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24 June 2013
There's always gossip in the City about the next transatlantic merger, but in truth there has only been a handful of US-UK link-ups. The most obvious examples are DLA combining with Piper Rudnick Gray Cary; the former Rowe & Maw merging with Chicago-based Mayer Brown & Platt to create Mayer Brown Rowe & Maw in 2001; and Gouldens being taken over by Cleveland giant Jones Day in 2003. And let's not forget Clifford Chance's absorption of New York's Rogers & Wells in 1999. Now transatlantic traffic has slowed to a trickle - although Olswang did enter into a formal alliance with Miami-based Greenberg Traurig in 2005.
So the news that Richards Butler is about to merge with fast-growing US national firm Reed Smith will kickstart the merger market all over again. Richards Butler was in talks with New York-based Proskauer Rose in early 2005, but the talks quickly foundered. Since then, Richards Butler has been on the hunt for the right partner to suit its own blend of litigation, shipping and media. It's not an easy match: shipping doesn't make much money these days, and Richards Butler's average partner profits (the main benchmark for merger negotiations) are relatively mediocre. What's more, it's Richards Butler's spectacularly successful Hong Kong office that makes the serious money. Without Hong Kong (which turns over £30m a year, around a third of Richards Butler's total revenue) average profits are £375,000. This may sound like a lot, but prospective US merger partners see it differently.
For Reed Smith, it's the latest chapter in an astonishing growth story. In 2001, it took over City boutique Warner Cranston, but was still virtually unheard of. Since then, managing partner Greg Jordan has pulled off five mergers, mostly in the US, and transformed an unfashionable Pittsburgh firm into one that is comfortably in The Lawyer's global top 30.
Freshfields freshens up
It's all change at Freshfields Bruckhaus Deringer, too, where the new management seems to be thinking the unthinkable. For years the magic circle firm has been wedded to the principle of traditional lockstep (partner pay by strict seniority rather than on bonuses or by merit) and an all-equity partnership, with no salaried layer or entry level of younger partners. The all-equity partnership has some advantages - there's no class distinction within the ranks, which causes so much friction at other firms. However, the pressure to have a more flexible partnership structure is increasing, as evidenced by Freshfields' decision to discuss junking the all-equity principle. (Believe me, this is a revolutionary notion at Freshfields.)
More evidence that the Freshfields management is willing to consider other radical ideas was the news that the firm was setting up a mentoring programme for its female associates. This scheme is the latest push to do something about the woeful ratio of female partners at the firm. According to The Lawyer UK 100 Annual Report 2005, just 11.8 per cent of partners at Freshfields are female. Meanwhile, 15 per cent, 12.3 per cent and 14.7 per cent of the partner population is female at Clifford Chance, Linklaters and Allen & Overy (A&O) respectively. For a firm that has struggled to shed its outdated image of being for Aryans and rugby players, this is off-the-wall stuff.
Up, up and away
The theme of partnership promotions is topical. From Easter onwards firms start publicising their partnership announcements. In March, The Lawyer published its first Career Report, which analysed the track record of every firm in the The Lawyer UK100 and the top 30 international firms in London regarding partnership promotions. (Find out more at www.the lawyer.com/careerreport.)
If a firm is doing well financially it tends to make up more partners. The number of promotions is also partly dependent on the structure of the partnership. It tends to be easier to make salaried partner at a firm that has a flexible structure with different layers of equity or ownership.
As Lawyer 2B went to press, the promotion announcements were still coming in. However, Eversheds was one of the biggest promoters this year with 24 new partners, seven of whom were in London. Employment, litigation and real estate dominated. Magic circle firm A&O reversed its trend of declining promotions with no fewer than 33 compared with 14 the previous year and 28 the year before. Thirteen of those promotions were in London. Linklaters promoted a similar number, with 32 new partners - the same as the previous year.
At the lower end of the scale is Freshfields with 10, the lowest in four years (hence the internal discussions regarding its structure). Herbert Smith also increased its partnership by only 10, while fellow silver circle firm Ashurst made up 15.
Full details of all these stories can be found at www.thelawyer.com