The Düsseldorf office of Bruckhaus Westrick Heller Loëber needed some permission to vote for the merger with Freshfields. Catrin Griffiths analyses the problems that inevitably arise when two firms of very different cultures merge
So Freshfields has won the prize which Clifford Chance, Herbert Smith and Shearman & Sterling had so assiduously courted. Yet among the sighs of relief, there was just a whiff of unease at Whitefriars.
After the setback of the first vote, when the requisite majority was not secured (The Lawyer, 24 April), the negotiating team embarked on a softly-softly approach.
The Freshfields side – Alan Peck, Anthony Salz and Ian Terry – and the Bruckhaus Westrick side – Christian Wilde, Harald Voss and Ralph Wollburg – had to convince the powerful core of the Düsseldorf office, which had felt railroaded by the speed of the original merger discussions.
Although the first-time ballot was ostensibly secret, it was well-known within the firm that the Düsseldorf lawyers were the most vocal contingent supporting the status quo. Ironically, the fact that Wollburg got involved on the Deutsche/Dresdner deal slap-bang in the middle of the negotiations created a communications gap with the Düsseldorf office which he was nominally representing.
Ludwig Leyendecker, now joint managing partner of the merged German firm, says: “If you're merging two top-end firms in the service industry, you have a lot of strong individuals who, when they are subject to change, take some time to adjust.”
And from their Rhineland citadel, the Düsseldorf lawyers might have had a point. After all, if there was one firm in Germany which could have gone it alone, it was probably Bruckhaus Westrick.
Wollburg and his colleagues Christian Decher, Christian Gehling and Eberhard Seyder have dominated the German corporate scene over the last couple of years. According to the leading German legal directory JuVe Handbuch, Bruckhaus West-rick is one of the best-known and best-rated firms for Aktienrecht – stock corporation law. Aktienrecht, in German terms, is distinct from M&A, and is essentially relationship-driven, rather than purely transaction-driven.
Those firms strong on Aktienrecht – others include Hengeler Mueller Weitzel Wirtz and Schilling Zutt &Anschütz (although both Allen &Overy and Shearman &Sterling have raided the latter) – are precisely those which have a strong corporate/industrial client base.
Because the number of public companies has explod-ed in Germany in the last couple of years, stock corporation law – once seen as something of a commercial backwater – has become of paramount importance to any mergers and acquisitions practice.
Bruckhaus Westrick's Aktienrechtlers in Düsseldorf were involved in three of the biggest and most public deals of the past year – Veba/Viag, Vodafone/Mannesmann and the failed Deutsche/Dresdner discussions. So clearly, a lack of an international network did not hinder the Düsseldorf corporate business, although Frankfurt has been developing its group of Aktienrechtlers of late in order to complement the equity capital markets practice.
By contrast, the business logic from the Freshfields Deringer side was clear. Stars such as banking partner Wolfgang Feuring had captured the likes of Goldman Sachs, but at 14 partners in total – of whom only three were banking specialists – the Frankfurt office of Freshfields Deringer did not have the capability of serving an expanded investment bank client base.
“We were pushed to service much else,” admits Freshfields chief executive Peck.
From the outside, it would seem to be proof positive that the Germans have succumbed to the Anglo-Saxon logic of globalisation. But from Germany, it looks rather different.
According to Leyendecker: “It is the equivalent of merging two magic circle firms [in Germany] in that two of what used to be the top four are merging,” he says. “[Other firms in Germany] are really impressed by what we are doing.”
Leaving aside the issue of whether Deringer was a top four firm (perhaps top six might have been nearer the mark), within a German context Freshfields Bruckhaus Deringer has become a veritable colossus. It is now the only serious challenger in terms of size and depth of resource to Clifford Chance Pünder.
Interestingly, it introduces an entirely new cultural element into Freshfields. The firm now has a huge new political bloc to integrate.
Germans are well-used to having to use English as the lingua franca and having to regard London as the de facto centre (though politically mindful of this, Freshfields Bruckhaus Deringer has cautiously not stated where the headquarters will be).
Rather, it is the turn of Freshfields' City lawyers to adjust to a new and powerful culture at the heart of their practice. There could be some interesting sparks.
Finances, year ending 1999
Bruckhaus Westrick Heller Loëber: £98m
Clifford Chance (Germany): £17m (1998-1999)
Pünder Volhard Weber &Axster: £67m