Herbert Smith green lights October merger with Australia's Freehills
Herbert Smith and Australian firm Freehills are set to merge to create an £800m firm after receiving the go-ahead from partners today.
David Willis
Herbert Smith’s partner vote was done by secret ballot and had been going on for about 10 days, with votes being counted today, while Freehills’ partners voted at a meeting earlier today.
According to Herbert Smith partners voted “overwhelmingly in favour” of the merger. Herbert Smith required 75 per cent approval from partners while Freehills required 85 per cent. The combination, which will be called Herbert Smith Freehills, is still subject to regulatory approval and is penned to launch on 1 October.
The two firms will fully financially integrate and share a single profit pool, as revealed by The Lawyer last week (21 June 2012), but Herbert Smith managing partner David Willis declined to comment on the proposed remuneration structure and how profits would be split. Based on Herbert Smith’s turnover for 2011-12 and Freehills’ 2010-11 turnover, a merged firm would have revenue of around £826m.
David Willis and Freehills managing partner Gavin Bell will lead the merged firm as joint CEOs. The enlarged entity will have 2,800 lawyers, including 460 partners, across 20 offices in Europe, Asia and the Middle East. Willis said that the two firms had been in serious discussions about a merger for around six months, but exploratory talks had been going on for longer than that.
In a statement, Willis said: “We’re excited about bringing together two pre-eminent law firms to create a new and distinctive global law firm. We share with Freehills a strong belief that over the next few years the market for premium legal services will become increasingly dominated by a small number of truly global firms. This merger will therefore put us in a strong position to provide clients with the single global offering they increasingly demand.”
Bell added: “The merger will give Herbert Smith Freehills the platform to become the leading global law firm across Asia Pacific, a region likely to see continued substantial growth and to become an increasingly important part of the global legal services market. Establishing from day one a single, integrated firm will give all partners the incentive to work together toward a set of shared goals and ensure a seamless service to clients.”
The Lawyer first reported that Herbert Smith was looking at a merger in Australia in May 2011 (16 May 2011).
Readers' comments (39)
Anonymous | 28-Jun-2012 11:23 am
By far the best litigation shop in the UK, Asia-pac and Australia, as well as the best M&A team in Australia.
Should go alright...
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Anon | 28-Jun-2012 11:51 am
Well done for showing some guts and getting this done properly. This merger is an essential step for both firms to avoid not just mediocrity but a steady slide into irrelevance and terminal decline.
Further moves will of course be required though, such a building a proper presence in China and the United States.
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Anonymous | 28-Jun-2012 12:32 pm
mediocrity + mediocrity = mediocrity
sorry. this merger doesn't change reality
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in the know | 28-Jun-2012 1:24 pm
anonymous @ 12.32 obviously doesn't have a clue what their talking about. Since when was a leading firm in a jurisdiction mediocre!
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Name | 28-Jun-2012 2:11 pm
"Herbert Smith Freehills" is a bit boring. Think I would've gone with HerbHills or FreeHerbs.
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Anonymous | 28-Jun-2012 2:14 pm
Fabulous news!!! I work in Support at Herbert Smith and feel incredibly proud that a firm that feels like family has today expanded that family. The mood is positive and we look forward to a lovely relationship with Freehills.
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anon | 28-Jun-2012 2:20 pm
FreeHerbs sounds like a hippy commune. Maybe if they open a Nimbin office...
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Anonymous | 28-Jun-2012 2:46 pm
Well done to both firms for pulling off a full merger, something which few of the other recent Aussie tie-ups have matched. A momentous step for both firms which was necessary to show that they were not oblivious to the changing times or expectations of clients. As another comment has said, they cannot rest there but it is often the case that the first step is the hardest. Anyone talking about mediocrity is ill-informed.
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Anonymous | 28-Jun-2012 2:53 pm
I thought they were going with Freebies. That's the name I keep hearing over and over when the merger comes up.
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Anonymous | 28-Jun-2012 3:00 pm
Best before commeting, wait and see how it goes.
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In the Know | 28-Jun-2012 3:04 pm
Hmmm... Declining profits, numerous high profile partner departures, over half of the partnership now non-equity, booted out of the "Magic Circle" by LegalBus last month, failed alliance in Europe, etc. Yep. Herbies is definitely mediocre.
