The prudent path: merger lite

It was entirely coincidental, but last week’s announcement by Norton Rose that it was merging with Australia’s Deacons came on the morning of The Lawyer Awards, where the former won Law Firm of the Year. Nice timing.

Except Norton Rose’s deal down under is a long way from being a merger. The duo will not be sharing profits so there is not – yet – financial integration. Instead, the new entity will set up a joint bonus pool.

This is all very voguish. DLA Piper hit on it a while back, but I’m not sure that’s the best example of the genre. I’m still sceptical of how culturally integrated DLA Piper’s Emea and US sides are, for example.

A more useful example for Norton Rose’s purposes is probably the CMS network. Two years ago Dick Tyler, then managing partner of Camerons, likened
it to a Deloitte model, with the various European ­businesses uniting under a common brand. Since then the CMS firms have been working on ­convergence in everything apart from their profits – except for the newly launched Moscow office, which is staffed by the UK, German and French members and is fully integrated.

Naturally, given lawyers’ mania for creating a recognisable pecking order, these sort of mergers are not quite considered to be in the same class as those that demand full financial integration.

I have some sympathy with this. In The Lawyer UK200 Annual Report we only recognise financially merged firms. That stops alliance firms (yes, I’m talking about you, Herbies) from adding up revenues to make them look like the biggest firm in Europe.

Still, a managing partner’s job is tricky enough without having to think up new profit-sharing ­systems that take partners’ egos, strategic priorities and good behaviour into account – let alone the economics in different jurisdictions.

Look at Clifford Chance. It called off its talks with Mallesons ostensibly because of the recession, but more likely because the prospect of financial ­integration was causing migraines at Canary Wharf.

Norton Rose’s solution is interesting: integrating IT, HR and conflict-checking is quite enough, but I still reckon there will be a few questions internally about how the the bonus pool will affect UK partners.

A law firm merger wouldn’t be a law firm merger without a good old-fashioned scrap.