For a man who declines to comment on the detail of the merger negotiations with BLP, Greenberg Traurig executive chairman Richard Rosenbaum is pretty forthcoming on where his red lines are: culture and compensation. As our main feature this week details, these will be the major sticking points of the negotiations. The GT governance culture is not a chummy one; Rosenbaum and his CEO Duffy rule the show, with some consultation with a 21-strong executive that operates more as a sounding board. This is not a participatory democracy.
Amidst all the generally positive noise about BLP-GT talks, nobody has yet picked up a fundamental difference in the two sides’ approach to partner remuneration. The US firm operates a ‘black box’ compensation system in which no partner knows what another is getting. Some lawyers throw up their petticoats at the thought, although a closed compensation system is pretty much standard in most other industries. You can certainly see why the executive might want it; it saves time and stops a lot of navel-gazing. As Adam Smith, Esq’s Bruce MacEwen notes, its virtue resides in “eliminating the rivalry of smaller differences”. But for it to work partners need to trust the management that they’re being fairly treated. Moving from an open system to a closed one will be a huge cultural shift – as will getting rid of any semblance of a lockstep ladder. It will be of immediate benefit to the real estate stars, but for most of UK partners it will be a leap of faith.
BLP partners may, however, figure that the practice benefits outweigh transparency. As a top real estate player BLP is cooking up a seriously game-changing deal in the mid-market. The German partners from each side might have to go on a few dates with each other, but London will see little disruption. In fact, it will be the biggest office in the firm, just as it is with Hogan Lovells and Baker & McKenzie.
Where BLP has accidentally been smart is in retrenching to its core brand of real estate and putting the big private equity and finance ambitions on hold. Stopping hiring superannuated magic circle partners was a good move, given the cultural costs.
There is another card that BLP holds. Unlike GT, it’s done mergers before and it knows a lot about integration. Furthermore, GT could do with this deal; it may be one of the biggest firms in the world but revenues have flatlined for years, hovering around the $1.2bn-$1.3bn (£850m-£920m) mark since 2008.
Internally, the deal is not being presented as a GT takeover, but it might be the last time BLP partners get to vote on anything. Let’s hope they take time to savour the moment.
