When East meets West

January 30, 2015

The Dentons-Dacheng merger will be huge. It’ll also be one giant cultural leap

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So Dentons has found the Holy Grail of every large global law firm. Or at least that’s what the firm’s global chairman, Joe Andrew, has said of its merger with Chinese firm Dacheng. And for sure, the legal community has been agog with the news of the creation of the largest law firm in the world, which will boast no fewer than 6,500 lawyers in more than 50 countries.

In this case it’s not (only) the size that counts. It’s the full-on plunge into China that’s got tongues wagging.  Yes, King & Wood did it first with its merger with Australian firm Mallesons Stephen Jacques and then UK firm SJ Berwin, but that’s not stopping many people from hailing this merger as the first of its kind, bringing a Chinese firm into a global partnership in one fell swoop.

And while many may be viewing this as something of a grand experiment, it’s unlikely to be the last. As Dentons’ UKMEA CEO Matthew Jones was reported as saying, ‘This combination reflects what it is to go global. Without China, a firm can’t properly call itself global.’

But what does this mean for the legal profession and lawyers? Well, apart from sending lawyers speeding to the nearest school of Mandarin, the Dentons-Dacheng merger poses a few interesting conundrums.

Portney’s complaint

For China, the merger is a fairly major deal given that the whole legal profession there is only around 23 years old. But that also means it has a lot of catching up to do with law firms in the West in terms of modern organisational structures.

Elliott Portney, the global chief executive of the combined firm, has been quoted as saying that ‘internal organisational structure is of no particular importance – it’s how you relate to clients’, but surely some form of sensible integration will be necessary, or why bother?

With integration issues always proving tricky post-merger, this might be a particularly tough one. This is particularly the case for those lawyers and employees working in overlapping offices (for example, Dacheng and Dentons both have offices in Beijing and Shanghai, as well as New York, Paris, Singapore, Los Angeles and Moscow). They should probably expect a period of considerable uncertainty.

There are huge cultural differences too – beyond the obvious language barriers. Lawyers in China tend to work like sole practitioners with their own secretaries and support staff, taking home a percentage of their own billings. This may create conflict with Western lawyers who have worked hard in recent years to become more collaborative and team oriented.

‘No dominant culture’

These differences may not be so stark where one of the merger partners is significantly smaller or weaker than the other –ie, where one will gradually be assimilated by the other. But in a merger like Dentons, both firms are relatively huge (Dacheng has 4,000 lawyers to Dentons’ 2,500 lawyers).

And while Dentons may dominate Dacheng in terms of revenue (Dentons bringing in $1.3bn in 2013 to Dacheng’s $400m in 2014, according to The Lawyer), there’s not much sign that the Chinese firm will therefore be willing to give way to the west on leadership. After all, the chairman of Dacheng, Peng Xuefeng, was recently quoted as saying, ‘The philosophy is all about polycentricity – no dominant culture and no dominant headquarters.’

For any meeting of East and West, resolving these leadership issues may be the trickiest issue of all – touching as they do on old rivalries and on-going tensions between old and emerging empires. How it will pan out in reality may be anyone’s guess right now. For most firms the luxury will be to sit back and watch.

But if we can be sure of one thing, it is that there is no shortage of enthusiasm to make this work. When Joe Andrew, global chair of Dentons, announced the merger, he likened it to the overhead passage of Halley’s Comet. ‘It doesn’t just transform our firm, it transforms the entire profession,’ he proudly declared.

If he proves right, then lawyers of today both in the East and West should be prepared – for tomorrow may bring with it a very different world of both challenge and opportunity. CP

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