Words used to describe the  merger between transatlantic firm Dentons and PRC behemoth Dacheng have ranged from 'surprising' and 'brave' to 'shocking'. The deal, which was approved by partners earlier this month and formally signed last week following regulatory approval, has created both the largest law firm in the world by headcount and the first with a significant presence in its two biggest economies – the US and China.

Little has been revealed about how the Swiss verein merger will work in practice, although management have agreed to the name Dentons with a Chinese prefix, and to create a 19-member board consisting of representatives from all of the combined firm's major markets. There is a commitment to full integration of practices, clients, people and systems.

The lack of detail at this stage has left much room for speculation about the challenges and opportunities for each party, the odds of long-term success, and whether the deal will spark the wave of US/UK-China mergers many in the profession have been anticipating since the tie-up between King & Wood and Mallesons in 2012.

There is broad consensus among observers that the union presents Dentons with daunting challenges when it comes to integrating the two parties, given the size of Dacheng and pace at which it has grown in recent years.

Law firms in China bear little resemblance to their counterparts in the west  when it comes to their level of development. Dacheng – the largest law firm in China with more than 4,000 lawyers working across 40-plus local offices – is no different from its rivals in this respect, operating a traditional decentralised model where lawyers working on an 'eat what you kill' basis earn widely differing levels of pay and operate like sole practitioners.

While one observer characterises Dacheng as a "very active and quite a dynamic firm", other partners at international outfits are quick to point out
that it is not regarded as a top-tier firm.

"No one should confuse size with quality," says one Beijing-based lawyer who professes to be shocked that Dacheng was considered a suitable merger candidate by Dentons. However, the same partner concedes that the combination will create significant opportunities for Dacheng, given the global network it can now offer mainland businesses seeking to grow and invest outside China.

The obvious attraction of the deal for Dentons is the massive presence it gives the firm in the world's biggest growth market. Better still, unlike King & Wood Mallesons – the only other comparable tie-up – it can offer clients a well-established US network as well as a far larger practice across China.

The challenge will be how to integrate two such radically different legacy practices, as well as the associated risk that the quality of service provided by Dentons' Chinese arm could fall below its international standards, with a resultant impact on the reputation of the firm as a whole.

While declining to comment specifically on the Dentons union, Cadwalader Wickersham & Taft's managing partner for Asia, Greg Petrick, believes huge challenges lie ahead for any western law firm seeking to merge with a Chinese practice.

"Law firm mergers are very difficult, even if you're merging two US firms with the same practices," he says. "The cultures are different, the people are different and the practices are different.

"There is a long history of unsuccessful law firm mergers. Merging two foreign firms operating largely in different jurisdictions may be even more difficult to do successfully because of cultural, practice and language differences."

Dentons' management team has insisted that it can successfully bring to bear its experience integrating international practices, and that it has received consistently positive testimonials about Dacheng from the firm's clients.

For his part, Dacheng managing partner Xuefeng Peng is frank about the need for his firm to raise its game. "The legal profession in China has a history of about 20 years," he concedes, "so the management of law firms in China and the expertise of lawyers are still far behind their peers in the west. Chinese firms have a lot to learn from their western peers in terms of the management and personal expertise in legal practice."

Meanwhile, there is no doubting the excitement the deal has generated. "I thought King & Wood Mallesons would be a one off; it wasn't obvious that there were good matches to be made," comments the Beijing lawyer. "This deal opens up possibilities for firms above [Dacheng in the rankings]. Before, everyone might have said: 'Well King & Wood were in a position to do it.' Now they'll say: 'Well Dacheng did it, and we are at least as competitive as them.'"

By throwing in its lot with Dentons, however, Dacheng is turning its back on potentially lucrative inward-bound referral work from other firms, and it remains questionable whether other Chinese outfits will become more open to a merger in the wake of this deal.

As Peter Yuen, a corporate partner at leading Chinese firm Fangda Partners, observes: "I think international firms do want to have a closer relationship with Chinese firms because they can't operate freely in China – but they want to align with sophisticated and serious Chinese law firms so that they can deliver services that their clients expect.

"So international firms want to get closer but I think they can only find a few firms that can offer what they want. And those firms don't see any immediate advantages in having an exclusive relationship or merger because they can do the international work that international firms can, at the same level, through their own 'best friends' networks."

Nevertheless, with firms including Baker & McKenzie, Herbert Smith Freehills and Simmons & Simmons all indicating that they are open to exploring tie-ups with Chinese firms, China's leading mainland firms will likely have no shortage of offers.

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Dentons' leaders on the union that will bring east and west together
"I have been wandering around China for about seven years trying to work out what we should do as a firm," Dentons chair Joe Andrew  (pictured) 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."

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 – it currently has seven offices outside China – for several years.

"We were attracted to Dacheng's leadership," he explains. "We have admired the way they have built the firm in a very short time and their public statements about their aspirations to become a truly global law firm. We approached them last year."

Xuefeng Peng, managing partner of Dacheng, is equally optimistic about the tie-up. Unlike King & Wood Mallesons, or any other firm for that matter, he says this is a merger that 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 with 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 growth of China's economy in the past decade has presented a lot of opportunities to both Chinese and international lawyers practising in the Chinese market. Our overall aim is for the lawyers from China and the west to come together to provide better service to the clients."

So how are two firms, with glaringly different backgrounds – and which are not permitted to integrate financially – going to offer something seamless?

"We have a lot of experience of integrating lawyers and support services where both firms have offices," says Portnoy. "We have a team that 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."

The next steps for the combined firm will need to include filling in the gaps in regional coverage, particularly in Asia. Portnoy declines 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, Asia and markets like Germany
and the US," he explains. "We believe that the new combined firm will provide us with the growth opportunities in those markets, which we hope to achieve in the coming months." 

Dentons and Dacheng – key figures
Dentons   
Lawyer headcount: 2,600  
Revenue: $1.3bn (£857m) 
Offices: 50+ across the US, Europe, Asia and Africa   

Dacheng
Lawyer headcount: 4,000
Revenue: $400m (£263.7m)
Offices: China: 44, including Beijing and Hong Kong. International: New York, Los Angeles , Singapore, Paris, Chicago, Moscow

• For more, see Why it's unfair to slate Dentons' ambitious China merger