Euro threat prompts CC merger talks

CLIFFORD Chance is in preliminary merger talks with three leading European firms as part of a dramatic change of strategy in response to the expansionist ambitions of its UK rivals.

The move comes as partners at Linklaters and the Alliance of European Lawyers gear up to vote on a plan to form a single-name legal federation of 1,700 lawyers.

Although the federation is likely to stop well short of a full merger, Clifford Chance's response shows it has been rattled by the recent European moves of Linklaters and Freshfields, which announced its merger with German firm Derringer Tessin in January.

Clifford Chance announced its strategy change last week in a statement ostensibly issued to celebrate the hiring of its 500th lawyer in its 14-office continental European network.

It said it wanted to double the number of lawyers it has on the continent from 500 to 1,000 in two years.

Up until now Clifford Chance has boasted that it has achieved its continental presence through organic growth.

Although he would not comment on the merger talks understood to be with leading firms in Spain, Germany and Italy Peter Cornell, Clifford Chance's European managing partner, said “plans are in place” to achieve the doubling of lawyers in Europe.

Cornell added: “The market is moving and while organic growth will continue fairly rapidly, we wouldn't rule out doing something on a grander scale.”

If Clifford Chance does merge it would be keen to do so on a single equity basis.

In Spain, it is understood to have unsuccessfully tried to persuade alliance firm Uria Menendez to merge with it rather than entering the federation with Linklaters.

But whatever happens in the long term, Clifford Chance faces the unedifying prospect of the Linklaters-alliance federation leap-frogging it in Europe by size.

The Linklaters-alliance firms voted in principle last month on a global brand name under which they will unite for marketing and the sharing of some foreign offices.

But each firm will retain its individual remuneration structures and, partly to comply with local professional rules, its own name domestically.

The seven firms will each contribute a percentage of revenue to a common pool for joint activities whose priority is likely to include setting up an Italian office or linking with an Italian firm.

They aim to move towards a full merger eventually but, unlike Freshfield's strategic alliance with Derringer Tessin, no timetable has been set.

The alliance's Brussels office will merge with Linklaters' existing Brussels office and continue to operate as a single profit centre.

Where at least two firms have offices in the same cities, lawyers will eventually move together.

Whether Linklaters will send staff to the Alliance's jointly-owned offices in Warsaw and Prague will be decided once the deal is signed.

Patrick Stewart & Robert Lindsay