AFTER 18 months of talks, Freshfields and Cologne based Deringer Tessin Herrmann & Sedemund have finally announced a 'strategic alliance' as the first phase of a full-scale merger.
From May this year, Freshfields' Frankfurt office will be absorbed into Deringer Tessin.
Operating under Deringer Tessin's name, the German operation will have about 100 lawyers. Meanwhile offices in Brussels and Moscow will be integrated and operate as Freshfields Deringer.
The move gives the UK firm a powerful ally in a legal market many foreign firms have had trouble cracking. Freshfields' chief executive Alan Peck said: 'It is a difficult market to grow organically to the size we needed.'
According to partner Ludwig Leyendecker: 'The market in 10 years will have a significantly smaller number of major players than today and concentration will be towards international networks.'
That logic is gaining ground in a country where law firms have traditionally resisted links with UK or US firms. Leyendecker believes that Deringer Tessin's competitors will be forced to respond to its move a view underlined by the talks taking place between Oppenhoff & RAdler and Linklaters.
But some lawyers remain unconvinced by the arrangement. One senior partner at a leading German firm said: 'We do not know what they mean when they say it will ultimately lead to merger. What kind of merger? How serious will it be? How strong? What will the balance of power be?'
A partner at another leading firm described it as 'problematic': 'As Deringer Tessin is much smaller than Freshfields, it runs the risk of being taken over by a larger partner.'
The alliance also raises cultural questions. One lawyer said that UK firms were more professional and hierarchical, and that Deringer Tessin partners may find the culture shock too much: 'Not many German lawyers are used to Anglo-American working styles.'
There are risks for Freshfields too. One lawyer observed that, if the merger did not work out, Freshfields could be left with nothing in Germany.
Some of Freshfields' lawyers on the ground in Frankfurt are said to be unhappy with the move. One observer said that Deringer Tessin was firmly in control and some Freshfields lawyers were deeply unhappy at the way the deal had been negotiated. Concerns about their future at the firm were also surfacing. One said that Deringer Tessin lawyers were 'all doctors, with upper second class degrees, very academic. They are not at all like the Freshfields local lawyers'.
However, Peck considers the criticisms to be unfounded. He said the takeover fear was 'a concern, but I think we have reassured them', adding 'our offices have a lot of autonomy'. Peck does not expect any fallout for cultural reasons either. He said: 'We have the same outlook on practically everything.'