Mayer Brown is somewhere between the west of its youth and the east of its future.
To the west is
Between the two, of course, sits the
In interviews, more than a dozen current and former partners described an ongoing struggle for power over the past year as the June retirement of longtime chairman Tyrone Fahner neared.
At 64, Fahner, according to firm rules, was required to hand over his leadership spot. To replace him, Mayer Brown unveiled a three-headed chairman’s office. The ruling triumvirate features two litigators,
For many within the firm, the divided leadership was an untenable idea. “You can not have three chairmen,” says a former Mayer Brown partner. “It has never worked in the history of
It is an arrangement that has raised eyebrows among some partners, who have questioned how a three-way leadership split will work on the ground. But for those who see the relationship in terms of jostling for power, there is a sense that Maher holds a clear advantage.
“Maher is younger, hungrier, tougher and more energetic. And the other two are not businessmen,” says a former partner from the
For their part, Holzhauer, Geller and Maher laugh off the idea there is any power-struggle between the three. “The feeling was that we are one of the largest firms in the world, and we need to increase our leadership bandwidth,” Geller says. “No threats were made by Paul. I can tell you, as one of the people in ‘the three amigos’, there is no tension.”
Rainmakers depart
The transition at the top has come during a bumpy 18 months, which saw the loss of at least 20 partners from the firm’s New York office as well as this spring’s de-equitisation of 45 partners (with many cuts, sources say, coming in Chicago, especially among the litigation, environment and labour practices — the Washington office was spared). Current and former partners say the firm is also dealing with flagging profits in several offices, including
A critical report by bankruptcy examiner Joshua Hochberg, a
Refco has so far seen Mayer Brown named in suit filed in July by Thomas H Lee Partners, which acquired a controlling stake in Refco in 2004 — alleging that the law firm failed to inform it of the true state of its finances. And last month, Refco trustee Marc Kirschner named Mayer Brown among a host of advisers and bankers as part of $2bn (£1bn) claim on behalf of the company’s creditors. Mayer Brown is contesting both claims.
“It is a really sad story,” says another former
As if matters were not bad enough, in May, high-profile litigation partner Alan Salpeter left the firm. After a 35-year run, Salpeter landed at the
Rumours swirled that Salpeter’s departure meant the loss of a $30m (£14.9m) book of business. But Mayer Brown says it has retained nearly all of Salpeter’s clients.
“Leaving the firm was about bigger, broader issues — it is not compensation,” Salpeter says. “It is the lack of including people. Why didn’t the firm’s management go to the biggest business generators and ask about these big decisions? They are not being inclusive.” Salpeter adds that the amount of business he took to LeBoeuf is still in flux.
Still, even with the bad news, Geller points out that 2006 was Mayer Brown’s best financial year ever in terms of both gross revenue and profits per partner. And even with the departures, the firm has more than 1,350 lawyers at its command worldwide.
Where smart people practise
Historically, Mayer Brown is characterised as a place where smart people can practise complex law at a high level. It is not for lack of talent that the firm’s partners have left. It is for lack of leadership, those close to the firm claim.
Some trace those difficulties to the 2002 merger of Mayer Brown & Platt with
publicly.
“Ty was at the helm for the integration, success and mergers of this firm, and to not give him his due is wrong,” says Hector Gonzalez, a partner in the
The animosity toward Fahner was concentrated in the
Fahner was travelling when contacted for this article but wrote by email about the
The firm says its
Reasons for the recent partner defections vary. Some were client-driven; some were seeking better pay — the profits per partner in 2006 were just above $1m (£496,000), an underwhelming figure in the
Last September, the firm replaced Thomas Vitale, who had a three-year run as head of the
Geller does not deny that
In this respect, Mayer Brown can also certainly point to continued growth of the business, with the firm in 2006 seeing its revenues grow by 11% to drive fee income to $1.087bn (£540m), keeping it comfortably within the top 10 largest US-based law firms.
Aside from the tail-off in
Holzhauer says emphatically that partners in the firm who were involved with the settlement handled it with appropriate care. “Anything about CFS is a big red herring,” Holzhauer says. “We have told them the impact it had on the firm’s bottom line and that the liability was within our insurance coverage.”
But the four partners who have left the firm say the settlement was never fully disclosed to the partnership and that rumours have been left to fester in the halls of Mayer Brown as to how high the number went.
Getting the stock up
But it was this year’s very public de-equitisation of dozens of partners that put the firm squarely in the public eye. Most firms cleave unproductive partners from their ownership stake in the way the Colts left
In an earlier time such a large move against partners would have been unprecedented. Instead, many industry watchers wondered what took so long.
“The three of us in the office of the chairman do believe that while we have got a robust practice, we were becoming a little concerned that our profits per partner were lagging behind firms that we regard ourselves as equal of, and others, modestly, that we are superior to,” Maher says. “When you look at Latham & Watkins and Sidley, they are not materially stronger than us — but their profits per partner look better.”
He is right. In 2006, Mayer Brown’s profits per partner were $1.1m (£546,000). Those figures, however, are well behind Mayer Brown’s
Still, critics latched on to the public manner in which Mayer Brown went about removing partners. In a newspaper interview earlier this year, Holzhauer went so far as to say the demotions and firings were necessary because “we want to drive our stock price up”.
It was honest and, from a public relations standpoint, disastrous, say many current and former partners.
“In retrospect, it is one part I regret,” Geller says. “We talked to a consultant, and he told us the names of several law firms that had de-equitised. They did it very quietly. We should not have done it as publicly.”
Still, Geller maintains that a more cold-eyed approach to firm management is long overdue, given the competition the firm faces in the international market.
“We are an undervalued asset,” Geller adds. “We have tremendous talent. We have key locations in every part of the globe. But we have allowed ourselves over the last 10 years to become a little flabby in the way we manage ourselves.”
Indeed, the question on the lips of many Mayer Brown observers is not whether Holzhauer and Geller have been too ruthless but whether they have been ruthless enough, a talent many believe Maher would have no trouble exhibiting.
A former partner puts the matter bluntly: “When Maher takes over, there is going to be a lot more bloodletting. He will have to fire half of
Not everyone thinks that is a bad idea.
“If you are a smart businessman in Mayer Brown’s world, you are evil,” says a former
A version of this article first appeared in Legal Times, a