It’s a tricky place, outside the magic circle. Norton Rose knows it - hence its tie-up with Deacons. And Lovells knows it too. Indeed, to borrow a phrase used internally by a senior Lovells figure, the firm was at a strategic dead-end. And the way out of this impasse is to reinvent itself through a merger.
That’s the theory, anyway. The easy thing for any observer to do is to focus on the match - the practice fit, the relative size, the comparative profit per equity partner and so on. And there are plenty of editorials out there making all the obvious conclusions, along the lines of: yeah, it kinda fits, so go for it.
I hate to play Cassandra, but none of the comment so far comes close to addressing the key point. When was the last merger of equals that really succeeded in transforming the fortunes of either side?
The Norton Rose and Deacons tie-up is an exercise in deferral and is predicated on the hope that two non-Asian firms can together crack China, while Mayer Brown ended up mired in politics.
Lovells only needs to look at its own birth back in 1989 when the merger of equals between Durrant Piesse and Lovell White & King was erroneously touted as the next Clifford Chance.
By the way, I’m not going to repeat the tedious old schtick that Lovells is ‘too nice’ to get anything done. That is clearly not the case. The firm has held its own in a difficult market and made some tidy moves in China. John Young and David Harris are perennially and unfairly underestimated. This merger of equals won’t be transformative: a single deal won’t change the market.
But as a defensive ploy, it’s not bad.
But to get this deal Lovells partners will have to give up their modified lockstep in favour of merit-based pay - and don’t underestimate how combustible an issue that is. It’s particularly sensitive since a senior group of people (including one close to the negotiations) made it clear to Lovells’ management just a couple of years ago that a move to merit-based pay would spark a revolt. It now looks as if the Lovells’ leadership might get its own way after all. Even if the deal founders, the genie’s out of the bottle.