Lovells and Hogan & Hartson size up high-stakes transatlantic merger
Author: Jeremy Hodges
08 Oct 2009 | 15:20
Lovells and Hogan & Hartson are in the early stages of merger talks, Legal Week can reveal, with the firms' management teams currently assessing the case for a transformative union.
Lovells is to discuss the proposed tie-up with the top 25 US law firm at a meeting of its international executive on 28 October. A deal would create a top 10 global practice in revenue terms.
A decision to pursue the talks, which were initiated informally several months ago, would trigger wider discussion ahead of Lovells' annual partnership conference on 21 November. The talks are being led on the US side by Hogan chairman Warren Gorrell.
A union between the two firms would create a 2,500-lawyer practice with revenues of around $1.9bn (£1.2bn) according to figures from the latest Global 100 rankings from The American Lawyer and Legal Week.
The Washington DC-based Hogan was the 22nd largest practice in the US in 2008 in revenue terms, with fee income rising 4.9% to $922.5m (£576m), while profits per equity partner (PEP) fell 1.7% to $1.16m (£725,000).
Lovells was an above-trend performer in Europe during the 2008-09 financial year, boosting revenues by 10.9% to £531m, though PEP fell over the same period by 11.3% to £586,000. The performance was ahead of the UK top 50, which saw fee income rise by 2.9% while PEP fell on average by 17.3% in the wake of the banking crisis and global recession.
The firms' practices are also broadly comparable. Hogan boasts a 13-office US network and highly regarded practices in regulatory/government law, real estate, disputes, antitrust and intellectual property. The firm also has a substantial corporate practice.
Hogan has 14 offices outside of the US, compared to 27 foreign offices at Lovells. Both firms have offices in New York, London, Beijing, Brussels, Hong Kong, Moscow, Munich, Paris and Tokyo. In addition to its New York arm, Lovells has a branch in Chicago.
Lovells, which currently generates around 60% of its revenue outside the UK, would bring substantial international capability to a deal as Hogan currently only has 23% of its lawyers based outside of the US.
Despite initial enthusiasm for the deal, both firms will be aware that US/UK mergers are notoriously difficult to secure given the challenge of marrying differing partner compensation and accounting models. The handful of transatlantic deals that have so far taken place in the legal sector have been effective takeovers rather than mergers of comparable practices.
A Lovells spokesperson commented: "In the US, we have to date been focused on providing a clearly defined range of services that reflect our international strengths, and it is no secret that any significant expansion beyond that would require a major strategic move.
"We review our US strategy on a regular basis and we have recently been taking a closer look at market developments and the opportunities that we believe are available to us. Beyond that, we are not in a position to comment further."
Additional reporting by The National Law Journal.
For more analysis, see Editor's blog: Something transatlantic this way comes?
Click here for more coverage from Legal Week US sister title The National Law Journal.
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COMMENTS (TOTAL 17 COMMENTS)
Wow
Holy crap, if this is true it's immense.
Jon Fletcher -08 Oct 2009 | 15:29
Although...
I'd say calling Hogan's corporate practice 'substantial' rather fails to do it justice. For what it's worth.
Jon Fletcher -08 Oct 2009 | 15:35
It's true.
Alex Novarese -08 Oct 2009 | 15:43
Is there a TV show in here? Hogan Knows Best?
Bobby Fleckman -08 Oct 2009 | 15:56
Hogan and who?
Anonymous -08 Oct 2009 | 16:38
There's a long road ahead...
It may be true, but it remains to be seen whether it goes anywhere. As the article points out, this is likely not to work out in the end.
Anon. -08 Oct 2009 | 17:25
If you put two OK firms together you get one bigger OK firm.
why -09 Oct 2009 | 08:38
Why is it 'high stakes'?
bod -09 Oct 2009 | 09:48
08:38 - by that yardstick, what's the point of putting two top-tier firms together - all you get is a larger top-tier firm? Actually, why bother do anything? Why doesn't the legal profession just stay the same? Actually, shouldn't businesses generally stop changing? It is these kind of attitudes that give the legal profession it's reputation for daft conservatism. It may be a good deal, it may be a bad deal, whichever it won't be because it's a deal not involving a magic circle firm. Make a good fist of putting these firms together and it's hard to see how CC has a much better global platform. Obviously, in any big deal there's risk.
Anonymous -09 Oct 2009 | 10:17
Does 10.17 work for the Lovells PR Dept per chance? Lovells needs to merge with a heavyweight corporate firm (to make up for its serious deficiency in that area). More of the same will add little of substance. No point in creating another Mayer Brown, Jones Day, Reed Smith etc.
Hogwash Brown -09 Oct 2009 | 12:00
I don't work for Lovells and have no stake in whether they do the deal or not. I just have a different opinion. And Lovells/Hogans is clearly in a different class to Reed Smith, Jones Day or Mayer Brown - the only people who would make that comparison are those who know nothing about the US market, which admittedly is most of the City.
Anonymous -09 Oct 2009 | 12:33
You're leaping around a bit there, Anonymous. I was only saying I cannot see any synergies there. All the enlarged group will have (which it did not have before) is transatlantic capability. That might boost turnover, but probably not much more.
why -09 Oct 2009 | 13:52
Only firms that are struggling seek mergers.
Gubster -09 Oct 2009 | 14:31
Struggling like Freshfields and Bruckhaus? Or Clifford Turner and Coward Chance perhaps? Ashurst/Latham? Yep, they were all on the ropes.
Anonymous -09 Oct 2009 | 15:19
@ Gubster: So most of the leading UK firms were in trouble ten years ago? I seem to remember that the expansion into (Western) Europe was pretty much a series of mergers (or takeovers, although at least Freshfields-Bruckhaus looked more like a merger in my eyes).
Anonymous -09 Oct 2009 | 15:42
10.17 - I can't quite see how CC will be quaking in their boots about Lovells tying up with H&H - a more global platform?? Get real!
Anonymous -09 Oct 2009 | 16:39
16.39, have you been keeping an eye on CC lately? If their US practice was independent, it wouldn't even be in the US top 100.
Anonymous -09 Oct 2009 | 17:02
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