Square Mile

My firm has never been involved in merger talks, and therefore neither have I. But I have plenty of friends who have. Frankly, I feel sorry for them, and this is why.

The fact is that the probability of a successful merger between substantial City firms, of comparable size and stature, is both small and diminishing.

Note my qualifications, then look back 10 years. I am not talking about a firm absorbing a much smaller one – Lovell White & King's absorption of Durrant Piesse, for example – but the fusion of firms of broadly equal "weight". I can think of nothing like this since the creation of Clifford Chance more than a decade ago, or Cameron McKenna in 1997.

It is too early to say how well the latter combination has gone, or where it will lead. However, a judgement about the creation of Clifford Chance can certainly be made, and it can only be a positive one. I offer three reasons. First, two very large firms for their day came together to become one of only a handful of firms that can genuinely be described as "global". Second, this was achieved with an acceptable level of attrition in terms of people, morale and profitability. Third, the merger was achieved quickly and secretly.

It is these last elements that have been missing from more recent negotiations. The debilitating grind of the rumour mill adds to the pity of it all.

We all heard and read, with decreasing fascination, about the long, eventually doomed, discussions between Denton Hall, Richards Butler and Theodore Goddard; about Arthur Andersen's efforts, first with Simmons & Simmons and then Wilde Sapte; about what Ashursts may be doing; and so on.

It is no cliche that mergers between large firms are very difficult to achieve, even at the best of times. The simple question, "Will two and two make five?", is the right one, but of course it can only be answered after many other hard questions – about clients, profitability, property and IT, for example – have been answered. The most important consideration is whether there is cultural compatibility in terms of the ambitions, relationships and constitutional habits of their staff.

Finding the right answers requires a tremendous amount of time, effort, distraction and money. To succeed, merger discussions must begin with a good deal of emotional and strategic momentum and be able to withstand fractiousness as they progress. When they fail, internal morale must be restored, clients soothed and disappointment overcome. Above all, the question "What now?" emerges again.

All this is hard enough for my most resilient, thoughtful and successful friends. It becomes much harder when so much that was once private is played out in public. More indeed is the pity.