10 February 2005
Mergers impose a maj-or impact on the culture, strategy and future success of a law firm with pot-entially serious ramifications for the merging firms trainees and young lawyers.
Last year witnessed a spate of law firm mergers. On the domestic front, national firms Pinsents and Masons tied the knot at the end of last year. This followed the pairing between Northern giant Addleshaw Booth & Co and mid-size City outfit Theodore Goddard, which merged in May 2003.
Meanwhile, DLAs bid for global domination took a major step forward with its transatlantic $1.4bn (750m) tie-up with US firm Piper Rudnick and technology experts Gray Cary Ware & Freidenrich.
According to a survey of managing partners and financial directors by accountancy firm Smith & Williamson, 93 per cent of large firms believe the level of merger activity will remain the same or rise in the coming year.
Decisions on whether or not to merge are taken at the highest level and are voted on by the partnerships of the firms concerned. Trainees can do nothing but sit back, watch events unfold and wonder how long it will take to get used to the subsequent ludicrously long post-merger name that always arises (only for it to be later cut back to the name of the largest firm anyway).
Once the merger is done and dusted, although it may not happen overnight, the consequences will eventually be felt by those lower down the food chain.
The indications are that merging firms recognise that a merger can trigger uncertainty and hopefully respond to this with as much communication as possible.
Paul Thompson, a third-seat trainee at DLA Piper Rudnick Gray Cary, says the firm was very good at keeping everyone up to speed on developments. The firm kept an ongoing dialogue with fee-earners and non-fee-earners and held roadshows at which video presentations were shown about the firms with which DLA was to merge.
"We were quite glad that they kept us informed. People wanted to know what was going on rather than read about it in the legal press," says Thompson.
There was no special information for trainees, but this was deliberate, adds the firms global HR director Robert Halton. "Our philosophy was to keep everyone informed and not target different groups. You got the same information if you were a secretary or a fee-earner," says Halton.
In 2003, Gouldens surprised the legal community by becoming part of the global and largely US-based Jones Day network. The quintessential UK firm, which now goes under the Jones Day name, had previously prided itself on its independent status.
John Papadakis, the graduate recruitment partner at the firms London office, admits that the merger did "cause disruption", but says this was minimised as the deal had what he calls a "short gestation period". In terms of communicating the news, as with DLA, the new trainees were treated the same as everyone else. Gouldens also held a special meeting for those who had been offered training contracts but had not yet joined the firm and so had not had the changes explained to them.
Papadakis says that some of them expressed concern, as they had signed up to Gouldens precisely because it was a medium-sized UK law firm and not a huge global player. However, their fears were assuaged once the set-up was explained.
Jones Day has its largest presence in the US and began life there, meaning it is generally seen as a US firm. However, Papadakis goes to great pains to stress that this is not the case, saying that instead it is part of a global network of which Gouldens is now the London office.
Although the merger meant that Jones Days London office folded into Gouldens, he says: "Things havent changed that much here; broadly speaking, the cultures pretty much the same as what it was."
The impact of a merger on trainees will vary depending on a number of factors. One is the position of the trainees firm in relation to the one with which it is merging. If your firm is the top dog in the deal, the changes you experience are going to be less seismic than for those coming in from the smaller firm, who will be under pressure to adapt to the working practices and culture of the larger firm.
Jones Days London office runs what it claims is a unique non-rotational training system. Instead of taking up seats to get the necessary experience of different practice areas, trainees are given an office on their arrival at the firm, which is theirs for the entire two-year training contract period. They then undertake work from different departments to meet the training contract requirements.
This was a Gouldens initiative that half the partners, including Papadakis himself, trained under, and he says there was "no question" post-merger that the firm would not continue to do this. The small number of trainees at Jones Days London office had to convert to the Gouldens system, which Papadakis says they were happy to do.
UK firms involved in transatlantic mergers have a big decision to make on pay and conditions. US firms generally pay more, but also want more hours billed than their UK counterparts.
It is business as usual for UK trainees at DLA Piper. Halton says the UK arm of the firm is keeping the same billable hours target of 600 hours per year. "Well not be importing the US hours and salary culture," he states. "We take the approach that we share the same fundamental values and vision across the business, but we operate differently to meet local conditions."
It is a more confusing picture where domestic mergers are concerned. Pinsent Masons is in the midst of setting trainee salaries across its UK offices in Birmingham, Bristol, Edinburgh, Glasgow, Leeds, London and Manchester. The firm was unable to confirm the result of these deliberations before Lawyer 2B went to press. But if the firm does choose to harmonise salaries through pay rises, it may be that legacy Masons trainees come off better, as in London they earn 25,000 compared with 28,000 at Pinsents, while Pinsents first-year newly-qualifieds in the capital earn 48,000, which is 3,500 more than their Masons counterparts.
Merger can have a huge impact on a trainees future prospects with their firm, sometimes with none too promising outcomes. If one of the key reasons for merger is to create savings through economies of scale, then watch out new qualifiers are an easy target.
Trainees at Denton Wilde Sapte (DWS) have been on the receiving end of this kind of policy since Denton Hall and Wilde Sapte merged in 2000. For the past two years the firm has let go the highest amount of newly-qualified lawyers. DWS has attributed this to the fact that the new firm needed far fewer newly-qualified lawyers than the amount of trainees to which the two firms had guaranteed training contracts. In total, the firms took around 55 trainees a year but now DWS says it needs only around 35, so those qualifying since 2000 have borne the brunt of the reduced requirements.
Pinsent Masons joint graduate recruitment manager Maxine Jayes says trainees at her firm should feel secure that the same will not happen to them. "The point of bringing the business together was growth," she maintains, adding that she has not been told to cut back on graduate recruitment.
On the positive side, a merger can mean you find yourself working in a totally different and perhaps better firm than you had first envisaged.
Rachel Channer, a fourth-seat trainee at Addleshaw Goddard, had been in Addleshaw Booth & Cos London office for just a few months when her firm merged with Theodore Goddard. "The difference it made for me was that the London office, which was small, became the same size as the regional offices, which is great because we have a bigger trainee intake now," she says.
She admits that the move did cause some fear at first. "I think it concerned most of the trainees, particularly the ones in London," she says. "The Theodore Goddard trainees in London were the most concerned. People thought they might be shunted up North, but weve never been put in a position where weve had to go anywhere."
There were also fears of increased competition for seats and jobs, but Channer says the feeling among the trainees is that this proved not to be the case.
In fact, the expanded London office meant that Channer was able to take up a seat in property litigation, which was an option that had not previously been available in the Addleshaw Booth London office. She is now qualifying into the firms property department, so the experience came in handy.
Thompson says DLA spelled out its ambitious expansion plans when he applied to the firm. "The message we were given when we went for interview was that this firm wants to be one of the big global players, and that was what appealed to me," he says. "And its happened even faster than I expected."
As well as being able to work on bigger transactions, at Jones Day the trainees now get to go to the US for a four-day new associate jolly, where they mingle with 200 other new colleagues. "They get to meet people who are going to be their future colleagues and contacts across the firm from Asia, Europe and the US," Papadakis says.
If a merger happens for positive reasons, then being a trainee at the time may not be such a bad thing. Not only are you likely to be more receptive to, and better able to cope, with the change than the old firm stalwarts, but if you do end up staying then it is your generation that will reap the fruits of the merger further down the line.