Sale of the century – Has Camerons picked up a bargain with Olswang and Nabarro?

Amid a turbulent market, the three-way union of Camerons, Nabarro and Olswang has forged a UK giant. Has Camerons picked up a bargain or will there be buyer’s remorse?

September 1988. Twenty fresh-faced trainees are preparing for their first day at Nabarro Nathanson. Among the recruits are Iain Newman, Paul Stevens and Duncan Weston. Not only will the trio go on to have prominent careers in City law and remain on good terms, but more than 25 years later they would kickstart the UK’s largest-ever legal merger.

Weston and Stevens forged paths at rivals in the packed mid-market. Weston joined CMS Cameron McKenna, building out its Central and Eastern Europe practice as a private equity lawyer before becoming managing partner. Intellectual property litigator Stevens would join Olswang in 1997 and ascend to chief executive amid challenging circumstances for the TMT firm. Newman, meanwhile, became one of the most prominent lawyers outside Nabarro’s core real estate practice, going on to run its corporate team.

The trio will professionally reunite on 1 May when Camerons, Nabarro and Olswang combine in the most audacious legal merger for years. The combination makes the firm a top-five global practice by lawyer headcount, with 4,500 fee-earners, if you include the CMS international network, and nearly 2,000 lawyers in the core UK-based partnership. The combined firm will trade as CMS UK with revenues of over £430m in the UK and more than €1.2bn of business across the CMS grouping of 13 member firms.

While all mid-market players, the three firms have taken divergent paths recently. Olswang and Nabarro are well-regarded brands that failed to live up to earlier promise, becoming mired in strategic culs-de-sac. The union takes them out of such impasses at the cost of independence – their names survive only on paper as part of CMS Cameron McKenna Nabarro Olswang LLP. Camerons has faced its share of reverses in recent years but is in stronger shape strategically after a well-executed 2014 takeover of Scots legal royalty Dundas & Wilson and benefits globally from the CMS grouping of major European firms.

In context, it is easy to see the rationale for the union, matching economies of scale with robust industry coverage spanning TMT, financial services, real estate, life sciences and energy. Interviewed in the wake of the announcement, even a host of peer law firm leaders were uncharacteristically upbeat. ‘It makes complete strategic sense,’ noted Dentons chair Joe Andrew; ‘It is really quite exiting – sort of a legal big bang,’ said Watson Farley & Williams’ Chris Lowe; ‘It could be a great way forward for all three firms,’ concluded Macfarlanes’ Charles Martin.

The question is whether this rationale is enough to overcome the cultural and logistical challenges of major mergers and galvanise three partnerships not overburdened with entrepreneurial drive. What the firms cannot be accused of when facing such hurdles is opting for the favoured strategic alternative of managing partners the world over: the status quo.

Says Weston: ‘We are doing all this in a time post-economic crisis. Our view is that we need to move and move fast when these things happen. We believe we would all be stronger together.’

Meeting up with Legal Business to discuss the union, the three leadership teams are in inevitably bullish mood, with senior partner Penelope Warne and managing partner Stephen Millar arguing that the new CMS UK’s sectorial heft will be matched with enough forward-thinking panache to make the 400-plus partner firm stand out in a crowded market.

Millar sums up the thinking: ‘Clients have to choose between sectors and scale. We wanted them to choose sectors first and take comfort from scale. I’ve always said it is about sectors, bench strength underpinned by quality people and quality clients.’

 

The vacuum

Though Olswang had previously been on Camerons’ suitor list, on paper the fêted media and entertainment adviser was not the most obvious match for a large institutional partner. Founded in 1981 by Simon Olswang and Mark Devereux as a media boutique, the firm was quickly established as a trailblazer during a period when basing your office in Covent Garden was an act of cool rebellion. In a 2001 profile, Management Today summed up the legend: ‘Olswang is the hippest law firm in Britain – a cool portfolio of communication clients; sleek, colour-co-ordinated offices; All very Ally McBeal.’

