The champagne corks had long-since popped when the great and the good of legacy British firm Lovells and Washington DC powerhouse Hogan & Hartson met at a practice area retreat in Barcelona in 2013. While there was cause for cheer at the bedding in of their union, there was also business to attend to.
Adrian Walker, now a global board member and head of Hogan Lovells’ ESG practice, was then a couple of years into his role as global co-head of infrastructure, energy, resources and projects, a role he shared with Hogan Lovells’ current chief executive, Miguel Zaldivar. He recalls the odd mix of levity and gravity: ‘I interviewed a load of people at the firm for a video we did at the retreat for a bit of fun. I spoke to Miguel about values, and how the world will look in 50 years. He mentioned green energy and autonomous cars but noted that core values will always remain the same. We learn them from our predecessors and pass them on to the next generation.
‘It’s why we weren’t afraid of the merger. The only question really was whether we had the right partner. A lot of other firms have “hearts and minds” issues with their strategy – where there’s not an agreement on whether you move forward and become global. That was never an issue for us.’
Speaking to well over a dozen current and former Hogan Lovells partners, there is a consensus that the merger made sense in that context. But the devil is in the detail.
‘A lot of other firms have “hearts and minds” issues with their strategy – where there’s not an agreement on whether you move forward and become global. That was never an issue for us.’
Adrian Walker, Hogan Lovells
Accepting received wisdom that no big merger goes off without a hitch, it is fair to say that the years immediately following the deal raised controversy. A Legal Business feature from 2013 reported dissent, particularly relating to the firm’s compensation structure, uninspiring financial performance and lack of progress in attracting transactional talent in London and New York. More recently, coverage of Hogan Lovells was tinged with a sense of what could have been. Therefore, LB endeavours to seek closure. Has Hogan Lovells delivered on its mandate?
Something special
For Lovells lifer Walker, the desire to create a global law firm goes back farther than you might think. In fact, he argues that the Hogan & Hartson tie-up was the continuation of a strategy set out in the 1990s by pioneering Lovells managing partner Lesley MacDonagh. By the early 2000s, Lovells had established itself in Germany and a number of other European markets, something MacDonagh termed ‘our European experiment.’
Walker invokes an image of a dynamic firm that did not rest on its laurels. In 1988 Lovell, White & King, as it was then, nearly doubled in size as it merged with Durrant Piesse. Then the firm changed its name again in 2000 to Lovells after merging with German firm Boesebeck Droste. Walker summarises: ‘We were used to growing, and we were not frightened of change.’ Hogan Lovells chair Marie-Aimée de Dampierre, former head of the Lovells Paris office, echoes the sentiment: ‘We knew it was coming. I joined during the Durrant Piesse merger, and we continued opening new offices afterwards so I knew the next step was a merger.’
The reality is likely removed from the restless firm described. Lovells had a reputation as the ‘nice guys’ of the London legal market, who were quickly losing ground to their Magic Circle competitors. José Balañá was a member of Lovells’ board during the combination and is now regional managing partner for Hogan Lovells’ EMEA region. He admits: ‘We were striving to keep up with the likes of Clifford Chance and Allen & Overy but we were too small to do so. We needed something transformational to change the pace of the firm, but it was a risk because the US was a different market.’
The consensus internally is that a tie-up was needed in order to take the firm to the next level globally. Michael Davison, storied litigation partner and now Hogan Lovells’ deputy chief executive, spells it out: ‘If you are a European firm you can’t be truly global if you don’t have a significant presence in the US, and that encompasses the west coast, New York, and the east coast.’
Susan Bright, Hogan Lovells stalwart and former head of the London office, was heading up the global Lovells antitrust team at the time of the deal and was charged with conducting due diligence. She recalls: ‘It was completely right for Lovells. I had seen the way we had developed since 1989 and I could see it was critical: Hogan & Hartson had a very strong antitrust practice, which was a natural practice progression for Lovells. We created something special.’
Those on the Hogan & Hartson side recount similar ambitions. While a muscular presence in DC was well-established, legacy partners were concerned the firm was becoming underweight internationally as clients began to globalise. Des Hogan is now Hogan Lovells’ global disputes head, but was a Hogan & Hartson partner during the combination. He recalls: ‘The merger made sense to me because our Hogan & Hartson client base was becoming increasingly global, we were pursuing opportunities all around the world. We also didn’t have the depth and breadth of practice areas in the US that we wanted. Clients would approach us and say: “We have this dispute in Asia and Europe” and we weren’t able to deliver that. We were using a network. We wondered: “Is there a partner firm out there who would truly offer a global solution to clients?”’
