The 160-partner mega-merger… to form the UK's eighth largest law firm. This opening statement is spliced together from two front page lead stories in The Lawyer.
The first appeared on 18 February 1987 and describes the merger of City firms Clifford Turner and Coward Chance to form Clifford Chance. The second appeared 10 years later on 7 January 1997 and refers to the merger of Cameron Markby Hewitt and McKenna & Co to form Cameron McKenna.
That the two fit seamlessly together reflects the overriding legal theme of the past 10 years – the biggest restructuring in the history of the profession in the UK.
The formation of Clifford Chance was a vital catalyst in this process, according to Tony Willis, who, as managing partner at Coward Chance, was intimately involved in the merger both before and after the event.
“We caught the market by surprise and we showed it could be done. Until then, we all thought 'merger' was merchant banker-speak for corporations. It changed the atmosphere. We were one of the first to see that there would only be a limited number of international players, and that we wanted to be one of them,” says Willis.
Although mergers can often be defensive, the primary motive is material reward. In the latest survey of the premier legal practices, The Lawyer Top 100, five of the eight leading firms thrust themselves into the “bulge bracket” by means of merger: Clifford Chance, of course, Eversheds, Lovell White Durrant, Dibb Lupton Alsop and – with the ink still wet on the contract when the Top 100 list went to print – Cameron McKenna.
But the sheer desire to be bigger does not drive every merger, “they have proved to be an outstanding success for the clients,” says Dibb Lupton Alsop managing partner Nigel Knowles.
In 1987, the four firms of Alsop Stevens, Wilkinson Kimbers, Dibb Lupton and Broomhead turned over in the region of £4-5m each. On 5 April 1997, the four firms, which had combined through two mergers into Dibb Lupton Alsop, reported annual earnings of £100m. Projected earnings for the current financial year are some £115m.
Knowles identifies the advantages of a larger practice as comprehensive service, geographical coverage, and critical mass. “That is what you have to offer to be relevant to corporate clients,” he adds.
Dibb Lupton Broomhead and Alsop Wilkinson were not seen as natural partners. The former was a fresh, aggressive entity which sprung from nowhere in the 1980s and spread rapidly in the north of England and the Midlands, establishing itself in corporate, commercial and property work. Alsops, by contrast, traced its roots to 1821 and was very much a London firm, working in banking and intellectual and commercial property.
The view among sceptics has been that the merger was a match of weakness. Dibbs was a regional entity unable to break into London. Alsops was a second-tier City firm lacking a hinterland, cut out from the top by the concentration of the Big Five “magic circle”, and from the bottom by niche and specialist firms.
According to Knowles, Dibb Lupton Alsop avoided the cultural clash which can twist up the stress-levels of a merger and, in some cases, defeat the purpose altogether. Dibb Lupton Broomhead had already adopted a style of focused business management, structured along corporate lines – a set-up that partners at Alsop Wilkinson had also begun to develop.
Malcolm Lloyd, managing partner at Pinsent Curtis – which was formed in 1995 from a merger between Pinsent & Co and Simpson Curtis – points out the opportunity of creating centres of excellence to back up partners working in local areas. “It has given us much greater strength in depth,” he says.
The point here is not just providing a one-stop shop, to which clients can look for a range of legal services and advice, but the ability to field larger teams more quickly and more effectively, particularly in the mix of specialisations that can be brought to bear.
“What we have is mobile fee-earners who can go where the work is,” says Lloyd, “but who are also backed up by a significant presence in London.”
According to Mark Jones, managing partner of Addleshaw Booth, which was formed out of Addleshaw Sons & Latham and Booth & Co, the merger put the new firm not in the premier league of the Big Five, but in the first division, where it is able to compete for plc and bank and building society clients on both a regional and national level.
“We did a lot of analysis and research before merging,” he comments. “In the event, one of the main attractions on both sides was that both firms had arrived at a strategic plan for the UK legal market – and what we saw was a core of clients which we could build upon by coming together.”
Eversheds, a firm frequently compared in the past with Dibb Lupton, has grown almost exclusively through merger and is now the second largest firm in the UK by number of fee-earners. It has a hybrid structure, evolving a national identity, while retaining regionalised management and profit centres which remain legally independent entities.
Chairman Keith James asserts that the strategy has worked through maintaining clear long-term objectives, good management and the creation of a common culture. “You have to be careful not to think that the merger is a strategy in itself,” he says.
The other side of the merger coin, of course, is concentration and rationalisation of costs.
But it is not always a simple issue of streamlining and downsizing. According to Jones, the initial phase of the merger at
Addleshaw Booth has involved pouring additional resources into finance, information technology, organisation and marketing. “In the future, because we will not have duplication, we'll be able to streamline. But these advantages will take time.”
Clifford Chance set the pace 10 years ago by showing the success and prestige mergers can bring. The downside is that mergers can also be astonishingly unsuccessful. In April 1996, the two Manchester firms of Donn & Co and Philip Conn & Co split after a merger lasting just 29 days. At the time, managing partner Ian Morris said: “The way forward is for larger firms specialising in certain areas to work together.”
When contacted for this article, Morris would only add: “We are specialising in intellectual property and doing very well at it. The merger was a long time ago, history.”
Another danger is if a firm is seen to be vulnerable, or if the rumour-mill turns too fast too soon, when confidence can haemorrhage. In September 1988, rumours of a merger began to circulate between Herbert Oppenheimer Nathan & Vanayk and Denton Hall Burgin & Warren. Speculation intensified when it was reported that three Oppenheimer partners and their staff were defecting to Richards Butler, a phenomenon almost unheard of in those days.
The following week, further defections were reported, with three more partners going to SJ Berwin. Two weeks later Oppenheimers' own leadership defected, with senior partner Anthony Alexander taking 17 partners and 62 other fee-earners to Denton Hall. Oppenheimers, an established Top 30 City firm, had simply ceased to exist.
Merger rumours persist, but the Big Five all deny that they are talking to other City players – the problems that could arise if such firms merged would be the stuff of nightmares.
Yet the standard response that “we are not in talks with any UK firms” inevitably leads to speculation that they are going further afield. Only time (and very careful negotiations) will tell if The Lawyer Top 100 in 2007 will be full of US-UK link-ups, but with the recent inroads by US firms and their aggressive headhunting, it does seem that the 21st century legal marketplace will be transatlantic – or even global.
3. Lovell White Durrant
4. Dibb Lupton Alsop
5. Cameron McKenna
6. Hammond Suddards
7. Nabarro Nathanson
8. Addleshaw Booth & Co
9. Pinsent Curtis