K&L Gates chief blasts Norton Rose’s ‘Noah’s ark’ mergers

The chairman of US firm K&L Gates Peter Kalis has slammed yesterday’s three-way merger between Norton Rose, Canadian firm Ogilvy Renault and South Africa’s Deneys Reitz.

Peter Kalis
Peter Kalis

Kalis, whose firm topped $1bn in revenue last year following a succession of mergers, claimed the Norton Rose deal was closer to an “arrangement” and not a merger in the true sense.

“There has been a recent spate of ‘Noah’s Ark’ mergers: two CEOs, two partnerships, two profit pools, two accounting systems, two operations centres, all with a single flag flying above the Ark,” said Kalis. “Apparently Noah must now accommodate them coming aboard three by three. I wonder what clients think of this since few of them, with good reason, embrace Noah’s methodology in their own organisations and since all of them expect seamless integration among their global law firms.”

Kalis claimed the Norton Rose deal was the latest in a recent string of deals including those between Hogan & Hartson and Lovells,Sonnenschein Nath & Rosenthal and Denton Wilde Sapte and Squire Sanders & Dempsey and Hammonds, in which the firms did not fully share profits from day one and which were therefore not true mergers.

“A merger is when two become one, not when two become two,” added Kalis. “Language is important, and I’d suggest that the most effective language is that which aligns with the facts. [These are] simply ‘arrangements’.”

Yesterday’s deals, set to go live on 1 June 2011, will see Norton Rose’s enlarged group become a top 10 global practice by number of lawyers with combined revenues of more than $1bn (£660m) with 38 offices globally and more than 750 partners.

Norton Rose chief executive Peter Martyr dismissed Kalis’s comments, claiming the Swiss Verein-structured deal represented considerably more than an association or a joint venture.

“This is the only way you can really do it to get two businesses together with different equity structures, currency issues and different profitabilities,” said Martyr. “You could wait until there was parity but that wouldn’t allow you to reach your strategic goals. In this deal we’re really nailed together, we behave as one.”

Martyr added that the new additions to the Norton Rose group would have “common systems, management, name, strategy, resources and one CEO”.

“The only thing we’re not doing on day one is splitting the pre-existing profit pools,” added Martyr. “This comment displays either a lack of understanding of our deal or is a person with their head in the sand.”