Eyes on ‘the prize’ – BCLP’s leaders on going all-in for transatlantic union

LB: What was the background to the merger talks?

Therese Pritchard (TP): I started it. It’s my fault. In February of 2017, I was interested in strategic growth. So looking for a firm that had the same culture and practice areas that are successful or where they were interested in growing. I did some reading. I saw enough that looked interesting that it was worth a call to Lisa. One chat led to another and eventually we invited more partners to the discussions and decided this looked like a great fit.

Lisa Mayhew (LM): Yeah, it was definitely an iterative process…

LB: I’m going to have to look that up.

LM: [laughs] No, you won’t. I mean neither firm had to do this. This was the first conversation, you only cover so much ground. Then the second conversation, again, was between the two of us, which was a full-day discussion in Berlin. After that it was: ‘OK, there’s enough here to bring in our respective COOs and a couple of others’, and you start sharing data, client lists etc. Then we had a meeting where we had six partners from each firm.

LB: When?

LM: Late June, early July, and then it was a two-day session. Then the boards went into overdrive.

LB: Boards do overdrive?

LM: It was pleasing to see them move up a gear actually. With something as significant as this, everybody’s very engaged and focused.

You kick the tyres, keep introducing people, clear more of the fog. You ultimately arrive at the point where it’s ready to share with your partnerships. It took longer than we anticipated because of the way we’ve structured it. The one-firm, single-profit-pool aspect to this is harder to achieve. We think it’s absolutely a prize worth the extra time.

LB: Who were BLP [Berwin Leighton Paisner]’s point people?

LM: David Rowe [BLP’s finance director] and Dave Fleischer [Bryan Cave’s COO] were aware, right after the second meeting we brought them in because that’s when we had to do the due diligence and the client work, so obviously our respective GCs as well on the client side, in my world the DMPs [department managing partners], Robert MacGregor. Quickly the board was aware and it was the same at Bryan Cave. Then we had a big meeting in Chicago in September – probably 40 partners, all pre-announcement to the partnership. We had to bring everyone along.

LB: What was the pitch to partners?

TP: Our vision was to have a fully-integrated firm that is committed to delivering the best possible client service globally. To structure it as one firm, meaning we would have one financial pot so that everybody is incentivised to work together as a team. It’s institutionalising collaboration.

On the practice side, it is very synergistic. We had previously identified an interest in becoming best-in-class in real estate and financial services. BLP is very strong in those spaces. BLP had identified an interest in becoming stronger in corporate and in litigation. We’re very often in the top ten on the Thomson Reuters deal list and very strong in litigation across the US. The commitment to innovation on both sides was a real incentive.

‘Both firms wanted to be more driven. This is not the destination; it’s a commitment to drive performance.’
Lisa Mayhew

LB: Does BLP move to the same year-end and cash accounting?

LM: Yes. There’s no point putting together two firms if they carry on as normal. The attraction is to recalibrate, reset and take the best from each firm. And in some cases we’re doing something completely new. We’re moving to a financial year which is the calendar year, we’re moving to cash accounting, we’re stepping away from lockstep. This is all immediate. We each asked partners from both firms to form working groups: one on partner remuneration, one on performance principles, one on partner promotions, one on governance. Those partners were tasked with coming up with the best proposals.

LB: Which area is the biggest shift?

LM: I knew change to the way we remunerate our partners would be a big thing. That requires a lot of explanation so partners feel they could trust me in the change. Same on the Bryan Cave side. Although we were lockstep, we were a very modified, managed lockstep, so 25% of the BLP profits went into a performance fund, a bonus pool. So there are changes on both sides. Some of the shift on [Bryan Cave’s] side was also on partner remuneration.

LB: So BLP had a higher proportion of profits in the bonus pool than Bryan Cave?

LM: Yeah, which is odd given we’re lockstep.

LB: Presumably because you were using it as a mitigation on lockstep?

LM: That’s right.

LB: And because [Bryan Cave’s] model’s more racy, you didn’t need that finesse…

TP: Yes, ours was maybe 1% of partner profits? So that’s a little scary to our partners.

‘One financial pot means everybody is incentivised to work together as teams. It’s institutionalising collaboration.’
Therese Pritchard

LB: How is the new model going to work?

LM: We’re moving, with immediate effect, to a prospective income setting, but with a bigger bonus pool being put aside. So not all of the profit being immediately allocated to partner remuneration.

LB: I’m a little hazy on what you mean by that.

LM: Normal world, normal business, you know what your salary is. In a lockstep world, you don’t until you’ve had the year you’ve had and it takes a good old while to figure out how you allocate that. It’s retrospective. So when we say prospective, early part of the calendar financial year, you know what your target income will be…

TP: … and you establish that by what people have done in the past.

LB: What is the criteria?

