'Law firm of the future' - Dentons MPs on the merger that will bring east and west together
Legal Week speaks to the firm's management on the next steps for going global
January 23, 2015 at 02:41 AM
6 minute read
As we enter 2015, there can be no doubt that law firm mergers are something of a trend. From Germany to Australia, recent years have seen a whole spectrum of legal professionals band together to try and meet the needs of an increasingly global clientbase; employing varying different financial structures and integration tactics as they go.
But even with the merger craze of the last decade, the Dentons-Dacheng combination yesterday, which received partner approval two weeks ago, came as a shock to many. While some thought King & Wood Mallesons (KWM) – the first merger between a Chinese firm and a foreign outfit – might be alone in its aspirations for some time yet, (most Chinese firms still lagging behind their international counterparts in sophistication and management), Dacheng, the largest firm in the PRC but not quite making the domestic elite, might be seen as among the less likely candidates for such a deal.
That said, the global co-chair of Dentons Joe Andrew has certainly been transparent about his China ambitions in the past; so one might have guessed that Dentons would be among the first to take the plunge. International firms have of course been scratching their heads for some time now on how to tackle the fast-growing but restricted and competitive market, but it was Dentons, and indeed Andrew, that seemed most determined.
"I have been wandering around China for about seven years trying to work out what we should do as a firm," he tells Legal Week. "We wanted to be the first firm to do a domestic merger in China. We contacted the majority of the large firms."
Further Dentons and Dacheng merger coverageAs for the choice of partner, Dentons' global chief executive Elliott Portnoy says Dacheng was a good match in terms of its expansion objectives, and had been eyeing its international options for a number of years. As it stands, the firm has seven non-China offices.
"We were attracted to Dacheng's leadership," he says. "We have admired the way they have built the law firm in a very short amount of time and their public statements about their aspirations to become a truly global law firm. We made the approach to them last year."
Xuefeng Peng, managing partner of Dacheng, is equally optimistic about the tie-up. Unlike KWM, or any other firm for that matter, he says this is a merger which creates a bridge between the world's two largest economies.
"It is a historic development because we have created a new law firm – [to combine] a firm from the east and a firm from the west is unprecedented in the history of the legal profession.
"It will bring benefits to the lawyers and partners, and to their clients."
The concern with this kind of deal is simply the significant differences between the two markets – one being developed; the other being emerging. Peng acknowledges the inconsistencies but says he is embracing the opportunity for all Chinese lawyers to gain traction on the international stage.
"The legal profession in China has a history of about 20 years, so the management of law firms in China and the expertise of lawyers are still far behind from their peers in the west, so in that sense Chinese law firms have a lot to learn from their western peers in terms of the management and personal expertise in legal practice.
"But the growth of the economy of China in the past decade has presented a lot of opportunities to both the Chinese lawyers and international lawyers practising in the Chinese market – that is where the Chinese law firms grabbed the opportunities to grow. Our overall aim is for the lawyers from China and the west to come together to provide better service and seamless service to the clients."
So how exactly is it going to work, one might ask? How are two firms with glaringly opposing backgrounds, and which are not permitted to integrate financially, going to offer something seamless?
Management says there will be strong leadership at all levels of the new firm, each region appointed a CEO who will adhere to global processes and principles. Practices, sectors and clients will be aligned. A 19-member global board will have representation from China, Canada, Europe and the US. Lawyers will be encouraged to get to know each other.
"We have a lot of experience of integrating lawyers and support services where both firms have offices," says Portnoy. "We have a team who will begin to focus on how that integration will occur in those jurisdictions in accordance with the regulations."
Andrew adds that the financial structure will not get in the way: "We are going to be one firm so the Verein structure has nothing to do with it. We have made choices towards an integrated structure."
Maintaining a level of quality across offices will be a further challenge. Even if integrated, and with commonalities such as size and ambition, the firms will inevitably need to ensure consistency across the globe – a tough task within even the most homegrown of firms.
Portnoy responds: "In all our discussions with clients who used Dacheng there have been strong responses about the consistency and strong quality of the lawyers and the consistency of service.
"The evolution [of the Chinese legal market] is staggering, as is the speed with which lawyers in China have been able to develop expertise. We continue to ensure there is consistency in quality of practice and values across all of our offices."
The next steps for the combined firm will need to include filling in the gaps in regional coverage, particularly in Asia – a strategy Andrew which made clear to Legal Week last year.
Portnoy neglects to give a timeline for such ventures, but says they are still within the game plan:
"We have a shared view about the importance of further growth in Australia, further growth in Asia and further growth in markets like Germany and the US. We believe that the new combined firm will provide us with the growth opportunities in those markets which we hope to achieve in the months to come." Peng adds that the firm "will never stop" growing for as long as its clients are going to new places.
You've got to hand it to them, none of the partners are lacking confidence about the venture. London-based Matthew Jones, UKMEA chief executive, sums up: "2015 may well be a year that we look back on and say: that was the year that the law firm of the future was born. Today is the day we may look back on as the day this became the case."
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