Formed by a rapid succession of cross-border mergers, Alex Newman asks whether Dentons will defy critics to become more than the sum of its parts

If this year's three-way mega-deal between SNR Denton, Salans and Canada's Fraser Milner Casgrain (FMC) still generates a large dose of scepticism among rivals, it does not seem to have knocked the confidence of the merged firm's chairman.

Indeed, in an interview with Legal Week, Joe Andrew, an approachable American corporate lawyer, says that far from being the 'merger of weakness' that critics portray, his new 'polycentric' firm should be a blueprint for the world's leading legal practices.

"We think we are uniquely, if temporarily, positioned as the only firm with this polycentric profile," says Andrew, arguing that Dentons' lack of a single dominant headquarters – along with its 2,400 lawyers spread across 80 offices and more than 50 countries – is not in fact a structural flaw, but rather one of its biggest assets.

"Of course, even firms such as Skadden Arps Slate Meagher & Flom and Clifford Chance will catch up with our thinking around culture," he adds. "These are superb firms, but imagine just how much better they would be if they were not still perceived as either US or UK law firms."

One can only admire such a positive view of things. But it still needs to be measured against the very real set of challenges facing Andrew and Dentons chief executive Elliott Portnoy, a Washington neighbour, since the merger went live six months ago.

Illustrating the market doubts around the deal, a Legal Week poll taken shortly after its announcement found only 28% of law firm partners thought it was a good idea. By contrast, six out of 10 viewed Norton Rose's merger with the US' Fulbright & Jaworski – which took place at about the same time – as a positive deal for the parties involved.

"For some reason, people felt the need to make arbitrary comparisons, which I think was unfair on Dentons," says one head at a rival firm, though he adds: "As to how their merger is perceived and how successful it is, I'm not sure."

So for many of the firm's contemporaries, the Dentons merger clearly lacked something, regardless of its much-trumpeted global reach. The prime reason for this is clear: the struggles – both real and perceived – that some of the new entity's member firms have faced in recent years, not least the seriously underperforming legacy UK partnership.

Another source of doubt is the apparent lack of clarity over the firm's strategy beyond just increasing headcount, offices and combined revenues. With at least three other firms boasting a similar geographical reach and profile of work – yet with greater lawyer numbers, revenues and reported profits – selling Dentons to the market is a tricky branding exercise.

The larger question is whether the combined firm represents something more than its parts. But while big may not always be beautiful, at least the merged entity is not facing the same problem as legacy Denton Wilde Sapte (DWS) three years ago: being stuck in the UK mid-market with no place to go.

As Stephen Parish, chairman of Norton Rose Fulbright, puts it: "Inaction would have been a dangerous gamble for them."

The London question

In May 2010, London-headquartered DWS confirmed it was to merge with Chicago's Sonnenschein Nath & Rosenthal. For many DWS partners, it was a welcome piece of good news after a sharp slide in the firm's profits per equity partner at the end of the last decade.

The deal, billed as a merger of equals, saw the firms split into two profit centres, partnerships and financial years, but with the top leadership positions taken in the US by Portnoy and Andrew.

According to a former partner, the American leadership of the newly-formed SNR Denton was largely welcomed back in London: "In the UK, I think people were bloody glad to have these saviours come along, quite frankly. After the tie-up, they were very, very visible across the entire network and in performances to stadia of partners."

The two lawyers – both well-connected Washingtonians – are personable and well-thought of within the firm. They also wield a huge amount of power, partly because legacy Sonnenschein remains its most profitable arm, despite the re-assertion of the Dentons name. 

Portnoy in particular – described as the driving force behind the 2010 combination – has a reputation as a sound people manager, with one partner describing him as having "a bit of an upmarket game show feel to him" and as "an all-American figure with a very good bedside manner".

"Ours very much feels like a contemporary, team-based management style," says Andrew. "I spend a considerable amount of my time outside the US in our various regions. But no one in our team pretends to be an expert in all of our jurisdictions, and we all rely on the knowledge and expertise of the CEOs of the individual regions to make decisions." 

Portnoy is no less travelled than his chairman.

