Ah, what might have been. Clifford Chance’s abortive negotiations with Mallesons to create a £1.6bn-turnover firm, which we reveal today, could have been the most exciting law firm tie-up of the year.
Last year we reported on David Childs’ wish for the firm to reboot itself in the US (The Lawyer, 23 July 2007). Since then Clifford Chance appears to have emotionally disengaged itself. Indeed, taking the long view, the US operation has actually shrunk since merging with Rogers & Wells. Frankly, it’s been nothing but trouble.
Last week’s exit of four senior US litigation partners (yet another wrangle over equity points) was an unedifying sight. The US litigation business is hardly bringing in truckloads of dollars. Most of the firm’s financial institution clients seem to want to settle, and the predicted upsurge in work hasn’t happened: hence the 20-odd redundancies in New York in the autumn.
No wonder an Asian solution presented itself. Any Mallesons deal was conditional on the Australian firm slimming down; Clifford Chance has evidently learnt one thing from its US experience in trying to get the weeding done beforehand. It would have definitively shifted the firm’s emphasis east and delivered some crucial differentiation within the magic circle. Revenue from the region would have leapt from £106m, or 8 per cent of current turnover, to nearly £350m, which would have accounted for 22 per cent of any merged entity.
The collapse of Lehman Brothers and the worsening credit crunch put paid to all that. It wasn’t just uncertainty over workflow and profit, although that was part of it. Also hovering was the ghost of Brobeck, Clifford Chance’s last bold venture. But the fact is that the apparently eternal verities of law firm strategy no longer exist post-Lehman.
Financial institution clients can no longer be relied upon. How do you cement your relationships with banks when half of them are no longer global power players? This isn’t just a question for Clifford Chance – it’s applicable to the entire magic circle.
In this context a big, fat merger deal seems…well… very 2006. Back to the drawing board.