‘We needed something transformational to change the pace of the firm, but it was a risk because the US was a different market.’
José Balañá, Hogan Lovells
Zaldivar is one of many partners to quickly assert that the merger is now ‘ancient history’, but rewinds the clock anyway to when he was a Hogan & Hartson partner: ‘At the time I felt that the firm was very American, and that it was trying to replicate American firms that were going global. We were telling the market we were an international firm but we weren’t really.’ According to Zaldivar, the firm’s global ambitions were the brainchild of long-serving Hogan & Hartson chair Warren Gorrell. ‘I didn’t appreciate what visionaries like Warren saw – we had to be global to succeed.’
Teething issues
There was buy-in on both sides of the pond for a deal, which ultimately went live on 1 May 2010. The united firm created a 2,500 lawyer behemoth with estimated combined turnover of $1.66bn – a monumental output, but inevitably, problems surfaced almost immediately.
The same day the merger went live, Hogan & Hartson’s Geneva office opted out and a seven-lawyer team decamped to Akin Gump. The following weeks saw a further spate of high-profile departures, notably including co-chair of global energy and natural resources Garry Pegg, who left for King & Spalding.
Financials failed to set the world alight – 2011 and 2012 saw flat revenues while in 2013 global income actually dipped 2%.
One former partner raises a well-worn criticism – that implementing legacy Hogan & Hartson’s performance-driven model firmwide was sluggish in London and Europe, making a uniform remuneration structure difficult to establish.
However, Walker is adamant that the firm got there in the end: ‘The important thing for us was to build a good, merit-based system that the new global firm could buy into, regardless of cultural background. Our system is neither lockstep nor “eat what you kill” – it strikes a good balance. Nothing is perfect, it evolves, but, broadly, partners are happy with it and the business is growing.’
Current partners concede that it took a substantial amount of time to iron out these issues. David Bonser, global managing partner of Hogan Lovells’ corporate group, applies his practice knowledge to the firm’s teething problems: ‘I have advised on many public mergers, and one of the key questions you always ask is: “How long will it take to become a unified company?” I rather naively predicted that we would feel like a single firm within about two years. But it took much longer. I’d say it was around 2014 or 2015 that it truly felt like we were one firm.’
‘I rather naively predicted that we would feel like a single firm within about two years. But it took much longer. I’d say it was around 2014 or 2015 that it truly felt like we were one firm.’
David Bonser, Hogan Lovells
Ina Brock, a disputes partner in the Munich office, recognises that legacy Lovells’ old compensation model was unsustainable: ‘The top performers like me and Sharon Lewis (Paris finance, insurance and investment partner) were weakened under the lockstep compensation system we had for many years at Lovells.’ Lewis agrees: ‘The old Lovells would have struggled to retain its people over time.’
Balañá identifies an early structural issue which led to considerable inefficiencies, going some way towards explaining the underwhelming performance: ‘We didn’t know each other too well, so we started with a dual structure with co-leaders for everything but we soon realised that wasn’t good enough because it slowed down the decision-making process.’
The enforced collaboration is nevertheless credited with bringing about the cultural change necessary, opening the door for future cross-selling. Bonser reminisces: ‘I remember the first thing we did with the combined firm with all the capital markets partners – we quickly moved to the idea that this was an education session. It forced me to learn more about what we were doing overseas. The merger was very easy to understand from looking at a map but that was just the starting point, we had to culturally mesh well.’
Rebound
Ask any Hogan Lovells partner today for an elevator pitch and they will gleefully tell you in near-unsettling uniformity: ‘We act globally for clients in high-stakes matters at the intersection of business and government.’ The majority point to the firm’s market-leading regulatory capabilities, backed by some hefty mandates.
The firm boasts assisting Uber in retaining its licence to operate in London – twice. It also advised the ride-hailing app on reforming its governance model, systems and policies to provide a foundation for sustainable growth. Other impressive regulatory mandates include supporting Salesforce on issues relating to GDPR and ongoing compliance.
The firm comprises 2,890 lawyers, of which 793 are partners, across more than 50 global offices covering every financial hub one could care to name. Crucially when looking back at the aims of the merger, Hogan Lovells has a well-balanced geographical hedge, with 49% of the firm’s business originating in the Americas compared to 45% from EMEA and the remaining 6% from Asia-Pacific.
Partners generally shy away from branding it a ‘transatlantic’ firm, despite its arguably unique claim to that title. Zaldivar himself admits it is hard for him to use the phrase, but asserts that the firm trounces even the most premier offerings either side of the pond: ‘Magic Circle? The culture is not as global as our culture. They’re organised more like UK firms, without our strength in the US. The successful US firms, like Kirkland, Akin Gump or MoFo, our US business compares to theirs. But they tend to be more specialised in their offerings outside the US and their culture is very American.’
