Another string for Camerons' CEE bow with CMS Moscow merger
30 June 2008
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CMS Moscow merger" /> At the end of this year, all eyes at CMS Cameron McKenna will be on Russia for what could be a defining moment in the firm's history. Last week The Lawyer revealed that the firm is planning to unite its Moscow practice with those of its European allies CMS Hasche Sigle and CMS Bureau Francis Lefebvre.
This will not be an alliance but a full-scale merger, creating the largest law firm in Russia. For the CMS network, which prides itself on being a single brand with nine separate members, it is a landmark decision. "It's a massive step for CMS," agrees Camerons managing partner Duncan Weston.
Weston denies the move is a precursor to a full-scale merger of the entire network, but it is clear the relationship with CMS is key to Camerons' future.
This is especially true for the firm's dealmakers, as corporate chief Andrew Sheach admits. "Companies want European coverage - frankly we've got more of that than anyone else," he says.
Taken as a single entity, CMS is indeed one of the largest M&A outfits in Europe. But the reality is not quite so harmonious and the road to convergence is fraught with difficulty.
One former Camerons partner reveals: "With the Continental firms there's a fear of domination and takeover. There's also a fear in London that they'll be going into Europe and they don't need to. There are some tough decisions to be taken."
Earlier this year the nine alliance firms - CMS Adonnino Ascoli & Cavasola Scamoni in Italy; CMS Albiñana & Suárez de Lezo in Spain; CMS Bureau Francis Lefebvre in France; CMS Cameron McKenna in the UK; CMS DeBacker in Belgium; CMS Derks Star Busmann in the Netherlands; CMS von Erlach Henrici in Switzerland; CMS Hasche Sigle in Germany; and CMS Reich-Rohrwig Hainz in Austria - voted for closer alignment and greater focus on the CMS brand, but stopped short of genuine integration and opted to keep local firm names.
From the point of view of Camerons' corporate group, convergence is more about presenting a single offering to clients than a large number of referrals.
Sheach says more that half the deals that land on his desk have a cross-border element, adding: "There's been a lot of debate about alliances and how serious that is. From a client's point of view, the idea is that we're a single organisation."
But some feel the CMS message will be lost on potential corporate clients. The Deloitte model might have a precedent in the accounting world, but in the legal profession it is unique. Can a network of nine separate profit centres really operate as a single firm?"Firms such as Camerons need to start deciding how hard they're going to push for full integration," says a corporate partner at a rival firm. "The middle ground is neither one thing nor the other."
All of which gives added spice to the Russian experiment. Weston is adamant that CMS is only considering mergers in new markets where several alliance firms have a presence. Others are not so sure.
A recently departed partner says: "Full integration is inevitable. They can't on one hand say the brand is important but then say, 'we're not really sure about having the same name'."
But Russia is more than just a testing ground for new international strategies - it is an important part of the firm's all-conquering Central and Eastern European (CEE) practice. And while the London corporate group is struggling to raise its profile in the congested mid-market, in CEE the firm is top tier.
CEE is undoubtedly the most dynamic part of Camerons. During Weston's reign as regional managing partner, turnover doubled in two years. Corporate revenue may be comparatively small - CEE contributed around £20m to a corporate total of £77m in 2007-08 - but the firm's strength in the region is opening doors in the City.
Toothpaste manufacturer Colgate is one example of a client that instructed Camerons in CEE first, before using it in the UK. In the financial institutions sector, which traditionally accounts for more than half of the firm's revenue, Camerons has just been handed a corporate instruction by a "major Western European bank" in CEE.
Sheach says: "We're confident that when we get these opportunities, we will perform extremely well and the client will be pleased."
The success or failure of this approach is pinned on whether the two parts of the firm measure up. A former CEE partner recalls: "The CEE group was very entrepreneurial and had a very good client base. I got the impression the corporate group in London was quite happy with where it was." The partner adds that Sheach has made an impact since taking over the practice. The final peg in Camerons' corporate strategy is its focus on the firm's key sectors: energy, insurance, financial services, construction, real estate and technology, media and telecoms.
It is an issue the management team takes rather seriously. Many firms boast of expertise in key areas, but Camerons partners are expected to "live and breath their sectors", says Sheach.
Last month (19 May) The Lawyer reported on the firm's new accounting system, pioneered by Weston in CEE. It allows partners to view the performance of their practice groups by sector, and break down where new streams of work are coming from.
The firm now recruits into sectors, appoints sector heads and reports financial results by sector - indicating the scheme is more than just lip service.
Senior partner Richard Price, who has led the strategy, says: "We reshaped the whole business around sectors. We're trying to give it more teeth."
Camerons' latest financial results, released in May, are impressive. Turnover across the firm is up by 19 per cent to £235m and profit per equity partner has rocketed by 30 per cent to £650,000. Weston singles out the corporate practice, alongside banking, as a key contributor.
But the firm faces a challenging 2008 - its mid-market position is likely to be squeezed from both above and below. The magic circle will be scaling down in the absence of larger deals and there are more established smaller corporate firms snapping at its heels.
One former Camerons partner warns: "Camerons cannot survive in its current format. It's stuck in a place in the market which will not exist for much longer."
Which makes the Moscow merger all the more impor- tant. Weston says the move "demonstrates we have the confidence to do things together and behave more like a single operation".
A truly united CMS? The legal world will be watching with interest.