For a market not naturally given to gossip, the Dutch legal sector is awash with rumour. Against the backdrop of a wave of M&A across Europe, the last 12 months have been deceptively quiet. In terms of law firm upheaval, the biggest event was the split of Trenité van Doorne in October last year, apparently to boost the international merger appeal of one or both of its Dutch offices. The two practices finished the year by symbolically reverting to their maiden names of Van Doorne in Amsterdam and Nolst Trenité in Rotterdam. The marriage lasted some 10 years.
Other flashpoints include the resignation of Nauta Dutilh's chairman Henri Ophof amid management discord; and a partnership vote at Houthoff Buruma in favour of pursuing an Anglo-Saxon partner.
Then there was Lovells' announcement of its forthcoming merger with Ekelmans den Hollander after partnership votes at both firms in December last year. Lovells thus became one of eight UK firms to be represented in the Dutch market, following in the footsteps of Allen & Overy (A&O), Clifford Chance, CMS Cameron McKenna, DLA, Eversheds, Freshfields Bruckhaus Deringer and Linklaters & Alliance.
The last 12 months, of course, has also seen enough defections from Dutch firms to undermine any last belief that partner loyalty has a place in the global market. The richest pickings came from Stibbe (three), Nauta Dutilh (three) and Trenité (two).
Dramatic stuff indeed, but small fry compared to the events of 1999, when A&O and Freshfields invaded the Dutch market with spectacular results. A&O successfully exploited the split of Loeff Claeys Verbeke, taking on 32 of its partners, while Freshfields adopted a greenfield approach, ramraiding magic circle firms for partners. In fact, it is impossible to imagine the Trenité split and the Lovells-Ekelmans merger without those precursors. “Last year was the continuation of a trend that started two years ago in a very obvious manner, with the demerger of Loeff Claeys,” says Sietze Hepkema, managing partner of A&O's Dutch office. “2000 was relatively calm. It was both a continuation of the 1999 trend and a time to settle down.”
Stibbe chairman Allard Metzelaar takes a similar point of view. “The Trenité split was something, but Loeff Claeys split the year before, so it wasn't as sensational,” he says.
Given all the upheaval of 1999, last year was a chance to consolidate. “It's proven to be good for us and good for clients,” says Clifford Chance partner Ate Veenstra. “There's a lot more client focus now because there's more competition among firms.”
Yet there is something unsettling about the relative quiet, a feeling that the market is holding its breath in anticipation of the next round.
Early in the New Year, rumour had it that Nauta Dutilh would follow in the footsteps of Trenité and Loeff Claeys by splitting in two. There is also speculation that Stibbe will merge with Herbert Smith. The two firms are known to have been in talks three or four months ago, but Stibbe has since confirmed its independent stance and begun the new year with a rebranding exercise, dropping the Simont Monahan Duhot in favour of a single name. The firm continues to work with Herbert Smith, Slaughter and May and Norton Rose.
“I know there are rumours around,” says Metzelaar. “The problem is that we're rationalising and strengthening our relationships with a number of firms. We have secondees in Amsterdam both from Herbert Smith and Slaughter and May. That doesn't mean we're going to merge, but we're giving much more attention and importance to those relationships and using them in our marketing to show that we can provide a cross-border service. Clients take an interest in international capability.”
Another Stibbe partner suggests that at least one of the firm's special relationships may soon fizzle out. The source says: “There are of course rumours that Norton Rose wants to merge with a Dutch firm. We expect to see them around as a competitor in due course.”
Herbert Smith and Norton Rose are both mentioned as potential partners for Houthoff Buruma, and so the list goes on. But true or false, such rumours are an important gauge of what might be in store.
“Every firm goes through a process of reconsidering what position it wants to take in the market, and I'm sure we'll see other developments this year,” says Hepkema at A&O. “In our league there are two firms to watch, Stibbe and Nauta Dutilh. Both have challenges to meet and both say they want to stand alone. But I think one will come back on that decision. Which one will depend on the pressures they feel.”
