Your firm’s talking up a transatlantic merger. What happens next?
You can’t be a leading UK law firm if you’re not at least trying to get in bed with the yanks. Or at least that’s what you’d think from the number of transatlantic mergers in recent years.
The latest spate started with Hogan Lovells in 2010, followed by Squire Sanders Hammonds (now Squire Patton Boggs), SNR Dentons (now just Dentons), and Norton Rose Fulbright, to name but a few of the biggies. CMS continues to seek out a transatlantic tie-up. And now Eversheds has just announced it’s seeking a US partner too. Yes, it’s hard to keep up.
These transatlantic mergers will be key to shaping the profession, no doubt giving more cause for concern for the remaining full-service mid-tier firms that cannot compete with the global behemoths. But in the short term at least, the impact will be greater on the individuals concerned in the all-important integration process.
So as an associate, what will it mean for you and your career if your firm goes transatlantic?
Well, it depends of course on what kind of merger is announced. If your firm is significantly bigger than your merger partner, then it’s a take-over. So expect more of the same, but with another office or two. Maybe you’ll get to visit your new colleagues to eat donuts. Maybe you won’t. Don’t expect a revolution.
It gets more interesting when your firm is the one getting acquired. You’ll know that’s you if your firm’s name quickly disappears off the door sign. Getting subsumed into a larger organisation is never going to be easy. Expect a period of considerable uncertainty.
When Clifford Chance merged with New York firm Roger & Wells in 2000, many of the US partners fled. A leaked memo in 2002 then revealed desperately low associate morale. Even as late as 2013, reports suggested that the firm was still working on turning the US operation into a profit centre.
But problems aside, there are massive opportunities in getting acquired – namely, becoming part of a global brand pretty much overnight. Richards Butler, for instance, a respected but pretty small London practice, joined Reed Smith in 2007 and became an instant global player – with new and swanky London offices to boot.
The London operation is now the largest of all the Reed Smith offices offering associates a strong career development framework and decent work-life balance. These are factors that have helped it score well in a range of employee satisfaction surveys in recent years. It was one of only eight law firms, for instance, to appear on this year’s ‘The Sunday Times 100 Best Companies to Work For’ list.
There may also be a more material benefit to joining a US outfit. Pay, for example, can be higher among top US firms in London – a whopping £90-£100,000 a year for newly qualified solicitors compared to the £67,000 and thereabouts mark at magic circle firms. Typically, juniors in US firms get more responsibility more quickly than in UK firms too.
The downside may, however, be higher billable targets (often closer to 2,000hrs a year in US firms) and a more aggressive ‘eat what you kill’ culture to go with it, although there are some US firms bucking this trend.
The merger of equals
Beyond the tales of acquisition on both sides of the pond, there lies the rarer phenomenon of the merger of equals. Hogan Lovells (or HogLov) was largely recognised as such a tie-up. With strong financials for the 2013/14 financial year, most would probably agree too that this merger has so far been one of the success stories.
But even when the conditions are favourable, a merger of equals poses challenges. Practices must be consolidated, which can lead to conflict, redundancies and uncertainty for lawyers across both firms (it has taken some time, for instance, for HogLov to shift to single practice heads).
And one culture will ultimately have to predominate, which will no doubt be difficult for the lawyers who end up having to shift. In the case of UK/US tie-ups, this will likely revolve around which compensation system is chosen – ie, a (possibly more aggressive) US merit-based system or the more traditional (supposedly collegiate) lockstep of the UK practice.
At HogLov, for instance, UK lawyers have had to shift to the pure merit system of the US. According to recent reports, there have been a few teething problems. Having said that, many firms are shifting to a more merit-based form of pay without needing a US merger to do so. There are many positive reasons for this, not least rewarding great performance and the right behaviours.
As long as firms choose the right balance of criteria on which to judge individual merit (including non-financial contributions), there is no reason why they can’t use a merit system to drive ambition and collegiality. Easier said than done, no doubt, but not impossible.
Transatlantic mergers are here to stay. While some firms may look East instead (think SJ Berwin and King & Wood Mallesons), many continue to see the US as critical to global expansion.
With any merger comes change, which will never be completely easy for lawyers in either firm. Some associates and partners may choose to seek greener pastures elsewhere as the cultural change proves too great.
But as a means to broaden your career horizons in an instant, there may in fact be little better than exploiting that special relationship and going transatlantic. CP