Editors' Blog

Clients maketh the merger

Posted 26/01/2007 by John Malpas

While queuing up at the cloakroom in the Royal Courts of Justice for the Reed Smith Richards Butler party last night I got talking to a client of the firm who asked me whether I thought the merger effectively amounted to a takeover.

My diplomatic response was to the effect that although Reed Smith was much the bigger firm, the UK operations were substantial, which meant they would carry some weight within the merged firm.

I also observed that Reed Smith’s takeover of, sorry, merger with Warner Cranston five or so years ago seemed to have been handled sensitively - a factor that Richards Butler partners say reassured them when their firm entered talks with the US firm.

Clients often report their frustration at not being consulted when law firms announce a merger. Asked for his opinion about the latest tie-up, the client in question said he knew three or four partners very well and had worked with them for many years, so he doubted it would make much difference as long as they stuck around.

UK firms are regarded as generally having a far tighter grip on their clients than their counterparts, making it more difficult for departing partners to take a large book of business with them when they move on. But this distinction can be over-egged and firms can underestimate the value of individual partners - much to their cost - when embarking on a piece of grand strategy that otherwise seems to make so much sense.

Recently, I heard tell of an interesting example of this. It concerned a de-equitisation at a leading firm and a key client’s angry reaction when they were informed without any warning that a new partner, who they did not know from Adam, would be looking after them from now on…