Author: Pui-Guan Man
23 Nov 2012 | 00:00 | 6 comments
Partners predict rise in transatlantic mergers will pile pressure on traditional firms. Pui-Guan Man reports
Norton Rose's transatlantic tie-up with Fulbright & Jaworski has received broad approval from law firm partners, against a more sceptical reponse to the other major merger deal of recent weeks – the proposed three-way union of SNR Denton, Salans and Canada's Fraser Milner Casgrain (FMC).
Legal Week's latest Big Question survey found that 61% of partners believe Norton Rose's merger with US firm Fulbright – which is set to go live in June 2013 – is a good deal, with 19% unsure and the remaining 20% having a negative view of the tie-up.
In contrast, just 28% of respondents were positive about the Dentons deal, with 37% expressing doubts about the benefits of the proposed three-way tie-up, which will be put to a partnership vote at the end of the month.
More than 60% of respondents described Norton Rose's merger as a better deal than the Dentons combination. Only one in three (35%) expect the three-way Dentons tie-up to fare better than the troubled 2010 merger of Sonnenschein Nath & Rosenthal and Denton Wilde Sapte.
Eversheds managing partner Lee Ranson said: "The Norton Rose deal looks like the culmination of a well thought-out strategy centred around the global energy sector. They spent time initially strengthening their practice in London before carrying out mergers in Australia and Canada.
"By doing this they became credible in the US market and have now found a good energy sector partner in Fulbright. Not all of the recent transatlantic mergers have been quite so strategic in their aims and are more about getting bigger than reacting to real client need."
Herbert Smith Freehills EMEA managing partner Allen Hanen added: "I admire Norton Rose's ambition, how they have taken their platform and internationalised it in such a creative way. I've heard particularly good things about how Canada is going for them."
In the wake of other recent global tie-ups such as the formation of Hogan Lovells in 2010, 40% of respondents believe that large, multi-profit centre unions will be strong players in the legal market as it evolves, although more than one in four (28%) were either 'unimpressed' or 'very unimpressed' by such deals.
CMS Cameron McKenna senior partner Dick Tyler said: "I'm not surprised by the view that multi-profit centre deals will make strong players. We were one of the first to arrive at this party, around 15 years ago, and our experience is that it can be made to work.
"I take my hat off to firms for getting these deals underway – it is not at all easy. But it is hard to predict the success of any merger so soon – it takes around 10 years before one can judge whether any deal was a good one."
Partners anticipate that the Norton Rose and Dentons deals will prompt more transatlantic mergers, with 64% saying similar tie-ups will 'definitely' or 'probably' follow. Meanwhile 67% believe rapid growth through such deals will add significant pressure to firms with more traditional models.
Forty-three per cent of partners believe mid-ranking firms such as Simmons & Simmons and SJ Berwin will be most threatened by the creation of global giants, while 48% believe the heyday of the magic circle elite is either 'fading' or has 'been and gone' in the face of the challenge from truly global players.
Seventy-nine per cent of respondents said that 'more' or 'much more' law firm consolidation is necessary in the global legal market over the next 10 to 20 years, compared with 21% who think little or no consolidation is required.
Tyler said: "[More] consolidation is needed, and I think it will happen. Firms can see there is zero or low growth forecasted in the developed economies, so they are chasing the developing markets more than ever. Everyone is feeling the pressure of increasing client demands and the pressure on prices and is looking for ways to navigate this."
Hanen added: "Every firm now has a simple choice: go global or stay local. The ultimate goal whatever model you choose is to provide clients with a unified solution. Providing that single answer for a client, regardless of how many jurisdictions are involved – that is the holy grail."
Partners on global mergers
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