Why it's unfair to slate Dentons' ambitious China merger
The firm's tie-up with the regions's largest law firm has attracted unjustified criticism
January 30, 2015 at 05:51 AM
3 minute read
Let's be honest, in recent years, in the UK at least, Dentons-bashing has been a pretty easy sport. Yes, in the space of five years the firm had gone from also-ran US player and struggling UK mid-tier to one of the largest in the world by headcount and a top 20 player by revenue – but that didn't stop the sniping.
Issues around profitability and questions about the level of integration and whether bigger really is better persisted, with opinion not necessarily helped by the firm's controversial decision to abandon reporting average profits per equity partner last year.
Earlier this week Dentons formally signed its merger with China's Dacheng. The tie-up with the region's largest law firm has more than doubled the size of Dentons to make it the biggest law firm in the world by headcount – even if Dacheng's revenues and, inevitably, revenue per lawyer (RPL) are a long way off Dentons' own figures.
Is this enough to stop the sniping? Well, not entirely, it turns out. Managing partners in the UK have raised questions about why anyone would want 4,000 lawyers in China, while others in the UK and Asia have questioned the quality of Dacheng.
But credit where it's due. China's economic output last year of $10.3trn (£6.8trn) is only bettered by that of the US and represented a five-fold increase over the last decade. The number of economically important cities in China will keep growing and Dentons now has greater access to these cities than any other western law firm. And while Dacheng may have been more focused on domestically facing clients than legacy King & Wood, King & Wood Mallesons' Chinese arm, the speed of development within China means that many of these clients are broadening their horizons.
If Dentons were trying to be Sullivan & Cromwell in every jurisdiction around the world it would clearly have failed in its mission for global domination. But it isn't. The firm effectively wants to be local, globally, with a strong brand around the world and decent profitability.
Against this ambition, it is hard to knock this latest deal. As the firm prepares to announce strong financial results for 2014, its management is keen to argue that criticism is inevitable for a firm daring to be different. Criticism would be more than justified if Dentons' Swiss verein unravels, if its financial performance dips or if its RPL falls. But knocking its ambition is unfair.
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