Herbies chief delays management exit to oversee Freehills integration

Herbert Smith managing partner David Willis has been forced to delay plans to step down next year while he oversees the firm’s merger with Australia’s Freehills, after which the combined entity will be run by a sole chief executive – likely to be Freehills’ Gavin Bell.

Willis had intended to step down in April next year when his term as managing partner, which has already been extended twice, came to an end. However, Herbert Smith’s tie-up with Freehills (28 June 2012) invoked a transitional period written into the information memorandum on the merger, meaning that Willis will stay on for another two or three years.

When the merger goes live in October, Willis will serve as joint CEO along with Gavin Bell, currently Freehills’ managing partner.

When the transitional period comes to an end, Willis will step down and the combined firm will move to appoint a single chief executive. The appointment process will be overseen by the firm’s governance board and then ratified by a partner vote.

One source close to the firm said that Bell’s position means he is the most likely candidate to become the combined firm’s sole head: “My understanding is that David Willis was intending to retire this year, but will stay on because of the merger, and then Gavin will take over as managing partner,” said the source, adding that if that was the case it would give credence to talk that some Freehills’ partners consider their firm the stronger party in the relationship.

That said, Herbert Smith senior partner Jonathan Scott will head the combined firm’s governance board, which sits atop the management team.

Over the integration period, Herbert Smith and Freehills’ remuneration will align, subject to a consultation within the firm, creating a modified lockstep where partners are are awarded shares based on experience but also on performance. At present Herbert Smith has a pure lockstep, while Freehills has a modified lockstep.

It is not yet known whether Willis, a corporate lawyer by background, will stay on at the firm when he eventually steps down.

Willis became Herbert Smith’s first managing partner when he was appointed for a two-year term in 2008 (21 April 2008), but before that term expired it was extended to 2011, and then extended again in 2011 to 2013.