In London, the question of leadership has been far more divisive for much of the era since the merger of Denton Hall and Wilde Sapte in 2000. 

The firm was the only top 20 UK outfit to suffer a decline in revenue in the five years to 2008, dropping 7.1% in a boom period during which many peers benefited from huge bottom-line growth. This raised obvious questions about the firm's strategic direction.

In fairness, this period also brought about a 50% increase in profits per equity partner (PEP). But after DWS took a serious hammering during the credit crunch, this dropped to just £232,000 in 2010-11 (the lowest reported figure among the top 50 law firms by revenue). 

This was compounded by a handful of reported one-off payouts to partners – most notably the £500,000 given to former DWS chairman James Dallas for relocating to Dubai in the year many partners saw drawings plummet.

This was a source of concern to a number of SNR Denton's lawyers at the time, according to several sources. "It upset a lot of the partners, as many were sticking by the firm amid very low profit returns," says one insider. Dentons declines to comment on matters related to partner pay.

A drop in work from NatWest – a core client – also hit the legacy outfit after the bank was taken over by RBS, a pattern repeated with Bank of Scotland after its acquisition by Lloyds. A former partner says a number of key clients were lost by the firm. 

Andrew is honest enough to acknowledge the problems which preceded the creation of Dentons, particularly at the point when Morris stepped aside for the current regional UKMEA chief executive Matthew Jones, who took the reins in March 2011.

"Matthew inherited some very difficult circumstances," Andrew comments. "The entire partnership has been hugely impressed with the economic turnaround of the UKMEA region. There are, at best, a handful of law firm managers in the world that can turn around a firm like Matthew has done."

The degree to which things are improving in London needs to be assessed on several metrics. First there is the question of profits, which showed signs of improvement before the Dentons/Salans/FMC merger, although the firm declined to break out the UKMEA figure this year.

But the jury is still out on the pressing issue of retaining top talent. A large number of partners left in the two years following the merger to create SNR Denton, especially in 2012 when seven partners defected to Stephenson Harwood.

So with this as the backdrop preceding the announcement that SNR Denton was to merge with FMC and Salans – a firm with similar issues around lawyer retention and profitability – it was no great surprise that a number of industry watchers felt it was a marriage of convenience for two damaged brands in need of papering over the cracks. 

By most accounts FMC, with a strong legacy in energy and mining, brought the least baggage to the marriage.

One market commentator says: "They have just created a bigger monster, which can't escape the problems the previous firms already had. But maybe something will come out of the monster."

Local logic

Looked at more kindly, many argue that the merger was a necessary step. The days of legacy Sonnenschein's status as a US corporate powerhouse, or the once magic circle-bothering prestige of Wilde Sapte's litigation and finance teams in London, have faded. 

What the combined firms do retain is a significant presence in a number of emerging markets, particularly Africa and the Middle East. Legacy Salans could also lay claim to having one of the best developed central European networks of any firm, although a number of high-earning partners have left since the merger.

So while Dentons may not be in contention for the most prestigious corporate work in developed financial centres, it has made headway in parts of the world where clients will need local knowledge and advice; and where tomorrow's global clients are likely to originate.

"The core concept that underpins the combination is a response to the needs of our clients," comments Jones (pictured). 

"Despite the financial crisis, some of the largest markets are still growing and clients are expanding into new markets. We want to give them locally assured advice in those markets, backed by the service quality and accountability that comes with a global brand.

"As clients continue to globalise, we think many of them are likely to want fewer advisory relationships, but with greater depth and global presence. We intend to position ourselves in the winner's circle as this trend plays out. Our sweet spot is where our geographic, sector and practice expertise intersect. 

"This is the global strategic context in which we are working in all our regions, and is key to how we are developing our UKMEA capabilities in areas such as banking and finance, energy, real estate, TMT and insurance."

It is an approach that has won over at least one of the world's foremost general counsel: Royal Dutch Shell's Peter Rees. Earlier this year, Dentons returned to Shell's panel of external advisers, winning slots to advise the oil giant in at least three jurisdictions.

Rees says the decision to appoint the firm was motivated by "high regard for their depth of knowledge in the energy sector and their knowledge of Shell built up over many years".