Simon Olswang in 1997 handed over to the youthful and driven Jonathan Goldstein as chief executive. The boy wonder lived up to the hype, overseeing rocketing turnover from around £18m to over £80m when he quit in 2007 to join client Heron International.

While there were signs that the astute succession was not going to be repeated – the firm was plainly rattled by Goldstein’s departure, summoning journalists amid much mystery to announce the exit – in many ways things looked set fair. Litigation partner David Stewart became managing partner and later chief executive, though the firm had already begun to evolve toward a broader service and more conventional player. An earlier indication had been the 2003 acquisition of a large property team from DJ Freeman. Real estate was bolstered further with acquisitions of Julian Holy Solicitors in 2005 and Kanter Jules in 2006.

While some had grumbled about diluting that sexy brand, Stewart’s tenure was steady even as he led a highly cyclical business through the 2008/09 banking crisis. Undeterred, Stewart pushed an agenda of international expansion. The idea was simple: in a globalising TMT sector, to create a cross-border network to position the firm for a high-impact US or European merger. In 2007 Olswang opened a Berlin office, with later expansion into Madrid, Munich, Paris and Singapore. The German practice was by far the most successful, generating turnover of £19.6m according to Olswang’s 2015 LLP filings.

But losses in other offices were substantial for a firm with a turnover of £126m that year. According to 2014/15 accounts, Spain, Singapore and Belgium all lost around £2m a piece. Olswang was now also managing its equity more robustly, cutting its full equity partnership from 55 in 2010/11 to 41 for 2011/12, which helped to push its profit per equity partner (PEP) to a record high of £567,000 even amid turbulent European markets.

There was a group of London partners, including rainmaking media specialist David Zeffman, defamation guru Geraldine Proudler and patent litigator Michael Burdon, who were becoming increasingly unhappy with the foreign losses and Stewart’s management style. This discontent manifested itself in 2013 when the firm set up a new board, which many interpreted as an attempt to reign in Stewart’s executive power.

The structure stoked tensions between both camps, with Zeffman quickly resigning as chair of the board. Stewart, meanwhile, attempted to enact plans to streamline the equity, moving some partners down the ladder, including senior partner Mark Devereux. ‘David was in a position where he was banging his head against the wall,’ says one former partner. ‘He had personal challenges with the board who he thought were non-contributors.’

Stewart was not always diplomatic. Says one former partner: ‘David was charming, but he could rub partners up the wrong way. I remember a partner after an argument saying: “I should have punched him.”‘ Recalls another: ‘David didn’t suffer fools. Never has.’

Meanwhile, Olswang held discussions with Florida giant Greenberg Traurig, entering an alliance with the US firm in 2005. However, after discussions for a full merger floundered, the alliance was abandoned in 2009.

Initially, Olswang looked for international tie-ups but widened its focus to domestic firms with foreign networks. Between 2011 and 2012 Stewart held exploratory talks with Osborne Clarke’s UK managing partner Simon Beswick and Bird & Bird chief executive David Kerr, but neither progressed beyond the early meetings. Stewart also held preliminary discussions with then Camerons managing partner Weston, though the process was derailed early thanks to the difficulty of putting Olswang’s European offices into the CMS grouping.

One former Olswang partner claims the Berlin office in particular, with its entrepreneurial culture, was aghast at the idea of combining with CMS’s German arm CMS Hasche Sigle, the second-largest firm in Germany by revenue with turnover of around €286m for 2015/16. ‘You’d have been throwing the European offices under a bus.’

Promisingly, Olswang in 2011 began discussions with Palo Alto-bred Cooley, one of the US’s largest and most respected technology advisers. With broadly comparable TMT businesses and personal chemistry between Stewart and Cooley’s straight-talking chief executive Joe Conroy, the opportunity to create a transatlantic tech media giant was tantalising.

The talks came to a head in a 2011 meeting in New York between management, including Stewart, Devereux and Conroy. The final discussions were described by one partner as ‘awkward’. Cooley felt Olswang had a curate’s egg practice and wanted the firm to downsize real estate and cut a substantial number of partners ahead of a merger. It was clear Cooley would be in charge. The UK firm baulked.