LM: Revenue generation, how profitable that revenue is, collaboration, strategic value, so if you’re one of our tax lawyers, that’s very strategically important to deals and relationships. We’ve built in stuff around diversity and inclusivity, what other contributions you make to grow the pipe. Partners are expressly encouraged to have cross-sold.

LB: How much did BLP have to factor in loss of referral business from other American firms? Was that significant?

LM: No. We looked at that in the antitrust group [and real estate], but it’s not a huge amount.

LB: Really?

LM: No, really, if it was then it would have been more of an earlier consideration you’d have heard about. I can track it now and it’s been significant in terms of the number of referrals that have gone to the US.

‘There’s no point putting together two firms if they carry on as normal. The attraction of this is to recalibrate, reset and take the best from each firm.’
Lisa Mayhew

LB: Significant?

LM: Well there’s 150 between us [from October to April], it’s more than that now. That’s about a month old now.

LB: What sort of earnings spread did Bryan Cave have for partner remuneration?

TP: Not out of the ordinary in the industry.

LB: I would take a middle-of-the-pack regime for an American law firm as being six or seven times, top-to-bottom.

TP: Probably around there. It does reward the same things that we’ve just been talking about. We annually talk about every partner in the firm, how they have done relative to the prior year, and they submit self-evaluations, others are allowed to comment on their performance, so there’s a ton of input. I think the combination of the prospective system but with the bigger bonus pool is going to work really well.

LB: How big will the bonus pool be under the new regime?

LM: We’ll phase it up to 12%. Put it this way, the [spread between bottom and top earners], is not dissimilar to the top and bottom of BLP.

LB: Could we get a little background on Bryan Cave? What brought you to this merger?

TP: It’s a very old and established firm, particularly in the Midwest – 144 years old. There are great stories within Bryan Cave about the old head of [aerospace group] McDonnell Douglas signing the incorporation papers 100 years ago that are now Boeing, so a great history in industrial America representing public companies, whether Boeing or Anderson Electric or Anheuser-Busch. A couple of decades ago the then leadership became interested in expanding beyond its Midwestern routes. Washington DC was established in 2002, we did a combination in New York with a firm called Robinson Silverman, since then we [in 2008] combined with Powell Goldstein in Atlanta… so there’s been an interest in becoming a national and ultimately a global firm. The London office was established some time ago and we had quite a presence in the Middle East. We represented the government of Kuwait. In becoming global, we saw more clients interested in using fewer firms. We felt it would be attractive to larger clients if we had a broad and deep service model.

‘We’ve held our own, but we’re in a very competitive space and wanted ways to differentiate ourselves from the many firms that look very much like us in the US.’
Therese Pritchard

LB: How do you think Bryan Cave’s standing has been in the US?

TP: It’s held its position in that it stayed strong during the financial crisis when many firms didn’t do so well, it took on a fair amount of mortgage litigation during that time that has waned. In 2016 we had our strongest year ever. Last year was not as strong because we lost some of that litigation. But if you look behind those numbers at our corporate practice and other areas, they have continued to be very strong. We’ve held our own but recognised we’re in a very competitive space and have been looking for ways to differentiate ourselves from the many firms that look very much like us in the US.

LB: Can you talk about the things both firms are achieving with technology?

LM: In our Manchester office we have a contract management system, which is entirely technology-based, we use it for clients like Tesco. It’s where you have a high volume of work and for it to be done in a way that makes sense for us and for them we use technology. And we have our streamline group, which is a separate group of consultants. Streamline is process mapping, they consult with the in-house legal departments of corporates and they help them more efficiently process map the various systems they have.

In terms of technology, you’re familiar with the work that Neville [Eisenberg] and Bruce [Braude, head of strategic client technology] do with GCs. They go out and consult basically with GCs. We’ve had a lot of success in that space.

LB: That’s a commercial service?

LM: Yes. You saw last week the Court of Appeal. We were the first law firm, I believe, to buy RAVN [to support advanced keyword searches via predictive coding]. It’s the first time the UK courts have blessed the use of this technology in litigation. We’ve been developing a forensic tool that helps clients predict the outcome of litigation.

LB: How substantial is the Streamline business?

LM: It’s a few years old. Six or seven people.

TP: We have a long history in this. One of our groups is called the practice economics group and is about using data to price matters so it’s less expensive for the client but still profitable for us.

We last year launched BCXponent, which focuses on consulting with in-house legal departments about how they can better manage their operations. We’re also very interested in analysing data, whether it’s with [AI providers] RAVN or ROSS. And, ultimately, AI will be something we’re all following right now.

LB: Do you have to make a one-off allocation to smooth the tax position as you go to cash accounting?

LM: It doesn’t involve partners putting cash in.

TP: How you fund it is something you can do a variety of ways but it certainly does involve a cost that gets amortised over a period of time and, as Lisa said, we are confident the revenues the combination will provide will far exceed the cost. And even the cost savings through things like sub-leasing our existing major offices [are significant].

