SJ Berwin and Mayer Brown in talks over £900m tie-up

SJ Berwin has held exploratory talks with US firm Mayer Brown with a view to joining forces to create a £900m business.

Paul Theiss
Paul Theiss

Senior management at the top 20 UK firm has engaged in high-level discussions with the Chicago-based outfit this month, with the talks coming since the confirmation of Mayer Brown’s new management.

The latest dialogue follows Paul Theiss’s confirmation as chairman, who has replaced Herbert Krueger in the role.

It is thought that SJ Berwin could have approached the firm about a deal before Theiss’s election but was told to return after the new management was made definite. Theiss’s election was formally verified internally on 11 May and announced externally last week (18 May 2012).

Krueger could not continue in the role because Mayer Brown’s partnership agreement does not allow for one individual to hold the chairman position for more than two terms.

Information about the talks, which are at a very early stage, is being kept within Mayer Brown’s senior management, which is mostly based in the US.

A source close to the firms commented: “There’s paranoia that the UK arm would find out. That would lead to serious defections in the UK.”

Factions within Mayer Brown are understood to have been pushing for a European merger, with the firm known to be open to a tie-up if the opportunity arises. Partners in Asia are said to be particularly strong advocates of a merger.

The merger option is also seen as a solution to the erosion of headcount in London, with a number of partners quitting the City base in recent months. Five partners resigned in a short space of time last December (16 December 2011). The firm also announced 20 London redundancies earlier this month (4 May 2012).

SJ Berwin, meanwhile, has publicly stated its ambition to link up with a US firm, with recently elected Stephen Kon describing the merger project as a “work in progress” (16 March 2012).

Rob Day
Rob Day

Managing partner Rob Day has also openly expressed his plans for the firm to find a US merger partner (6 June 2011).

The firm held protracted but unsuccessful merger talks with Proskauer Rose in 2010 (12 November 2010), choosing the firm because it had an established New York practice. The UK firm had drawn up a list of three firms to look at, with Proskauer, Goodwin Procter and Orrick Herrington & Sutcliffe all on the list (26 April 2010). Mayer Brown, which has had a Manhattan base since 1978, was not considered at the time.

A deal would gift SJ Berwin the US capability that it currently lacks, with a US merger widely seen as the firm’s best way of holding on to talent that American firms are currently attracting.

SJ Berwin would become the smaller partner in a combination, with the City firm turning over £179m in the 2010-11 financial year. It has not announced its figures for 2011-12.

Mayer Brown, on the other hand, brought in $1.13bn (£715m) in the 2011 calendar year (3 February 2012). Its UK practice turned over £169m in 2010.

The firms’ profitability figures are more aligned, although Mayer Brown’s 10 per cent rise in profit per equity partner (PEP) propelled the figure to $1.18m

Stephen Kon
Stephen Kon

(£746,741) in 2011.

SJ Berwin’s PEP rose 40 per cent in 2010-11 to £626,000.

The disparity in profitability between SJ Berwin and Proskauer was a major factor in the merger talks falling apart.

SJ Berwin has also been touted as a possible tie-up partner for Asia-Pacific firm King & Wood Mallesons, which is on the lookout for a merger in the UK and the US (21 May 2012).

SJ Berwin and Mayer Brown declined to comment.