Tensions over foreign offices once again came to the fore. By 2014, Spain had become a major issue to Stewart with weak revenues in the loss-making office. The firm had hired Bird & Bird’s Spanish corporate head Javier Vasserot to head up its Madrid operations in 2010, but issues over unpaid invoices and financial management soured relations, becoming a lightning rod for Stewart’s critics. Vasserot and several Spanish lawyers quit in late 2014. That year saw Olswang’s bank loans up to an uncomfortable £22m. Stewart countered that the debt position was a short-term blip due to the timing of tax bills. Meanwhile, the Berlin practice was asking for more equity, angering London partners who remembered the practice’s substantial start-up costs.

With divisions entrenched, a group of board members canvassed the partnership for support for a vote of no confidence. Working life for Stewart became increasingly strained. ‘His door was always closed,’ recalls one partner. ‘He actually put a lock on the door, so if you went to his room you couldn’t enter unless he pressed a button.’

The axe finally fell as the board called Stewart in. ‘Most partners knew on that Friday in October [2014] that the board and executive were considering merger partners,’ says one ex-partner. ‘We were considering King & Wood Mallesons, who had approached us, and Simmons & Simmons. David was fired on the Friday and on the Tuesday Michael Burdon stepped into the interim role. [Burdon] said: “Just so we’re clear, a merger is not on the table.” Then lo and behold, a few months later we were exploring merger partners.’

‘David was charming, but he could rub partners up the wrong way. I remember a partner saying: “I should have punched him.”’

While views on Stewart are mixed, the abrupt nature of his departure and the sense that a divided Olswang was unsure of its next step was damaging. Says one former Olswang partner outside the warring camps: ‘The partnership, in its wisdom, wanted a change. The problem was there wasn’t a plan to fill the vacuum.’ Stewart’s forced exit also disenfranchised Olswang’s foreign offices, especially the Berlin practice, which had not been consulted.

Partners appointed Stevens as chief executive in May 2015. However, prominent partners such as Fabrizio Carpanini left, joining Dorsey & Whitney in late 2015, and productive corporate partner Stephen Rosen was snapped up by Cooley. Then a split with the profitable Berlin office saw the 50-strong team move to former alliance partner Greenberg in July 2015, depriving the firm of its one clear international success. During 2016 more than 20 partners left, though according to several accounts nearly half of these were managed exits under Stevens.

Stevens credits his appointment with the need to address international questions, but denies he was appointed just to find a merger (this view is contradicted by some, including one Camerons partner who says Stevens addressed Olswang’s financial issues ahead of a union, adding: ‘Paul promised to deliver a merger by the summer [2016] and he did it’).

With the firm caught between the rock of struggling to be international with a strained balance sheet and the hard place of humiliating retrenchment to domestic status, an attractive merger looked a better alternative than independence.

Stevens comments: ‘The partnership had a huge desire to be further forward than we were. There were significant challenges around international depth and part of my mandate was how we meet clients’ needs.’

 

The heart of the matter

While its fall from grace was less dramatic, Nabarro had drifted since its 1990s heyday, when the property front runner was on the fringes of the UK’s top ten with revenues of more than £50m and had a formal alliance with New York leader Weil, Gotshal & Manges.

 

‘We are doing all this post-economic crisis. Our view is that we need to move and move fast when these things happen. We believe we would all be stronger together.’
Duncan Weston, CMS Cameron McKenna

 

 

 

As the decade wore on, and the tie-up with Weil ended, Nabarro was being left behind by a globalising legal market. The pairing in the 2000s of managing partner Nicky Paradise and senior partner Simon Johnston tried to recapture some of the old spirit and invest in its transactional practices. One former partner says: ‘What was brilliant about Johnston and Paradise was the ambition; they wanted to take the firm away from its real estate routes.’

But with the 2007 credit crunch hitting Nabarro’s property practice hard, the firm started to retrench. A 2008 revenue high of £142m and a lawyer headcount of 490 both fell sharply in 2009 and 2010.