LM: Some of the press reporting of what it would involve is just not accurate…

LB: … well, you did disappear for about three months.

LM: Oh, here we go [laughs]. I have never disappeared for you, Alex. Not for more than an hour, certainly not three months. It’s certainly not involved individual partners having to borrow money to put into the firm.

‘Changing the remuneration was a big thing. That required a lot of explanation so partners could trust me.’
Lisa Mayhew

LB: I wasn’t suggesting that. But there is a cost you have to put in as a one-off which is an accounting issue as you shift position from accrual to cash.

TP: That’s right.

LB: Doing US/UK mergers is tough. What was the hardest thing to reassure the troops over?

LM: This is a journey BLP partners have been on for a while. Three years ago, when I first became managing partner, we had a conference and we were talking about our strategy around building an international business but one that built on our strengths and culture.

But it was important we kept cool heads and our eye on that rationale. We’ve had other conversations. Terry rang. Terry became the equivalent of the managing partner at Bryan Cave at a similar moment. They had done their own strategic exercise in 2015 – the year we did ours – they had an ambition to internationalise too but not in a structure that diluted the culture or priorities. They prioritised three sectors: real estate, financial services, and one that made sense for Bryan Cave, food and agriculture. Honestly [partners were reassured] once I started telling partners about that and that we would gain access to the corporates across America.

The bits that caught most of our partners’ attention was that – the alignment of strategic goals in 2015, two years before we first started talking and the lack of geographic overlap, which means you don’t disappear for three years mashing it together.

For BLP, we will be part of designing [together] the governance, the strategy, the sectors and practice groups. To be honest, there wasn’t a single thing that was proving a stumbling block.

LB: As BLP evolves does it need to become more driven?

LM: Absolutely. Both firms recognise that. We had to explain this isn’t just about combining and feeling great for five minutes and job done. This is rooted in coming together, the ability to hit the ground running, not just disappear on internal matters, look outwards, build, travel, improve, share, connect, all in the one firm structure. This is not the final destination; this is a commitment to drive performance.

For your highest-performing partners, that’s where you need to convince. And for others who might find that unsettling, it’s reassuring that it’s not joining an entirely different animal where it’s an eat-what-you-kill, very short-termist culture.

LB: Looking at other transatlantic mergers, many have underwhelmed, do you feel you’ve got a handle on how to avoid that fate?

LM: I think we have. We’ve talked to people in the market; we’ve talked to clients most of all.

LB: You did the Jones Day thing, so you have a few scars on your back.

LM: Yeah, I’ve experienced different environments and I know what I like and don’t like. It’s a people business, you get the best out of people by creating an environment that helps them flourish. Whether it was a lesson we learned or a shared attachment to the one-firm philosophy, it’s been over a decade since a non-verein transatlantic combination has happened, so we feel optimistic about hitting the ground running.

TP: We created this structure knowing integration is key to being highly successful. We have an all-partner retreat scheduled within the first month, so all partners from both legacy firms will get together in Boca Raton, Florida. Want to come?

LM: Ha, no! No offence, Alex. [laughs]

LB: Little too quick on that, ‘NO’, Lisa.

LM: Beats Brighton in November, put it that way.

TP: It’s a great opportunity to get to know each other, figure out who’s good at what. That’s an important event for us.

LB: Is it fair to say that full financial integration is the key lesson you’ve learned from other deals and why you pursued it so hard?

LM: I’m reticent to say it’s a lesson, more about what we believe makes sense for us and the way we work with clients. We’ve been in a situation where you’re a client of organisations that might not be structured that way in other sectors and you notice it in the service. I’ve been a client in that situation as well as a provider, and I find that frustrating. It really makes a difference.

LB: Over the next two or three years, what are the key yardsticks you’re setting yourself?

TP: We’d like to see revenue growth, we’d like to track how much work is moving across offices and how many clients we have introduced to multiple practice groups. We care about other statistics like diversity and inclusion. We don’t have statistics around innovation, but we will be looking at what products we roll out. We track clients who generate over $1m, over $2m, over $5m, because part of the concept is as clients want to use fewer law firms we want to be firm of choice.

LB: BLP had mixed results in building London corporate finance. I’m assuming investing in the City is about a sustained push in corporate finance and a little more weight in contentious areas.

LM: I agree.

LB: Are there bits of the network you need to upgrade?

LM: We want to add real estate to Paris and some of the US markets. In corporate, again, it’s very strong in the M&A space in the US, but there are certain cities where we want to add to the bench, and one of those is London. Litigation – they’re looking at various things, but they include strengthening the regulatory capabilities in New York, in Hong Kong. It’s very tangible aspirations that have been put up.

alex.novarese@legalease.co.uk

hamish. mcnicol@legalease.co.uk

For further commentary on BCLP see BCLP: A slightly better sales pitch than expected