Doubts remain about verein-backed mergers but partners believe such unions can deliver a strong service for bluechip clients; with Hogan Lovells and Bakers viewed as the most effective platforms

City partners remain sceptical about tie-ups between US and UK law firms that fall short of full financial integration, with around 75% questioning whether such deals can be thought of as true mergers.

Thirty percent of respondents to Legal Week's latest Big Question survey expressed doubts about the validity of UK-US mergers which operate under multiple profit centres, with a further 10% dismissing the idea that these are true mergers outright. An additional 36% of respondents said they had 'mixed feelings' about such unions.

neville-eisenbergBerwin Leighton Paisner managing partner Neville Eisenberg (pictured) said: "It all depends on the specific circumstances in a firm. You can find examples of firms that have integrated well financially but not in other areas, as finance is just one metric among many."

When asked to identify the two most integrated firms operating under separate profit centres, nearly half of all respondents selected Baker & McKenzie, with 35% opting for Hogan Lovells and 29% picking DLA Piper. Norton Rose Group and CMS were identified by 15% and 11% of respondents respectively, with Eversheds International, SNR Denton and Squire Sanders Hammonds all securing the vote of less than 10% of respondents.

When asked to what extent multiple profit centres negatively impact on a firm's strategic direction and its ability to incentivise and align its partners, 92% of respondents saw it as having some negative impact. Almost one in four said such structures affected it 'a lot', with a further 34% saying they affected it 'a fair amount'. Only 8% of respondents said split financial structures had no effect.

However, respondents were more positive about the service provided to clients by such firms. With respect to the extent to which multiple profit centres affect client confidence and service levels, 27% thought they had no effect, while 43% thought such structures had a minor negative impact, with 30% saying that a lack of financial integration affects such factors either 'a fair amount' or 'a lot'.

Freshfields Bruckhaus Deringer managing partner Ted Burke (pictured, main) said: "Financial integration in an international merger is key and it was one of the things that we were very clear about in our own mergers in 2000. If you do not share success and risk, partners are not as incentivised or motivated to collaborate and therefore the firm will not be able to operate fully globally."

However, Hogan Lovells co-CEO David Harris (pictured) argued: "A partner at Hogan Lovells is appointed, appraised and remunerated on a consistent basis worldwide. Our david-harris-lovellsstructure actually ensures that partners' interests are fully aligned, regardless of where they work. Structures don't factor. We are puzzled by all this emphasis on structure. Partners don't focus on it. Clients don't care about it."

SNR Denton chief executive Elliott Portnoy added: "Having added over 60 new partners and counsel, established a presence in multiple new geographies, and generated substantial new client relationships and revenue in the nine months since our launch, the SNR Denton legal structure clearly poses no impediment to client service or our firm's growth and success."

Many partners also expressed a belief that multiple profit centre unions will not be good for legacy UK practices, with 43% responding that they are either 'not at all' good or that 'they will be damaging'.

Hogan Lovells was identified as having the strongest proposition for major international clients compared with other merged firms with Swiss verein structures, taking 65% of the vote, followed by Bakers (45%). Both DLA Piper and Norton Rose were selected by 27% of respondents. No respondents selected Squire Sanders Hammonds, while SNR Denton, Eversheds International and CMS were all identified by less than 5% of respondents.

Travers Smith senior partner Chris Carroll said: "The fact is without financial integration it is not a true merger, it is just the first step. However, I'm agnostic as to whether this affects a union further, as I think the most important thing is the value of the brand that comes with a merger."

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Partners on verein-backed mergers

  • 69% believe verein-backed mergers have either no or only minimal negative impact on client service
  • 65% of partners see Hogan Lovells as the strongest client proposition among verein-backed mergers
  • 58% of partners believe multiple profit centre mergers have a major negative impact on the strategic direction of a law firm
  • 24% think verein-backed mergers will be strongly positive for legacy UK practices