An ex-partner says: ‘It shrunk massively. It had great profitability but every year it was falling down the league tables. It always talked about being international and had various alliances which never got to the heart of the matter.’

By 2016 the firm, which maintained rigorous financial management, pushed its revenues back to £130m while PEP was at £585,000. But a loose referral alliance with four European firms – known as the Broadlaw Group – was not providing the needed results. Nabarro had established a small network of international offices, with a presence in Dubai, Singapore and Belgium, and had set a target of a third of its work to come from international clients. But it was a struggle, particularly in its small Singapore branch.

The obvious response was to hit the merger trail. Under senior partner Graham Stedman and managing partner Andrew Inkester, who was appointed to succeed Paradise in 2011, Nabarro held merger discussions with Addleshaw Goddard in 2012.

The deal had a mixed reception and the discussions generated some complaints over a lack of candour. One former partner remembers: ‘People wanted to know the official line. I met a client for breakfast who told me: “I hear you are merging with Addleshaws.” He instructed both of us. I said: “That’s news to me.” There was an official denial, but it then turned out to be true.’

 

‘Partners could see how much work had gone into the merger. I had no doubt we would get there.’
Ciaran Carvalho, Nabarro

 

 

Another stumbling block was Nabarro’s pension deficit, which contributed to the end of the talks. Plunging bond yields had sent the deficit to a high of almost £32m for the year ending April 2015 and Stedman pushed through a programme to plug the hole. The firm began to pay down its pension deficit, in addition to standard £1.25m annual contributions. Nabarro’s 2015/16 accounts show the firm making a £4.4m contribution to the pension for that year, with a £5.25m injection planned for 2016/17.

Nabarro also overhauled its partnership in 2012, leading to the exit of 17 partners. In recent years salaried partners have generally served three to five years before making equity. In 2014, Nabarro cut its focus to four core sectors: healthcare and life sciences; infrastructure, construction and energy; real estate; and technology.

‘I don’t get the excitement about merging with Olswang, but there is a lot of excitement about merging with CMS.’
A former Nabarro partner

But despite its reputation for rigorous operational management, it was clearly going to require something dramatic to address the wider strategic issues the firm faced. Meanwhile, corporate partners were getting edgy over the firm’s positioning.

Though relatively collegiate, Nabarro was not a firm that encouraged internal debate, having been driven by a small group of senior management and practice heads.

Senior partner Stedman had been less explicitly focused on mergers, championing modernising the business culturally and selling Nabarro as a great place to work. When Ciaran Carvalho – a restless former Dechert partner who was a strong merger advocate – won the senior partner election in early 2016 against Newman and disputes head Jonathan Warne, it became clear where the firm was nailing its colours.

 

The school disco

While Nabarro and Olswang were casting around for suitors, they found a counterpart even more determined to consolidate its way up the value chain. Camerons under the energetic Weston had previously toyed with a plan dubbed ‘the magnificent seven’, an audacious/outlandish attempt to secure a string of mergers in the UK and abroad that led to a lot of caffeine and bemusement among rivals but little to show for it.

Camerons would instead end up focusing on the nitty gritty of its business going through a post-Lehman overhaul of its partnership, via a deal to buy out older partners; its back-office, via an ambitious outsourcing deal with Integreon; and its property, via a move to open-plan offices in Cannon Street, saving millions of pounds in the process.

 

‘Penelope Warne’s a force of nature – completely in charge.’

 

 

Costs were managed much more tightly. And they needed to be as Camerons shed tens of millions of pounds of revenue after the banking crisis. Still, profitability improved as the firm cut back its equity ranks, rising from a recessionary low of £6,000 per point to currently hit around £11,000, in recent years achieving a PEP of £787,000.

The only deal that emerged was the 2014 takeover of the distressed Scots leader Dundas & Wilson which, despite much sniping, by consensus has proved successful, bringing more muscle to Camerons’ already respectable energy and financial services business and achieving substantial cost savings.