"It is their knowledge of the way we work, their energy expertise and their presence in some key jurisdictions that we value rather than a specific global footprint," he adds. "We look for local expertise rather than a global presence."

So what do rivals make of the logic behind Dentons? "I can understand why they've done it," says Parish at Norton Rose Fulbright.

"In many respects, by following their strategy they've avoided being stuck among what I call the 'soft centre' of law firms: too big to be niche, but too small to be regarded as serious international players. They have created a stronger business case for themselves as a credible international player."

Structurally, the firm has some similarities to Norton Rose Fulbright, with Dentons split into five Swiss vereins, none of which is earmarked for full financial integration. 

Dentons does, however, use a more flexible partnership structure and credits lawyers with origination of work outside their immediate jurisdiction. Whether its branding – both internal and external – can overcome the limits of the Swiss verein structure is another question.

A brand apart

Anyone visiting Dentons' website and keen to find out more about the combined firm's core ideals will find a word that could easily be the neologism of a late 20th century postmodern French philosopher. "Polycentric," the 'About Us' section reads, "is the concept that most accurately captures what differentiates Dentons from other more traditional law firms."

In a nutshell, polycentrism is the term Dentons has used to brand the strategy of having no single headquarters or cultural identity, regardless of the heritage of its constituent parts. 

Senior management insists – with a bit more conviction than many of the firm's partners, it has to be said – that unlike its competitors, the firm has been "designed" to reflect or remove characteristics that would give it a single dominant centre or culture.

For Andrew (pictured), the logic of this approach also plays into the increasing antipathy among clients for too much of an Anglo-Saxon view of the world. 

"The Acritas legal brand survey showed the profile of the current purchaser of legal services is far different than the image of three decades ago – traditionally from the US or UK.

"The purchasers of legal services are now three times more likely to speak three languages, and as a consequence, increasingly reluctant to hire someone who doesn't reflect a multicultural world with nuanced local expertise."

Though the Dentons management team prefers not to talk publicly about firms that might be seen as competitors, one partner highlights what he says is an important difference between the firm and Norton Rose Fulbright. 

"Peter Martyr is a model leader and has accomplished fantastic things at the firm," he says. "But he really is Norton Rose and despite their impressive growth, that firm is still temporarily perceived as an English firm. Our management team and brand are not perceived as having one culture."

Rivals remain unconvinced. One senior partner says: "I'm not sure there has been any major successful combination that doesn't recognise there is a centre. It is slightly naive to say that a business is without a centre of gravity, and that all 360 degrees of the firm are equally represented."

Another former Dentons partner suggests the 'polycentric' label was in fact largely a ploy to placate US partners' fears about London becoming too dominant in the new set-up, given that the City remains Dentons' largest global office.

Setting aside such theories, it remains uncertain as to how much a decentralised international brand can help a firm capture work in the most developed legal, corporate and financial markets. 

For all the well-intentioned thinking behind the polycentric brand, some argue that perhaps what the firm needs most is a substantive core, rather than a scattered £830m practice.

"From a London point of view, the brand remains a serious problem," says one City partner. "That problem arises from issues of quality, which in turn feed into issues of perception. I do not think that either of these issues can be addressed by size alone."

But Jones is a passionate defender of the strategy. "If you're measuring success of a combination like ours, there are at least three indicators to watch," he says during a conversation a couple of months after the combination. 

"One, are you meeting the needs of clients better and growing your business with them? Two, are you advising new clients that you previously couldn't have served before? Three, are you acquiring people and talent whom you previously couldn't have reached? To all questions, we are finding that the answer is 'yes'."

Indeed, the firm has at least one useful acolyte for its new way of doing things: leading franchising partner Babette Marzheuser-Wood, whom it poached recently from Field Fisher Waterhouse.

Speaking to Marzheuser-Wood in her third day at the firm, she is already full of praise for Dentons' extensive list of European offices and the boon this will be to her clients' needs for local advice in multiple offices.

Whether more lawyers such as Marzheuser-Wood will begin to look at Dentons in this way – the way the firm wants to be seen – is uncertain. For a franchising lawyer, it is a prospect that makes sense. To many others, it is an argument that has yet to be won.