Getting the German strategy right

Merging with a German firm seems to be flavour of the month as UK and US firms chase their German counterparts. Linklaters and Clifford Chance led the way and now Freshfields is following suit.

Freshfields' link-up with Deringer Tessin, which The Lawyer revealed some 18 months ago to be on the cards, caused some degree of surprise among observers. The German company is a medium-sized Cologne-based firm, chiefly known for its strengths in competition law. Its interest in Freshfields stems from its need, among other things, for a higher international profile.

Freshfields' interest in the merger seems to have arisen from a need to do something substantive in Germany. To date it has followed a go-it-alone approach in Germany with an office in Frankfurt staffed by a mix of UK and German lawyers. However, this latest move gives substance to the fact that this office was not working in the way Freshfields would have liked.

It is a dilemma which has faced most firms looking to make their mark in Germany. As it now stands, Deringer Tessin is running the German operations, and Freshfields lawyers on the ground look to have been marginalised.

The strategy is a high-risk one for Freshfields as it will have to ensure that the merger works or be left without a German presence if the relationship breaks down.

It will be a rocky road with cultural differences between the two firms, which is one major issue to be dealt with.

Whether Deringer Tessin a highly profitable firm really wants to invest in Freshfields' international network is another issue which may rear its head at some point in the future.

As one senior German partner pointed out, it will take at least a year before the full impact of the alliance becomes apparent.