The merger also strengthened the position of Penelope Warne, whose understated demeanour conceals a rock-solid pedigree as an energy adviser and practice builder. ‘Penelope’s a force of nature – completely in charge,’ says one former Camerons hand. Warne in 2014 succeeded Dick Tyler as senior partner. Much of the office politics that beset Weston in his first term as managing partner when he clashed with Camerons’ board was easing as the firm regained some confidence. Having set up Camerons’ energy-focused Aberdeen arm, Warne had championed the Dundas deal alongside energy, projects and construction head Stephen Millar, underlining the rising influence of energy lawyers in the firm.

But the desire for a City merger continued. Early contact in autumn 2015 between Stevens, Weston and Newman kicked off the process. So intent were all three firms on doing deals that the trio sheepishly concede, like the proverbial school disco where the guests are determined to not leave alone, it is unclear who initiated the process or when bilateral talks morphed into a three-way dance. There had already been some contact between Olswang and Nabarro but the ambition to push for a high-impact tripartite merger reflected Camerons’ frustrated ambitions. By the end of 2015, the respective leadership teams were looking at the union in more detail.

Comments Stevens: ‘I expected the talk [with Weston] to go into the catch-up bucket – so let’s move on. But we really got into what the law firm of three or five years would look like and it chimed for me with where Olswang as a business should be.’ Observes Warne: ‘We felt the culture was good and each one of us was a leader in our sectors.’

 

Nabarro and Olswang – a 15-year view

 

Outline deal terms were thrashed out by Easter, with due diligence and more detailed planning held over the summer.

Weston, meanwhile, was handing over to Millar as Camerons’ new managing partner, with the new head increasingly driving the process. ‘Stephen was fantastic,’ says Weston. ‘The whole period from May and seeing the deal come across was phenomenal – to get that deal done during [the Brexit vote].’ Also influential in shaping the union were Newman and Caryn Penley, executive partner for Scotland who had led Dundas into the Camerons union. Camerons received tax advice from Deloitte.

The Nabarro camp was clearly for the union. Says one former Nabarro lawyer: ‘When I talk to former colleagues I don’t get the excitement about merging with Olswang, but there is a lot of excitement about merging with CMS.’ In contrast, Olswang had to get its head around its hang-up with image. Says one partner close to the process: ‘[Olswang] initially struggled with the brand thing. The sexy brand stuff was tricky. In the end, a lot of this was down to timing.’

It helped that the trio shared considerable cultural common ground. Despite the racy image, Olswang was never stuffed with SJ Berwin-style mavericks. The three were relatively collegiate firms, in some teams verging on the laidback.

It helped that the trio shared common ground. Olswang was never stuffed with SJ Berwin-style mavericks. The firms were relatively collegiate, in some teams verging on laidback.

The summer months saw board members network to build links, though the process remained largely under wraps. Says Camerons’ finance head Rita Lowe: ‘We had a series of dinners to try and ensure a less formal environment. People let their hair down more and you could probe a bit. If we had come out of those dinners saying: “We just can’t get on,” we wouldn’t have gone through with it. You can’t put a price on that.’

Says one partner: ‘Penelope was very key. She is a strong personality and she warmed to [the Nabarro and Olswang teams] very quickly.’

When the deal was finally presented to partners at three separate meetings on 30 September, much detail had been sorted out. Before voting on the combination, partners were presented with a thick memorandum detailing their places on Camerons’ equity ladder and any governance roles.

The move would fold the three into Camerons’ four-tiered partnership model, which is divided with three gates. The first tier of partners are awarded between one and ten equity points plus a fixed share. This class is generally seen as non-equity. The other three tiers make up its core equity partnership ranging from 28 to 70 points.

Compensation between the three firms is broadly comparable in model and profitability, with both Nabarro and Camerons operating heavily managed partnerships. Nabarro uses a nine-level ladder divided into three tiers. Olswang has a six-band system, with the lower two tiers reported as non-equity and partner compensation running from around £140,000 to £740,000. The deal sees the transferring equity partners from Nabarro and Olswang subject to a lock-in until October 2017.

