A decade and a half after US firms started taking the London market seriously and opening in the City, a wave of transatlantic mergers no longer seems outlandish.
Dentons’ deal with Sonnenschein – revealed on TheLawyer.com last week (26 May) – has a slightly different motivation from that of Hogan Lovells, but both have capitalised on the fact that many US firms are shaking themselves free of their traditional insularity.
o begin with, a system of separate profit pools – something pioneered by DLA Piper – now make the transatlantic merger an entirely feasible proposition. A mismatch in PEP is no longer the dealbreaker it used to be, and management can get on with integrating client services rather than coping with all those playground wrangles over partner payouts. Note: this does not apply to magic circle firms, which toil under the austere rigour of the unified profit pool; anything less would damage their brands.
That said, it is remarkable that these mergers are allowing the management to accelerate some cultural change; both the UK ends of Hogan Lovells and SNR Denton are getting rid of their modified lockstep. Without a transatlantic merger to distract the partners, it’s unlikely that either partnership would have embraced such a change.
Meanwhile, managing partners of mid-tier UK firms are uniformly reporting a vast increase in approaches from US practices. Now, you might argue ’twas ever thus, but the difference is that US firms are belatedly realising there’s only so much growth they can accomplish at home. Suddenly the attractive targets are not necessarily the quality domestic firms such as Macfarlanes, Travers Smith, BLP or Nabarro, but the less fashionable mid-market brands such as Eversheds, Pinsent Masons and Trowers & Hamlins – all of which have invested in international networks, particularly in emerging markets. It also puts Simmons & Simmons, CMS Cameron McKenna and Norton Rose right at the top of any major US firm’s shopping list.
Within five years there will be a credible tier of international firms beneath the transatlantic elite of the Sweet Sixteen. Whatever you think of the Sonnenschein-Dentons deal, they’re in the vanguard of something big.