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).
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Readers' comments (39)
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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