Freshfields sets out stall for US merger

Magic circle firm would love to meet similar US practice with view to merger within the next couple of years. Must be prepared to do deal with hundreds of Germans. Good sense of humour and sensitivity when dealing with lockstep issues preferred.

In his very first interview, the new Freshfields senior partner Guy Morton has come right out and said it. Freshfields is in play: a US merger is now a priority.

His partners should have seen it coming. Morton declared in his 10-page manifesto last year: “We face increasing competition from US firms operating from a highly profitable home market. We should work towards a substantial US business in our principal practice areas, if possible through a merger with a high-quality US firm.”

And here’s what co-senior partner Konstantin Mettenheimer said in his manifesto: “We need to reinvigorate our efforts towards a merger. I sense a shift in perception [among] US firms… We need to test this. The probing of the US market is an essential task.”

But Morton’s candour will nevertheless send a shock through the partnership. Up until now, a US merger has always been a Platonic ideal. If the perfect match comes along, then great. If not, let’s bide our time, Freshfields partners say.

Morton has decided not to be defeatist. He recognises that a truly perfect match doesn’t exist. And by saying he would be prepared to do a deal with a firm outside New York, he’s widening the net further than the usual suspects of Cleary, Cravath, Davis Polk or Debevoise. That is a coded message to the likes of Gibson Dunn, Kirkland, Latham and O’Melveny.

But there’s a sticking point. How can Freshfields reconcile its lockstep with a US merger? Just look at the contortions Clifford Chance has had to go through after the Rogers & Wells merger. Clifford Chance could only square the circle by the adoption of different ladders in different jurisdictions, which create a kaleidoscope of profit points across the world.

You can count the number of US lockstep firms on the fingers of one hand – and they’re famously reluctant to do a deal with what they would see as a dilutive bunch of Brits.

But here’s the good news. Despite Freshfields’ performance over the past couple of years, there has never been the slightest doubt of its inherent quality. As more and more US firms wake up to globalisation, Freshfields will be a prize worth bidding for. Morton might just pull it off.