Certainly, few firms can match the depth that Hogan Lovells has accrued, with 22 outposts in Europe and 18 in the Americas. But while talent has come a long way since the merger, quality transactional recruitment remains a concern in the centres of London and New York. M&A star Patrick Sarch, who switched White & Case for Hogan Lovells at the beginning of 2021, is the sole, albeit substantial, piece of pure corporate investment in London since the start of 2020. Although there is genuine excitement internally surrounding his arrival, with several partners stating with confidence that Sarch has been tasked with the crucial responsibility of taking the firm’s corporate offering in London to the next level.
Bonser is not resting on any laurels, however: ‘Probably the best way to describe our London corporate practice is “not as heavily weighted as we would like” but a lot of firms would say that. Patrick Sarch brought with him a really strong practice, and he saw a real opportunity with us. We also have a terrific group of young partners but it’s going to be people like Patrick at a senior level who can guide the younger partners to success. The question is: “What can we do to bring in more Patrick Sarches?”’
‘Our lawyers are doing timesheets daily and sending bills out every month. Clients have paid and cashflows have been positive and healthy.’
Miguel Zaldivar, Hogan Lovells
Nevertheless, Bonser highlights a number of rising stars in the London team: Georgy Kalashnikov, Ben Higson, Sarah Shaw, John Connell and Dan Simons are all highly rated. Externally, there was praise for banking partner Jo Robinson, while one former partner described head of restructuring Tom Astle as ‘one of the strongest performers in the market’.
On the other hand, Davison bullishly insists that the firm has delivered on its aims: ‘The ambition to build out corporate in London has been realised. There have been significant investments in bringing talent in – Patrick Sarch built out our corporate bench, and Ed Harris on the private equity side (who joined in July 2020 from Paul Hastings) has proven to be a fantastic cross-seller. The quality of our transactional work is on a par with any firm in London.’
To back up that claim, the firm said it advised on over 600 M&A transactions globally over three years with a total value in excess of $450bn. Among the headline mandates were acting for AmerisourceBergen on its $6.47bn acquisition of Walgreen Boots Alliance’s wholesale distribution business in Europe, and Marvell Technology on its $9bn pending acquisition of Inphi Corporation.
Bonser declares that the New York corporate scene is ‘one of the hardest markets in the world to be successful in’, evidenced by the firm’s uninspiring track record of lateral recruitment in recent years. Aside from an impressive three partner hire into the capital markets team in October 2020, with Matthew Schernecke, Ben Garcia and Richard Aftanas arriving from Morgan, Lewis & Bockius, Milbank and Kirkland & Ellis respectively, there have been no partner-level appointments in core corporate since the start of 2020.
‘My job is to focus on the London engine, but also to increase our exports and increase the “pie” for other parts of the firm through the connections we have.’
Penny Angell, Hogan Lovells
While the merger still clearly has space to grow into, the firm should be credited with a notable turnaround in financial performance since. Revenue for that period has increased by 39% from $1.665bn to $2.3bn while profit per equity partner (PEP) jumped by 73% from $1.14m to $1.97m. During the decade, revenue per lawyer grew by 31% and overall billing climbed 39% (52% with currency removed). Most recent financials show the firm’s turnover increased by 3% from $2.25bn to $2.3bn, but the more eye-catching statistic was the 31% surge in PEP to $1.97m from $1.5m which Davison and Zaldivar largely attributed to good financial discipline. When the results were announced in February, Zaldivar said: ‘The main contributor was not a drop in equity partners. In 2020 we introduced a floor on compensation for some partners to act as protection to them without a financial risk to the firm.
‘Our lawyers are doing timesheets daily and sending bills out every month. Clients have paid and cashflows have been positive and healthy. Michael has been the enforcer of the rules!’
Miguel who?
Despite assuming their positions at a challenging time, only a few months into the Covid-19 pandemic, chief executive Zaldivar and deputy Davison have been widely praised for strategic and cultural clarity as well as shrewd financial management.
A rather uncharitable 2019 Legal Business headline questioned ‘Miguel who?’ upon Zaldivar’s nomination, but his reputation internally could not be more solid. Zaldivar’s family, which originated from Cuba, was forced to flee the country as political refugees. Since then he has pursued a globetrotting legal career at Hogan & Hartson and later Hogan Lovells, where he has occupied a slew of senior roles including Asia-Pacific managing partner, head of Latin America and co-head of the projects group.
