The US firm would gain access to Europe, but what’s in it for SJ Berwin?
Proskauer Rose has battened down the hatches as its merger talks with SJ Berwin enter an advanced stage – the firm said it preferred not to comment on this article. But while Proskauer may be reluctant to speak about its potential tie-up, market observers are not.
Mergers are always guaranteed to get tongues wagging and the Proskauer-SJ Berwin talks are no different. Several recruitment consultants contacted by The Lawyer, for example, believe a tie-up looks increasingly imminent. Yet many appear unconvinced over the potential benefits for both parties, and in particular where SJ Berwin fits into Proskauer’s strategy.
Proskauer is long established in New York, where it first opened in 1875, and has developed one of the country’s pre-eminent labour and employment practices. It is also well-known for its investment funds, real estate and sports law capabilities.
Proskauer has certainly been active in the recruitment market. Since 2006 it has made a total of 82 lateral hires, 47 of whom arrived as partners, and this hiring pattern says much about the firm’s strategy.
The biggest area of growth has been at the New York headquarters, where there have been 25 hires. Sixteen have been made in Washington DC, seven apiece in London and Paris, six in Boston and four in Chicago.
In terms of practice areas, the highest levels of investment were, unsurprisingly, in labour and employment as well as investment funds, both of which saw 15 lateral hires. Significant investment has also been made in the corporate and finance practices.
In the current climate the firm’s global strategy is of more interest. It opened a spate of offices during the 1970s, expanding its US reach into DC, Los Angeles (LA), Newark and Boca Raton. But it was not until 1991 that it made its first foray outside the US, when it opened in Paris. Unlike many of its New York contemporaries, however, this was not the beginning of a golden period of international expansion. It was another 13 years before it opened its next office.
By 2004 a clear shift in strategy began to emerge as the firm, which had previously been noted for its conservative approach, opened offices in New Orleans and Boston.
Three years later it embarked on its next stage of growth, establishing bases in London and São Paolo. A year later it opened in Beijing, Hong Kong and Chicago.
While global expansion was clearly on the agenda in the noughties, the firm appears to have struggled to develop some of its offices outside the US. London is a case in point. When it first opened in the City three years ago – in an operation spearheaded by former O’Melveny & Myers managing partner Matthew Hudson – it quickly began bringing in new partners, including finance partner Michael Crosby from Addleshaw Goddard.
But the office, which remains focused on its funds practice, is only a bit player in London, with just five partners and four associates.
The London office also received a setback earlier this year when Hudson left the firm, later to be replaced by Mary Kuusisto. In Paris, too, the firm has experienced difficulties. Last autumn it was hit by a series of partner defections, including a group of construction and project partners that left to set up a boutique practice, forcing Proskauer to shelve plans to develop a full-service offering in the French capital.
The greatest benefit to Proskauer of a tie-up with SJ Berwin would be instant access to markets in London and Europe, thanks to the latter’s extensive network of offices, which include bases in Berlin, Brussels, Frankfurt, Madrid and Milan.
Expansion in Asia is believed to be high on both firms’ agendas. But that would require a sizeable level of investment considering both firms are relative newcomers to the region. Certainly neither party would be buying into a ready-made practice: SJ Berwin has seven partners across its offices in Hong Kong and Shanghai, while Proskauer has just three.
One managing partner at a US firm’s London office is cynical about the benefits of a merger for SJ Berwin.
“Proskauer’s long been regarded in the second tier of New York firms, akin to the second tier, the silver circle, in the UK,” says the lawyer. “They’re primarily known for labour law and they’re certainly not considered a New York corporate player.
“I think [the merger] is an easy way for Proskauer to get into the London market because it means they can ride on the coat-tails of SJ Berwin.”
While SJ Berwin will gain access to key markets in New York, Chicago and LA, lawyers in the US say this will not secure it involvement on the country’s elite transactions.
A senior figure at a leading New York firm says: “I see firms like Sullivan & Cromwell and Cravath [Swaine & Moore] every day, but I never see Proskauer. That doesn’t mean it’s not a fine firm or that it’s not profitable, but it’s not a Wall Street practice.”
Proskauer had a disappointing year in 2008 when average profit per equity partner (PEP) fell from $1.55m (£844,000) to $1.4m, one of the more significant reductions among US firms that year.
The situation improved in 2009 when the firm was ranked 47th in The Lawyer’s top 50 international firms, with a turnover of $643m, up 1 per cent on the 2008 figure, while its average PEP bounced back to $1.5m.
If the merger goes ahead the combined income of the two firms is estimated at £620m. It would certainly elevate both firms up the global rankings by revenue, but questions will remain over the fit.
As one recruitment consultant tells The Lawyer: “[Proskauer has] found it quite difficult to grow in London, so a merger seems a natural thing to do, and it looks like it will go ahead. SJ Berwin is a good fit for Proskauer, but is it a good move for SJ Berwin?”