When the music's over – SJ Berwin goes home alone
"The talks [between SJ Berwin and Proskauer Rose] remain at a relatively early stage but with the UK firm's strategy becoming increasingly public, neither party is expected to needlessly draw the process out." That line from a blog in May certainly isn't going to go down as one of my more astute predictions because, of course, the pair did go on to draw the process out, before today (12 November) announcing the end of the protracted merger discussions.
November 12, 2010 at 12:25 PM
4 minute read
"The talks [between SJ Berwin and Proskauer Rose] remain at a relatively early stage but with the UK firm's strategy becoming increasingly public, neither party is expected to needlessly draw the process out."
That line from a blog in May certainly isn't going to go down as one of my more astute predictions because, of course, the pair did go on to draw the process out, before today (12 November) announcing the end of the protracted merger discussions.
How else could it have ended? While the deal had initially seemed to be a broadly workable combination, it looked increasingly unlikely that it would get over the line as the months wore on. Indeed, it was looking increasingly unlikely that the deal should get over the line.
There is a rarely contradicted rule of thumb in mergers – if a deal's worth doing, it gets done reasonably promptly. Strategic combinations need a lot of will, determination and common ground to get agreed, let alone to work in the implementation stage. Once these talks went into the summer dead-zone without a clear signal as to the likely outcome, the odds of a union started dropping.
Clearly, there was the issue of the substantial difference in profitability between the two firms – indeed, the one surprising element about the talks was that SJ Berwin didn't aim to get a year or two of recovery under its belt before pursuing the transatlantic merger option.
Though there was very limited information given to the partnership – too little, with the internal black-out serving little practical purpose once the talks had gone public, beyond unsettling the firm – it seems clear that Proskauer had reservations about the shape of the City firm, in particular the importance of its property team in a combined practice.
With last month's narrow election of Rob Day as managing partner turning into a referendum on the merger – and one that failed to deliver a clear mandate – partners were unsurprisingly calling for a resolution to a process that has been public for nine months now.
Day remains convinced that the deal could have ultimately worked on a strategic level, but argues that the momentum – having been further sapped by the City firm's leadership election – was no longer sufficient to realistically keep slogging on.
As the dust settles, it is undeniable that some damage has been inflicted on SJ Berwin, not least thanks to the departure of a property team led by Jon Vivian to Irwin Mitchell in October. In truth, the firm could have played this one better – the talks were ominously starting to resemble Ashurst's energy-sapping merger bid with Fried Frank back in the day.
Given that context, it's no wonder that SJ Berwin immediately followed up the news of the talks' termination by announcing a very respectable set of first-half results, which will be an immense relief given the damage the recession inflicted on the firm's property and private equity-heavy practice. The firm deserves some credit for delivering under tough circumstances in tougher markets.
But some lessons should now be learned. Partners have for years called on SJ Berwin's management to communicate more. Sure, partners always say that, but in SJ Berwin's case they had a point and they should now be heeded.
Decision-making that goes light on communication and consultation can be justified it if delivers a coherent vision and nimble leadership. Too often, SJ Berwin appears to have achieved the worst of both worlds on this front.
Management remains supportive of the ultimate goal of a US deal, but any such move looks off the agenda in the short-to-medium term. In principle, why not? But in execution, SJ Berwin will have to do some things differently next time unless it wants to go through the whole bruising rigmarole again.
- For more, see: SJ Berwin and Proskauer Rose call off merger talks
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