‘I had to leave my country when I was young. My personal life has always been defined by crisis, so in my professional life I am not afraid of change,’ he asserts. ‘I was asked the question as soon as Covid hit: “Do you really want to take on a management position at this time?” I had no hesitation.’
Colleagues describe a chief executive who is ferociously astute in his duties, but who also possesses a much-needed personal touch.
Washington DC regulatory partner Alice Valder Curran says: ‘Miguel is incredibly strategic in his thinking. He’s very much a people person, and definitely not a micromanager. He can be firm when he needs to be, but not in the cliché “rattle a few cages” way.’ Walker adds: ‘It’s very useful to have a CEO who has good old-fashioned values but is also the ultimate world citizen. It’s very helpful in producing a different culture.’
Balañá recalls meeting an eager Miguel in Madrid soon after Covid restrictions eased and the chief executive was finally able to travel. ‘He told me he was taking two days off soon, one of which would be spent going to a conference in the US’, Balañá says. ‘He is impossible to reach via email but will respond to WhatsApp at all hours of the day, which instils a culture of hard work among the leadership team.’
Davison is an equally integral component in the leadership duo, credited with doggedly converting strategy into action. Bonser says: ‘Michael has done a really good job of executing good ideas. You go into partner meetings and get so energised and then client demands slap you in the face! You never end up following through on ideas, but Michael makes sure they are implemented.’
Among the most important initiatives Zaldivar and Davison have sought to maintain is a culture of proactive cross-selling. Zaldivar insists that predecessor Stephen Immelt should be thanked for introducing incentives for sharing work among Hogan Lovells’ vast international network, but it is clear it remains high up his own management agenda.
He says: ‘It would be inaccurate to report that our highest-paid partners are in the US. If you look at our top 20 rainmakers, you will see a broad range: Germany, France, UK, US – and not just DC. Our China team is extremely successful at generating work outside of Asia and exporting it.
‘Cross-selling is part of what’s growing our economic success. It makes us an easier proposition to clients. Our regulatory practice is the gold mine, they have access and credibility to our clients, and they can now speak confidently about our incredible corporate and disputes lawyers.’ Underlining this, a ‘role model group’ of 30 of the best cross-sellers has been created to inform pitch tactics and train young lawyers. While putting those more selfless partners on a pedestal, it also sharpens client acquisition. It has already fostered results, as Zaldivar claims that the firm as a whole has just reached a much-improved 40% success rate on client pitches.
And as for taking care of the coffers, under Zaldivar’s leadership the firm has re-negotiated most of the rents across its real estate portfolio which led to ‘massive cost reductions’ around the world, including in Colorado, Paris and Hong Kong.
Engines
One pillar of Zaldivar’s five-point strategy is providing power to the four geographical ‘engines’ of the firm: London, Washington DC, Paris and Germany. Balañá terms this as ‘being strong where we are strong’, but it is also a fundamental factor in the wider cross-selling push.
Penny Angell is newly-installed as UK managing partner, and she clearly understands the remit: ‘My job is to focus on the London engine, but also to increase our exports and increase the “pie” for other parts of the firm through the connections we have.’
‘When you meet a team from Hogan Lovells they all know each other and like each other. Clients can see that and appreciate it.’
Michael Davison, Hogan Lovells
For Zaldivar and Davison, there is a consistent message when it comes to future ambitions. Despite the firm’s already enviable global presence, the pair agree there is more to be done in certain important jurisdictions. Davison says: ‘In the US we need to do more in California, Texas, and New York. That’s where the client demand is.’
While Walker admits that building out the London corporate team must be a ‘priority’ for the firm, overall he is sanguine about Hogan Lovells’ fortunes. He asserts: ‘It’s about long-term sustainable growth. You have to do the short-term as well but it needs to be values-based. I don’t like “fast buck” strategies. The firms that tend to fail are the ones who get it wrong on culture.’
And on the culture front, Hogan Lovells appears to be onto a winner. While it may have taken longer than desired to iron out thorny issues around compensation and leadership structure, the cultural attitudes of both Lovells and Hogan & Hartson were rarely in doubt. If the firm can leverage its collegiate approach to attract the right transatlantic talent, then it is due for a long and happy marriage.
Davison concludes: ‘When you meet a team from Hogan Lovells they all know each other and like each other. Clients can see that and appreciate it. I’ve been at the firm since I was a trainee and it means a lot to me. I can still see the conference room where I met my wife, and the room where I was first interviewed. I want to continue being part of a leadership team at a firm where people feel good about themselves.’ LB