There is now widespread recognition of two distinct categories within the market – the international firms on the one hand and the remaining Dutch firms, which must either face a marginal domestic role or be swallowed up by outsiders. Freshfields' Dutch managing partner Hans Galavazi doubts how many more new entrants the Dutch market can support, in terms of both clients and recruitment. “I doubt whether the Dutch market is big enough to accommodate more than four or five big Anglo-Saxon firms,” he says. “There may be room for one other big office, but I think that will be it. This isn't Wall Street.”
The spotlight this year will also be on Linklaters & Alliance member De Brauw Blackstone Westbroek. The promised merger is now long overdue, with size and profitability the likely culprits of the hold-up. A source at one UK firm says: “De Brauw must either merge with Linklaters this year or forget it. If they keep postponing, people will lose interest.” A Dutch source says: “More and more you hear rumours that it's not a done deal. Either they have to merge lock stock and barrel, with De Brauw becoming part of the equity, or not at all. From De Brauw's point of view, anything less is an anathema. It doesn't have to merge. De Brauw has a very strong culture. It will only do it if it is satisfied with the terms.”
Not surprisingly, De Brauw chairman Peter Wakkie is decidedly cagey about the talks. He does not sound overly confident about the prospect of a deal. “We're still negotiating. Until we sign we won't know for sure,” he says. “We don't set deadlines because timing isn't important. It's more important that the merger is well thought-out and carried out efficiently.”
For Wakkie, downsizing is not a means to that end, except for those not pulling their weight. “We're not prepared to lose people for the sake of a merger. But if someone doesn't perform, that's different,” he says.
Across the border in Belgium, similar stories abound about the troubles of fellow Linklaters & Alliance member De Bandt van Hecke Lagae & Loesch. “At the end of the day, it's economics that are creating problems,” says a partner at one US firm in Brussels. Another points to the fear of handing over control. “English firms tend to be quite centralised. The decisions are taken in London,” he says. But De Bandts managing partner Roel Nieudorp does his best to put a positive spin on the delay. “Setting a deadline in merger talks may have a reverse effect,” he says. “What we've always looked for is not a marketing scoop, but a structure that has been worked out in detail and ensures the objective of integrated operations. This is why timing for the various firms may not necessarily coincide. Each firm has its own peculiarities. We do, however, expect good progress in the immediate future.”
After a series of mergers and alliances over the last few years, the Belgian legal market is slightly more mature than in The Netherlands and consequently was quieter last year.
Nevertheless, there was still room for some manoeuvre. In November, a pensions team defected from De Bandts to link up with 30 employment lawyers leaving Loeff Claeys, which finally agreed to merge with A&O. The breakaway employment practice is now practising as Claeys & Engels. But it seems that there is little that can shock this worldly-wise market. “It was no surprise that A&O took over Loeff Claeys. Nor was it surprising that only part of the firm went to A&O,” says Francois Gabriel, managing partner of Baker & McKenzie's Belgian practice. “A&O is known for corporate, finance, securities and M&A. It's not surprising that those lawyers felt they had no interest in joining. The firm has kept a small labour practice, but just to concentrate on labour work which is associated with M&A.” No doubt the market is now watching for signs of impact following the A&O takeover. “We haven't seen too much of Loeff Claeys in the past on large corporate deals,” says a partner at one rival firm. With a Benelux practice now totalling around 60 partners, A&O is sure to want to change that.
The growing push of law firms linked with the big five accountants could also add to the competition. KLegal is the latest to take the extra step into Belgium. In January this year, its network of law firms was joined by Belgian practice Lontings & Par
tners. It followed Bogaert & Vandemeulebroeke, which joined Landwell, PricewaterhouseCoopers' legal arm, last July.
However, according to Gabriel, such firms are not yet competing for work at the top end. “The law firms linked up with audit firms are competing with the mid and lower end of the business, except on very specific deals. M&A, initial public offerings and securities are still a market for the top law firms,” he says. Among those he sees most are Freshfields, Clifford Chance, A&O, Cleary Gottlieb Steen & Hamilton, Stibbe and Nauta Dutilh. All of them will be keeping a close eye on the progress of the accountancy firms and any other new entrants to the Benelux markets.
But no matter what happens, most rumours this year are likely to surround Linklaters' alliance firms De Bandt and De Brauw. That speculation will end only if the deals are done. If that happens, it really would be shocking. n