Dentons-Sonnenschein merger will be one of many, says Howard Morris
A “tide of economic events and business developments” will push UK firms to extend into the US, according to Denton Wilde Sapte chief executive Howard Morris, whose firm is preparing to merge with US counterpart Sonnenschein Nath & Rosenthal.
In an interview with The Lawyer, Morris said he was “proud to be in the same market as Simmons & Simmons and CMS Cameron McKenna”, but thought the £500m proposed merger between his firm and Sonnenschein, which The Lawyer revealed last Wednesday (26 May 2010), would put clear blue water between Dentons and its competitors.
“Our vision is to extend further round the globe and into more sectors,” he said. “I think our peers are going to have to recognise that there’s a tide of economic events and business developments that are increasingly pushing towards US [coverage]. We recognise – as have Hogan Lovells and DLA Piper – that there are opportunities there.”
While there are similarities between the SNR Denton and Hogan Lovells deals in terms of management structure, the use of a Swiss Verein and the decision to abandon lockstep, Morris pointed out that talks with Sonnenschein began before the Hogan Lovells merger became public. He added that he had “always wanted” to change the firm’s remuneration system. “Hogan Lovells was a corroboration that our analysis of the market is correct,” he affirmed.
Despite the obvious similarities between the two deals, Hogan Lovells co-CEO David Harris emphasised the differences: “There is an undoubted trend towards clients wanting to have their work handled by a single firm in the major economic and financial centres around the world, so scale, quality and coverage are increasingly important. The underlying trends are therefore likely to lead to more transatlantic mergers, although other factors may be the prime drivers beyond the strategic and business rationale we found so compelling.”
But Kent Zimmermann of US consultancy Zeughauser Group, which advised Lovells on its merger, thought the macro-economic drivers behind the two deals were broadly similar. He identified these as recognition of the importance of the US market, the need for a global platform and a “battle for market share”. He also thought that together the two combinations would trigger accelerated consolidation in the market.
However, while managing partners among Dentons’ peers recognised the trend for transatlantic tie-ups, they were keeping their own options open. “There seems to be a bit of a fashion for these things at the moment,” noted Simmons & Simmons managing partner Mark Dawkins. “We think we’ve got a market position and a strategy that works for us, but obviously we’ve got to be alive to the changes happening.”
“There is a trend [towards consolidation],” agreed Berwin Leighton Paisner managing partner Neville Eisenberg, “but it’s over a long period [of time]. We work with a group of law firms across the US. Our strategy abroad is in emerging markets – that’s going to be our focus. There’s room in the market for different models,” he said.
With a turnover of $473m (£328m) and average profit per equity partner (PEP) of £540,000 in the 2009 financial year, Sonnenschein is twice as large and one-and-a-half times more profitable than Dentons, which carried out due diligence on a further two US firms before opting for this particular arrangement.
But Morris brushed off assertions that the deal was the result of a buyer’s market for UK firms. “I think we’ve got a fair deal and I think they have too,” he said. “Both firms have their good sides and flaws. We have two fundamental things in common – quality of service and a perception of our brands that lags behind that service.”