand, 39% of respondents felt that it would offer little benefit to clients, with 4% contending that clients would not benefit at all.

Young added: "There is an increasing demand from clients for firms that provide a truly global service, and this can only be achieved through a US/UK merger."

Partners on US/UK mergers

- 92% believe that mergers between large US and UK practices are more likely in the wake of the creation of Hogan Lovells and SNR Dentons
- 57% believe clients will benefit from cross-border consolidation
- Only 16% view US/UK tie-ups in which both firms maintain separate profit centres as true mergers
- Only 3% believe the merger between Dentons and Sonnenschein is a 'great deal'

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