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Professor | 28-Jun-2012 3:11 pm
Get your maths right!
Mediocrity + mediocrity = 2Xmediocrity!
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Anonymous | 28-Jun-2012 3:13 pm
Sorry - what superior firm does Anonymous 12.32 work at?? Just wondering...
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Herbies Partner | 28-Jun-2012 3:16 pm
This is great news! It means our antiquated lockstep is finally dead! Thank you Jonathon and David for finally managing to kill it - even if you did have to take a back door approach.
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Gordon Gekko | 28-Jun-2012 3:28 pm
How do I feel about the merger? Mixed emotions, buddy. Like David Willis going off a cliff in my new Maserati.
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now now | 28-Jun-2012 3:39 pm
Let's be fair. Herbies has a good litigation practice. The rest of the firm may be mediocre but the litigation practice is strong - at least the litigators who haven't yet left the firm.
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Curious | 28-Jun-2012 3:42 pm
Why was Herbert Smith's partnership vote done by secret ballot? Was their a concern that partners might suffer retribution if they did not support the merger?
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what?!? | 28-Jun-2012 3:45 pm
Herbies was booted out of the magic circle by Legal Business last month?!? I am shocked to hear that they were ever in the magic circle. I thought every one considered them to be silver circle at best.
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where does Anonymous 12.32 work? | 28-Jun-2012 4:05 pm
What superior firm does Anonymous 12.32 work at? Who knows. Could be any of a number of better firms - Slaughters, Linklaters, Freshfields, Clifford Chance, Allen & Overy, Dewey Lebeouf...
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Ronald McDonald | 28-Jun-2012 4:10 pm
Bell's comment is ridiculous. Saying the merger will give the firm "the platform to become the leading global law firm across Asia Pacific" is like saying McDonalds is the leading global restaurant across Asia Pacific.
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Anonymous | 28-Jun-2012 4:16 pm
I don't know anything about the detailed terms of this "merger", but I have a sinking feeling that a lot of UK firms are going to get their fingers burned as a result of their push into the Australian market. I can see the advantages in terms of Herbert Smith's access to a source of well trained and relatively cheap lawyers, but what about the revenue side of the equation? What happens when exports of natural resources from Australia to China and elsewhere slow down and the Aussie dollar slides back towards its historical average against Sterling? I think this will end in tears for all concerned, and I'm not just talking about Herbert Smith / Freehills.
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Pay really close attention Freehills partners | 28-Jun-2012 4:17 pm
"Herbert Smith managing partner David Willis declined to comment on the proposed remuneration structure and how profits would be split..." Look out Freehills partners. That means you're the new source of revenues to support Herbies' ever declining profitability.
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Anonymous | 28-Jun-2012 4:18 pm
There really are some pathetic people out there. Freehills clearly is a top tier firm. While hs may not be, who really is that big of a *&@! to come on here saying the magic circle firms are better? Do you work at any of the aforementioned? If you do, is it enjoyable spending most of your waking time at work?
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top tier | 28-Jun-2012 4:30 pm
Globalisation! Being "top tier" in Australia doesn't cut it any more. A fact that the partners at "top tier" Freehills must have realised if they were willing to marry frumpy old Herbert Smith and make Jonathon Scott the chair of the new Freebies firm.
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Magic Circle Solicitor | 28-Jun-2012 4:36 pm
One of the great things about working at a Magic Circle firm is that I know if I ever get tired of spending most of my waking time at work I can always get a job at one of the lesser firms like Herbert Smith where I can bill 2 hours a week and surf the web for another 30 hours a week, which is what most of my friends at Herbies do these days.
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Anonymous | 28-Jun-2012 4:41 pm
Either way it looks like the end for some departments e.g. Finance - get out while you can guys
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economist | 28-Jun-2012 4:46 pm
How do mergers create value? Operating synergies, such as improving resource allocation and cutbacks in expenditures. Get ready for the next redundency program.
