It was only a matter of time before Theodore Goddard entered into merger talks. The more cynical among us saw last year's extraordinary rise in profits as pre-merger beautification. According to The Lawyer 100 Survey, turnover last year leapt 48 per cent to £39m, with average profits per partner rising from £270,000 to £400,000. Much of this was due to a jealously-held equity, a huge overspill of work from Diageo from the previous year and savage cost-cutting.
This year, unsurprisingly, Theodore Goddard will not be maintaining that sort of growth – preliminary indications suggest an increase of around 10 per cent. Neither is the firm particularly well-hedged; it has little insolvency capability to speak of. The last recession was tough – only the safety net of the Brent Walker workout, where it acted for Standard Chartered and billed millions, helped it avoid crisis.
Small wonder, therefore, that its management is quietly canvassing for an international deal. Yet the preliminary talks Theodore Goddard (TG) is having with Salans Hertzfeld & Heilbronn are perplexing. One might respectfully suggest that Salans Hertzfeld, which has an odd mix of practice areas in London, is getting the better bargain here. Not only has Salans become a favourite target of headhunters in Paris, but despite the merger with New York firm Christy & Viener (itself a minnow on Wall Street), it has not been able to knit itself into an international force. In any case, Theodore Goddard partners have a habit of rejecting mergers. They nixed Eversheds' approach in 1993 by one vote, and then said no to Richards Butler in 1999 after Denton Hall withdrew from the tripartite talks.
Despite its stuffy reputation, TG has a good corporate practice and some useful relationships with mid-tier intermediaries. But after abortive attempts to enter Eastern Europe, it has never sorted out its international presence. If the firm is really after a global reach, there is surely only one contender.
TG needs a firm with a solid corporate practice based on international referrals, but which in turn requires a credible domestic practice. It needs a firm with some claims to a private equity practice – an area TG has signally failed to penetrate. It needs a firm which is not too heavy on property and which would blend nicely with TG's finance-led business. And most of all, TG's media group needs a firm with a fantastic hard IT and telecoms practice. There is only one candidate, Mr Cooke – Baker & McKenzie.