'The idea of the national US firm is under strain' – Dentons sets out American merger strategy
With the candle on Dentons' one year post-merger birthday cake now blown out, senior management at the firm are focusing squarely on the next priority: the US.
June 13, 2014 at 02:18 AM
4 minute read
With the candle on Dentons' one year post-merger birthday cake now blown out, senior management at the firm – formed in March 2013 through the union of Salans, SNR Denton and Canada's Fraser Milner Casgrain – are focusing squarely on the next priority: the US.
In brief, the strategy is to target tie-ups with strong mid-tier US firms with national expertise, but whose management struggle with the cost of international expansion expected by clients.
"The idea of the 'national US law firm' is under some strain," global chief executive Elliott Portnoy tells Legal Week. "Clients and lawyers of firms that have 90% of their lawyers within a single national border – and have clients that need their lawyers to be outside that border – are increasingly turning to global firms."
However, after focusing attention overseas in recent years, the perception from the market – and Dentons' own clients – is that the firm needs to increase its investment and presence in the US.
"Our thought process is there are significant opportunities to grow in the US, if you can find high-class mid-size or smaller firms that represent the best in class in their location or practice," says global chair Joe Andrew.
"There are dozens of law firms that have expressed an interest in us," he continues. "We are in talks with a select number of firms around the world that share our vision."
According to Andrew (pictured), Dentons is currently working on "opportunities" – note the plural – "that could come to fruition".
"As well as organic growth [and lateral hiring], we have a number of strategies for how we approach larger combinations in several markets," he says.
Dentons is looking carefully at three areas of the US in particular: Texas; the northeast – with a key focus on New York and the corridor between Boston and Washington DC; and California, which, as Portnoy points out, "has a higher legal spend than most nations".
"Think about it from this perspective," he suggests. "We're the fifth largest firm by headcount in Europe and the sixth largest in Canada, but only around the 50th in the US."
Recent months have provided evidence that, of these regions, Washington is particularly high on the agenda. Talks with DC-based international law and public policy-focused outfit McKenna Long & Aldridge were announced at the end of September, but fell at the final hurdle two months later.
Then in April Portnoy confirmed the firm had made "a serious overture" to the then struggling Patton Boggs. Given the target firm was already in merger talks with Squire Sanders, the move sounded risky.
Indeed, according to a senior partner within the newly formed Squire Patton Boggs, Dentons' acknowledgement of the approach was "a spoiling tactic… that left them looking ridiculous".
Not so, says Portnoy. "We only confirmed our overture to Patton Boggs after a series of leaks to the media that required a response," he explains. "Our interest in initiating conversations with the firm was fuelled by outreach to Dentons by key Patton Boggs partners, including those in leadership."
Andrew, meanwhile, argues that Patton Boggs' decision to give exclusivity to Squire Sanders in the talks was regrettable, as it prevented partners at the Washington firm from weighing "multiple opportunities simultaneously".
As to the multiple opportunities currently open to Dentons, its next publicly confirmed merger talks are likely to face a bit more scrutiny, given the failure of its last two discussions to produce a combination.
Dentons though is unashamed of its plans for rapid expansion. Given the enthusiasm with which its management pursues strategic growth, it seems highly likely that Portnoy and Andrew will need a bigger cake for the next birthday party
- Related: Dentons to stop reporting 'meaningless' PEP figure
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