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DDR | 29-Jun-2012 2:15 am
Very interesting - Herbies has been trying extremely hard to battle its own to move out of an archaic mindset that has been entrenched by underperformers at the top of the lockstep (ie the useless ones have the power and votes). Well done to the management for pulling them out of a slow and steady decline. Any misconception that they have been in the magic circle at any time in the last 10 years must have been blown out of all but the most stagnant waters by now. The firm had steadily been losing its grip on its litigation crown and has seen clients prefer the more commercially minded and service oriented firms and has seen high level departures. For HS at least, this has been a big step in the right direction after six months of constantly poor news. Fingers crossed they can make up the ground they've lost. Management shouldn't think they've succeeded yet though - the hard work's only beginning.
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Anonymous | 29-Jun-2012 3:25 am
I do not work at either firm; I am very much a competitor. My assessement:
quality + quality = quality
Well done both on creating some competition for the Magic Circle.
I expect that it will work out well.
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Anonymous | 29-Jun-2012 9:46 am
This does nothing to move HS forwards. Its best partners will be seduced elsewhere to more profitable, better balanced firms. Trying to play international catch up is going to take too long and be too dilutive of PPP. The stars will not wait around in the hope...Be careful what you wish for Herbies.
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Another Aussie | 29-Jun-2012 1:01 pm
An emphasis on structure is the wrong approach for the two firms to take. It focuses on the firm and suggests that the priority is on partner profits and profit sharing, rather than on client service and the platform that you bring to the clients.
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Anonymous | 29-Jun-2012 2:32 pm
Mixed feelings about this "excitement" - some of those who took redundancy (due to the powers that be deciding less of us can do the same work) are still at the firm - bit insensitive to suddenly spring this on everyone - great timing, was it Willis' idea I wonder
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General Counsel | 1-Jul-2012 6:29 am
I have worked with both Herbies and Freehills as a client. Both firms were average at best. The new Freebies firm poses no competition for the Magic Circle firms. If we use them at all - and that's a big IF - it will be for the commoditized work that a chimp sitting in front of a word processor could do.
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Sock Puppet | 2-Jul-2012 3:00 pm
I must congratulate the Herbert Smith PR people for popping up so quickly in the comments section to put a positive spin on the story before the great hordes of real people put in their more cynical view. I would just like to reassure them that they style of comments are exactly what we would normally expect to see on these pages and I can't imagine anyone will be able to tell which are real and which are puffery. So don't worry - it will work brilliantly and you will not look at all desperate or sad.
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D Willis | 2-Jul-2012 3:14 pm
That is a bloody good idea! Chimps in front of word processors. Why didn't I think of that myself?!? Just think of how many associates and support staff we could make redundent by replacing them with chimps in front of word processors. I'll get right on that - will call it Project Bananas!
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Herbies Insider | 2-Jul-2012 3:35 pm
Senior management has been pounding everyone over the head for months about the "merits" of this merger and partners were "strongly encouraged" to support the merger. Notwithstanding that the merger managed to pass the FIRST vote, many partners are highly skeptical. Let's see what happens at the next vote when the sacred lockstep partnership is up for sacrifice as part the true financial integration.
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Anonymous | 2-Jul-2012 3:55 pm
Isn't Herbert Smith the same firm that once referred to themselves as a "mini Slaughter and May"? The reality is they have been in decline for years. Who knows if the merger can pull them out of their long spiral downward. Probably not. Can't think of any truly great law firms who merged their way to greatness.
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Anonymous | 3-Jul-2012 2:13 pm
Lots of firms have merged their way to greatness. Why there's ... uh .... well ... I'm sure there must be at least one. Maybe.
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Anonymous | 5-Jul-2012 3:59 pm
Freehills needs herbies much more than the other way around.
Anyone with the slightest understanding of the profession can see that.
Freehills has failed appallingly in every non-Aussie venture it has tried including the UK, Singapore, China, Indonesia, Vietnam, Thailand.
In the past 2 years freehills has been left behind by the magic circle breaking ground in its australian backyard.
Now every top partner and law student wants to join CC and A&O here.
So what will herbies do, now that it is saddled with rubbish from downunder?
Force Freehills partners to commit to international mobility? What a joke! Cite the Freehills track record of wasting time and money anywhere outside their country. Surely this international mobility "commitment" was oh-so-subtly written into the contract by freehills as a plan B excuse for its failing partners...
Forget the hype - Herbies will have to do what it does best these days - sack and sack again...
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