Herbert Smith to vote for full financial integration with Freehills
Freehills partners agree to global mobility; Herbert Smith set for modified lockstep as poll result imminent
Freehills Sydney offices
Herbert Smith and Freehills are set for full financial integration if the two firms’ partnerships vote to combine, with the result of the poll widely expected next week.
The proposal of full profit-sharing merger will be seen as a radical move by Herbert Smith as it represents a definitive break with any alliance strategy. Last year it ended its European alliance with German firm Gleiss Lutz and Dutch firm Stibbe following the Continental firms’ decision not to take the decade-long relationship any further.
It is understood that Herbert Smith, which set in motion a review of its lockstep last year as part of Project Blue Sky, is likely to opt for a modified lockstep, much as operated by Freehills. “It’ll be a single economic merger and a single profit pool,” said a source.
Other details of the deal between Herbert Smith and Freehills include a commitment by Freehills that its partners should be prepared to be mobile across the network - signalling a planned push into China.
Up until now the firms that have combined with Australian practices have opted for arms-length tie-ups. Linklaters will maintain separate profit pools in its agreement with Allens Arthur Robinson (AAR). The two firms have formed a joint venture (JV) bringing together their Asia-focused energy, resources, and infrastructure lawyers and will share revenue on a matter-by-matter basis.
Although Ashurst has entered into a strategic alliance with Blake Dawson with the intention of completing a merger after three years, Norton Rose operates a Verein model with Deacons.
Last year Freehills turned over A$511m, according to Australia’s BRWMagazine.
Readers' comments (20)
Anonymous | 22-Jun-2012 9:38 am
Will it save them money?
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Anonymous | 22-Jun-2012 9:43 am
Could it be that this sudden urge to embrace a full merger is in fact Herbies realisation that it has some serious gaps to fill across the firm? Will Freehills partners be relocated to London?
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Economicwarfare | 22-Jun-2012 10:55 am
While the financial crisis or Great Recession that began in 2008 dominates our financial consciousness, it strikes me that the events that began in December 2010 and will no doubt continue through the U.S. presidential election in November 2012 may have more of a lasting impact on our collective economic futures.
Thanks,
Economic Warfare Book
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Anonymous | 22-Jun-2012 11:56 am
Game changer
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Anonymous | 22-Jun-2012 1:16 pm
Wow, an actual merger... big
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Insider | 22-Jun-2012 3:08 pm
Assuming the deal gets approved, Herbies is keeping its separate lockstep for the time being. The deal requires a second vote at a later date before any changes get made to the Herbies lockstep. The turkeys aren't voting for Christmas just yet, but this is the first step.
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DavidW | 22-Jun-2012 3:29 pm
Freehills + Herbies = FREEBIES!
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Anonymous | 22-Jun-2012 3:41 pm
Does this mean they will soon be launching a redundency program for Freehills in Sydney and Melbourne? It's the Herbies way afterall. Manage profits through redundencies since they're incapable of generating a meaningful revenue per lawyer figure.
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Skeptic | 22-Jun-2012 4:03 pm
Freehills has considerably more equity partners than Herbert Smith, where more than half of the partnership is non-equity. If they are truly going to merge into a single equity partnership it will crush Herbert Smith's profit per equity partner numbers, which already lag considerably behind all of the Magic Circle firms. How will Herbert Smith continue to manipulate their profit numbers without their huge number of non-equity partners to hide their pathetic financial performance?
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Gordon Gekko | 22-Jun-2012 4:16 pm
Poor James Palmer must be mortified to see his precious lockstep going the way of the dinosaurs. I wonder how this will impact their "collegial" culture that they treasure so much. I bet it won't be collegial when they have to start trying to justify their paychecks in a non-lockstep firm. Welcome to the wonderful world of capitalism gentlemen!
Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Freehills, but that other malfunctioning partnership called Herbert Smith!
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Anonymous | 22-Jun-2012 4:34 pm
So Freehills partners in beautiful Sydney and Melbourne should be prepared to move to Beijing and Shanghai. Get ready for record high pollution levels, horrific traffic and tainted milk!
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Anonymous | 22-Jun-2012 6:42 pm
Dewey Ballantine and Lebouf Lamb merger redux.
Two failing firms merging to try and pretend the can merge their way out of fundamental business problems.
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Anonymous | 24-Jun-2012 6:03 am
Freehills partners relocated to London? Talk about deja vu - Freehills tried expanding into London and it was as abject a failure as its forays into Asia have all been. Freehills needs Herbies much more than vice versa, notwithstanding the mess Herbies have created around the globe.
Either Freehills sell themselves into this second tier partnership now, or slide inexorably towards third-tier, then fourth-tier, then also-ran as the global elite leave them in the dust. Their Asia presence is already rated fifth tier to unrankable, depending on which league table you pick up.
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Deadly Lampshade | 25-Jun-2012 8:08 am
Freehills sole named foreign office Singapore will be the first sacrificial lamb surely!
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Anonymous | 25-Jun-2012 10:56 am
No doubt this bright idea will result in still more redundancies within HS - these were clearly enforced with the intention of accommodating Freehills' workforce and that there will be another round of them to make the correct "shape" of the firm ("pearshaped" comes to mind.....)
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Anonymous | 25-Jun-2012 1:00 pm
Still seems a very strange deal: culturally it's all wrong - Freehills are pretty arrogant and they are letting Herbert Smith (who are pretty arrogant) take them over?
They should have look one tier down and merged with someone like Simmons or Camerons and developed a joint-Asia strategy as a combined entity.
Suspect many Freehills partners will regret this.
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Anonymous | 25-Jun-2012 1:07 pm
Funny the number of snarky comments here! A couple of questions:
How is a single profit pool going to work given the likely on-going variance in £-A$ exchange rates?
What are the actual PPP *not PEP* numbers for each firm? And in the post-Dewey world, how much net debt does each firm have?
On relocations, why on earth would any Freehills partner move to London in the current market?
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Rio | 25-Jun-2012 5:43 pm
Aside from a few top Aussie partners, Herbies is going to turn Freehills and its relatively lower paid staff and junior associate tier into a huge Antipodean outsourcing centre that will make the Belfast workhouse look minuscule.
(That kind of cost benefit aside, this deal still strikes me as quite odd, but think it will go through just to save face).
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Insider | 26-Jun-2012 1:11 pm
I think it's more likely that a spate of London corporate partners will be relocating to the Sydney and Melbourne offices of Freebies. Herbert Smith's way of dealing with underperforming partners is to move them to another office.
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Anonymous | 26-Jun-2012 2:11 pm
You mean like relocations to Singapore? Dubai? Qatar?
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