Comment and Analysis: Two plus two makes five at Cameron McKenna?
28 July 1998
One year after the merger and there have been no major ructions, but revenue is not exactly flooding in, reports Robert Lindsay. "And this is our new staff dining room," enthuses Robert Derry-Evans, Cameron Mckenna's managing partner. "People love it. We've put a glass roof on it."
At first Derry-Evans' pride in a new dining room seems rather strange. A year after his firm, McKenna & Co, merged with Cameron Markby Hewitt, should he not be more concerned with the complexities of running the new firm?
In fact, the design broom which has been swept through what was McKennas' headquarters on Aldersgate is of great psychological significance. The Cameron Markby Hewitt personnel who used to work on the southern side of the square mile at Sceptre Court, tower Hill, have now been moved into Mitre House on the northern side, apart from the insurance team which needed to stay close to Lloyd's.
McKennas already occupied five floors of the building. To house the Cameron markby people it expanded into the whole building and in the process produced a completely new office layout, which makes the McKennas people aware they are now part of a new firm.
"People say it was great management that allowed us to move together so quickly," smiles Derry-Evans. "In fact it was luck."
Just after the Cameron Markby-McKennas merger, Linklaters vacated the top two floors at Mitre House. At the same time, Cameron McKenna was able to find a taker - Trowers & Hamlins - for the entire space on Tower Hill it had occupied.
The move then was a success. How about productivity? Profits have held up well considering the cost of the merger - particularly integrating the two firms' IT systems, which took longer than expected. But more worrying is that revenue has gone up by only a couple of per cent (see page 3).
This can partly be explained by the luck of the draw. The firm's work is largely in projects, insurance, regulatory and banking work, all of which have not particularly boomed compared with US and western European mergers and acquisitions work. In fact, in corporate work the merged firm appears to have slipped. Corporate Money ranked Cameron Markby at 51 for deal value in 1996 and McKennas at 17. In 1997 Cameron McKenna was ranked at 25. This year's ranking looks like being similar.
But with a recession predicted shortly, the revenues may be about to flow for the firm in its strong insolvency and litigation practices.
Meanwhile, the numbers of fee earners and partners have grown. Unique for recent legal mergers, there has been no whisper of a fall-out.
Just before the merger, McKennas lost its entire 15-strong Lloyd's office, including top billing partner Robin Williams, who was believed to be unhappy at the way profits were distributed. But since then, not only has the new firm kept hold of the partners it wants to, it has also laterally hired six partners, including Martin Stewart-Smith, who has brought with him his project expertise having advised the World Bank on privatisations when he was at Ashurst Morris Crisp.
Shortly after the merger the firm made up 13 McKennas assistants who were already down for partnership. In this year's round it made up an incredible 23.
Preventing its profits from dipping seems an even more remarkable achievement when you look at how the firm has grown overseas.
In April 1997, just before its merger, it opened a two-lawyer office in Gdansk, Poland, partly to advise the Gdansk Transport Consortium on a £900m motorway project. In Warsaw, in the same month, it hired Poland's leading insurance lawyer Beata Balas-Noszczyk and last December it took five more Polish lawyers from White & Case's office. In Moscow last October it snapped up three lawyers from rival firms.
In Kazakhstan in March this year it doubled the size of its Almaty practice by taking Faegre & Benson's office - one partner and three associates. And then in June it sent three partners to Bristol to set up a corporate practice in the city.
Derry-Evans reckons the firm is now number one or two in Eastern and Central Europe. He says Cameron Markby's links with banks and McKennas' links with project regulators have provided synergies in PFI and overseas projects work.
He names a high-speed rail link in the Netherlands, a project for London Underground, and the firm's appointment on three major water privatisations around the world as deals they would not have won without the merger.
But worldwide the firm advised on £12bn-worth of declared projects last year - not much higher than McKennas' $13.3bn-worth in 1995-96. In the UK the firm has seven signed PFI projects under its belt, according to PFI Report's project database, making it equal fifth with Berwin Leighton and Nabarro Nathanson. It has a further four in the pipeline.
Derry-Evans says product liability, defending companies against suing customers, is another area where two plus two has equalled five - McKennas acted for companies, Cameron Markby for their insurers.
But despite all the claimed achievements, the task ahead for the firm is even more daunting. It wants to be one of the top ten or so international law firms in the next millennium. To achieve this it has both to knit together its rather loosely bound alliance with German practice Sigle Loose and firms in Scandinavia and the Netherlands and form a merger with a UK or US firm.
The Cameron Markby-McKennas merger will seem like a piece of cake in comparison.