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The Year of the International Merger

Posted by: Laurence Simons 15/11/10

What makes 2010 notable in the legal community is the popularity--seemingly all of a sudden--of the international law firm merger. Hogan & Hartson merged with Lovells, then Sonnenschein with Denton; and now Squire Sanders and Hammonds have announced a merger effective January 1, 2011.

While large scale law firm mergers aren't unusual, these truly international mergers are. The complexities are overwhelming: having to merge sometimes highly different compensation schemes, comply with a myriad of overlapping ethics and conflicts regulations and integrate cultures across continents.

Why are these mergers popular?

I believe the reason these international mergers are so trendy at the moment is a combination of factors. The party line is that the practice of law - like much of the corporate world law firms represent - is increasingly a global affair.

Carey Bertolet, Esq.
Managing Partner, North America
carey.bertolet@laurencesimons.com
+ 1 646 380 6631
New York Office
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Major law firms are more likely to be required to service clients across continents, so today's mega firms must not be so United States-centric. This is the simple answer, and it is true. Even so, US firms seek suitors overseas for other reasons, as well. There is a school of thought that a more geographically diverse practice will weather economic downturns better. An international merger may also bring in a yet-uptapped pool of new clientele--and decrease the likelihood of conflicts that would jeopardize the merger. When I'm feeling cynical, I wonder if international merger partners offer fresher options than the 'usual suspects' in that a firm may have already considered, courted, and rejected.

“And for a national firm with global aspirations, an international mega-merger is turn-key. It may not be the easiest way, but it certainly is the quickest way for a US firm to establish a significant global reach.”

Whenever an emerging market starts making its way onto the global playing firm, major US law firms start to evaluate their position in that market. Plenty of law firms claim (and do have) expertise with respect to a remote city or nation. But at what point is it necessary to have feet on the ground to confirm that expertise? And what is the best way to get a foothold into the market--if a physical presence is important? Send a US lawyer over to head the office? Poach from a competitor who has already set-up shop? Or acquire an existing local firm?

In the case of these international mergers--the answer to the question of how to locate oneself globally is a super-sized merger. These law firms are choosing to partner with other firms that are large enough that the firm has doubled its location and suddenly has a roster of specialists in a much wider variety of locations.

I would argue that if international law firms want to perform truly internationally, however, these cross-border mega-mergers are necessary--and we haven't seen the last. Even the largest New York firms with the most sophisticated of practices are often practicing law from only a handful of cities. It begs the question: can you ever be an 'international' firm and not be resident throughout the world? It's easy for a firm or a lawyer to use the word 'international' with respect to its practice. But what does that mean?

To be an international law firm in the truest sense of the word, a law firm must also be decidedly local. It's a contradiction in terms--but shouldn't be ignored. It is not enough anymore for a law firm to extol its international capabilities from a single location in one particular city. Even if it is an international city--New York, London, or Hong Kong. If a law firm is promoting its ability to navigate the business waters in a far away country, it is increasingly important to have lawyers from or in that country who can give clients the confidence that they understand the peculiarities of doing business in that jurisdiction.

Law firms need to reflect their clientele, as well. The major multinationals tend to be international in the truest respect--they have operations and locations throughout the world. In our recruitment function, we are so often called on to handle assignments for one particular client with needs very literally around the globe. What our corporate clients teach us about law firms is that it's very possible to run an international business that is -- to get right to the point -- actually international. Even with all of the technology that allows us to be so many things to so many people in a short time, the truth is that business at its highest levels requires not just the best people: but the best people in the right places.

From a recruitment standpoint, I can tell you that even the most global practice is also very local. Lawyers -- whether they operate from inside of a corporation or a law firm -- are never the same from place to place. Hiring protocols, cultures, compensation and ethical considerations vary widely even within a city, state, or region. Having now gone through an international merger of sorts -- integrating a US recruiting practice into Laurence Simons international one -- I can tell you that there is no substitute for a global network that focuses on local expertise.

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