China: Successful law firm mergers

Last Updated: 23 October 2014
Article by Meg Utterback

Mergers take patience and tolerance. The following is my experience in law firm mergers and I hope it helps you understand where I hope we are headed at KWM.

When I began practicing law in 1991, lawyers still aspired to join a law firm for life. The partners were like our parents, mentoring us and bringing us along as lawyers, imbuing both good and bad habits that they themselves had learned over the years. Oddly though, I do not long for the familial atmosphere of my original firm. Those days of practice, while comfortable, were not innovative. A lot of bad habits were passed down to junior partners. Not many partners were looking to be creative or change how the system worked. They had nice cars and kids in college and bills to pay so the status quo was safe.

In the past twenty-three years, the profession has taken a diametric shift. It began with lawyers being more inclined to change firms or develop new practice areas. The availability of new modes of communication via the internet, mobile phones and teleconferencing brought us closer together with our colleagues and with our clients. It also created a 24/7 work ethic that changed how we related to our jobs and our families. In this time, it became acceptable to change firms. In fact, by changing firms, you could see what worked and what didn't work. The world also shrunk. I moved into bigger law firms and from the US East Coast, we often worked with our colleagues on the West Coast or traveled cross country to take depositions and try cases. It was no longer a provincial local practice.

In the late nineties, more and more firms began to look at mergers. Working in a big firm, we already knew the cultural differences from city to city. In New York, the intensely competitive associates immediately asked you your grade and your billable hours for the prior year. In DC, we were a bit more collaborative but everyone knew who was on the partner track and what partners were important to that selection process.

My first law firm merger occurred right before I made partner at Reid and Priest, a New York firm. We merged with a California firm called Thelen Marin Johnson and Bridges. We thought they were aliens. They had a laid back style and were too friendly for the tastes of uptight Washingtonians. On the first day of the merger, the Thelen partners sent everyone baseball caps and tee shirts that read "Thelen Reid and Priest". Jim Mitchell, the partner in the office next to me, walked in wearing the cap and said, "What have we gotten ourselves into?"

The truth of it was that we had gotten into a much needed merger. Reid and Priest had great clients, many big utility and infrastructure companies, but had no business sense. Our systems were as antiquated as our view of the legal market. Thelen, in contrast, was well run. Thelen had administrative staff that could practically run the firm without the lawyers and a marketing department that worked around the clock. For Reid and Priest, it was like being catapulted into the future.

We never did really understand the Californians but we learned to co-exist and make money together. We actually came to like each other and both firms benefitted over time from the merger. It took three years before those benefits even began to be visible. It was hard at first because our head quarters had always been New York and ceding control to San Francisco seemed more like an acquisition than a merger. At the same time, the firm infrastructure freed us up to do more business and thus be more profitable. The Thelen side complained often in the early days that they had not gotten access to Reid and Priest's client base. That change too was slow but eventually all the clients were served by "Thelen Reid and Priest" lawyers from everyoffice. We developed a brand no longer based on the strength of one office. We integrated by talking. Partners and associates moved internally between the offices. We had annual meetings and lots of conference calls. We got to know each other. We started referring business to one another as we learned what resources we had and how to best use them.

As the years passed, the New York market became increasingly competitive. One of the things we, as a firm, had failed to do was to fortify that office and improve our brand in New York. In fact, it had suffered from becoming the 'New York office of a California firm". After the merger too much of the firm's innovation was driven by California. Our New York office stagnated. Rather than analyzing how best to build the existing brand in that market, the management decided to fix the problem with another merger. Any merger looked good as long as it was done soon to get the attention of the legal market and increase the size of the New York office. We entered into a deal with a large local New York firm called Brown Raysmann and Steiner (BRS). The deal, hastily drafted and promoted, was approved more out of apathy than support. The lack of due diligence and the failure to know them undermined the success of the merger. Culturally, the firms could not have been more different and the practices created conflict rather than complimenting one another. Thefirm ultimately failed, in no small measure due to that last merger.

I joined Pillsbury Winthrop Shaw Pittman (Pillsbury), which was a merger of three law firms and the merger was not yet five years old. Pillsbury was working hard to integrate the people and the practices. They were grappling with three different cultures—again DC, New York, and California—but they were working together. They were open to change. Pillsbury had accepted the differences between the markets. It was akin to peaceful co-existence. I think to this day they are still working on integrating and creating the merged brand.

I left for King and Wood because I felt it was a better platform for me personally, not because of the atmosphere at Pillsbury. Soon, we merged with Mallesons and then shortly thereon, with SJ Berwin. It seems all firms gravitate toward expansion through merger.

What makes a law firm merger work? Sometimes I catch myself complaining about our merger and then I remember Jim Mitchell in the baseball cap. I am reminded to be patient and open to change. Given what I have seen, here is my recipe for a successful law firm merger:

  • Embrace innovation and change
  • Don't complain unless you can do it better and if you can do it better, speak up and contribute
  • Don't forget that we are all lawyers withthe same ultimate goal of serving clients and making a living
  • Be tolerant and celebrate our diversity
  • Make the effort—join the conference calls, attend the meetings, raise your hand for cross border projects and get involved
  • Think about where your practice fits in the whole picture and use the network to your advantage

When mergers first occur, there is resistance. Perhaps people inherently fear change. Don't resist it. It has happened so find your way. If we do not change and innovate, we will be left behind. Staying where we are is not an option in a world that is moving as fast as the internet and shrinking every day. One of my partners said that he never thought we would be in a merger. I laughed to myself and thought, in 1991, I did not think I would be working in a Chinese law firm. The world is changing and this is our chance to change with it—or just maybe, it is our chance to bring about change.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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