Why Ashurst is about to enter a rock and hard place

Bold Ashurst is first to achieve full financial docking with Australian firm but it will be no walk in the park

The full merger between Ashurst and Ashurst Australia is the biggest unsurprise of the year. Their intention to marry was clear at the engagement party in September 2011 and the market has been kept fully informed since.

But we must recognise that this will be the first full financial merger between large UK and Australian firms, four years after Norton Rose Fulbright became the first UK firm to ‘merge’ with an Aussie firm.

On 1 November, 123 Ashurst Australia equity partners will migrate to the Ashurst UK profit-sharing system, dropping the merit-based system. The merged firm will operate a managed lockstep of nine equity levels from 25 to 65 points, with four main gateways at 33, 45, 50 and 57 points.

The only surprise, to some, will be if the pair actually achieves full integration – a route rivals such as Norton Rose Fulbright and SJ Berwin have notably avoided. 

The process is no walk in the park. In the past two years, both sides have had to take significant steps to move towards alignment. Ashurst has changed its capital structure to synchronise with its Aussie mate, which requires equity partners to put in a sum based on their equity points every autumn. It has also rejigged its equity ranks, with the removal of six partners from the plateau and the de-equitisation of several others.

In Australia, legacy Blake Dawson has moved from an all-equity partnership and had seen a gradual fall in its equity partnership, from 145 in 2011/12 to 123.

Herbert Smith Freehills might argue that it should be seen as the first financially merged firm, as it has had a single global profit pool since day one. But it still operates two profit-share systems for the UK and Australia.

Nevertheless, it could still claim second spot. The firm has long had plans to implement a modified lockstep, somewhere between legacy Herbert Smith’s pure lockstep and Freehills’ merit-based system. The exodus of partners at Herbert Smith Freehills is a sure sign of restructuring as the firm moves towards that goal.

It’s not easy, so hats off to Ashurst, which has done it first.