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Let’s play Pollyanna for a moment. Could it be that the collapse of the alliance with Gleiss Lutz and Stibbe is a blessing in disguise for Herbert Smith?
One of the many problems with the alliance was that it allowed Herbies partners to delude themselves that the international issue was, well, not an issue. The Gleiss-Stibbe relationship functioned in marketing terms and allowed Herbies to say it was hefty in Europe. But they all essentially operated in separate spheres. This means that the rupture is less seismic than a demerger; but now that the alliance is definitively at an end Herbies is going to have to make its strategic choices based on realism rather than wishful thinking.
The danger for Herbies is if it retreats into its rabbit hole. If Herbies was a different sort of firm it would use the energy of rejection to galvanise its global practice, as Latham & Watkins did when Ashurst couldn’t quite bring itself to the altar. Or it would get ruthless with its former alliance partner, as Allen & Overy did with Gide’s capital markets practice in Paris and which became a useful trial run for its subsequent aggressive raids around the globe. Or it could finally get around to opening in New York and go full-pelt for an Asia-Pacific deal. But as this column has observed on many occasions, Herbies’ problems have stemmed precisely from its penchant to avoid anything disruptive - meaning anything that might require risk.
Last week TheLawyer.com readers were helpfully suggesting all sorts of solutions, including merging with Shearman & Sterling or Vinson & Elkins. It would certainly be a mistake to spend serious time trying to build up in Germany. Another alliance would be laughable and it takes a long time to prise out partners. And the fact that Herbies and Gleiss worked together on such a limited basis shows that Germany is no longer the categorical imperative it was a decade ago. Indeed, it’s a very different world from when the alliance began, when UK firms were busy transforming the Continental landscape. For a start, the prosperous German firms are unlikely to hook up with a UK practice whose growth prospects look uncertain. As the King & Wood-Mallesons deal shows, it’s not just the Western firms that call the shots any more.