 

‘The modelling allows us to carry people across in such a way that they would not be worse off – they might be better off in some cases. There had to be a high degree of trust.’
Paul Stevens, Olswang

 

 

 

A three-year assessment on a value-per-point basis was made of the profitability of Nabarro and Olswang, with an equity share agreed with their management. Legacy leadership was then largely allowed to determine awards for their own partners. Says one Camerons partner: ‘We delegated the choice to them.’

Stevens comments: ‘The modelling allows us to carry people across in such a way that they would not be worse off – they might be better off in some cases. There had to be a high degree of trust.’ Millar admits there will be ‘tweaks’ to Camerons’ system. This may address the disparity between the top of Nabarro’s equity of roughly £950,000, a position currently enjoyed by six partners, compared to Camerons’ plateau of around £850,000. Camerons also has a small bonus pool for star performers to provide additional flexibility. There is not expected to be profit dilution for Camerons’ partners despite the firm’s much higher PEP – roughly £787,000 against Nabarro’s £585,000 and £489,000 at Olswang. The disparity is due to how narrowly full equity is now held at Camerons. Only 65 partners are ‘core equity’, the rest of its 245 partnership comprising fixed-share partners and a smaller band of salaried partners deployed primarily in foreign offices. According to one former partner, in recent years Camerons’ fixed-share partners often earned in the region of £130,000-£180,000. The firm’s LLP 2015/16 accounts shows profits for division among members falling from £61.6m in 2014/15 to £50.3m, which the firm attributes to a ‘small amount of restructuring within our partnership’. Camerons says this exceptional item led to a £10.4m accounting charge as an ‘accelerated recognition of costs that would have otherwise fallen in the next three years’.

 

‘Clients are impressed by the ambition that we are doing something to shake up the sector and that we are a new player at the top.’
Stephen Millar, CMS Cameron McKenna

 

 

While partners did not have long to digest the deal, they had comprehensive information to assess. Nabarro partners in London were gathered to vote, with one partner reporting: ‘I didn’t see anyone who was not putting their hand up.’

Says Carvalho: ‘Preparation was crucial – when we went to outline this to partners they had roughly a week, but they had a very detailed document to read and they could see how much had gone into that. This is about creating a platform for the future – not just about creating a business for us but creating a business for the associates coming through. I had no doubt we would get there.’

All three met their targets, Camerons requiring 80% for full equity partners, while Nabarro needed 75%. Olswang finally got its merger with a 75% threshold. After 12 months of work, the vote was through on 7 October. The deal was announced on 10 October with a launch date of 1 May 2017 under the brand CMS UK.

 

Change agents

The firms have formed an integration leadership team, comprising Warne and Millar as well as Weston, now in the role of executive partner for global development, Olswang’s Stevens and Devereux and Nabarro’s managing partner Andrew Inkester and senior partner Carvalho. The group currently meet every two weeks to thrash out implementation.

Under the governance structure Warne and Millar retain the top roles, cementing what is seen as a strong leadership duo. Given the sector pedigree of the trio, Camerons can be forgiven for banging home so relentlessly its message of building on sector expertise post-merger. CMS UK defines its core sectors as consumer products; energy; financial services; hotels and leisure; infrastructure and project finance; life sciences and healthcare; real estate and TMT.

Olswang’s practice is best known for work in TMT, gaming and betting and reputation management. Key practitioners include corporate real estate partner Simon Kanter and head of technology Clive Gringras, who manages its Microsoft relationship. The pair have in recent years been among the firm’s top billers. Other significant figures include Zeffman, head of music John Enser, disputes head Catherine Taylor, corporate partner Mark Bertram and finance head Charles Kerrigan.

Nabarro’s practice is heavily focused around real estate, covering well over half its revenues, but also adds weight in funds and projects.

Camerons has credibility in energy, financial services and pharma and has a self-contained and profitable pension team that has considerable internal clout under the highly regarded practice head Nigel Moore. Other key partners at the firm include Lowe, corporate head Charles Currier, corporate partner Louise Wallace, telecoms, media and communications head Chris Watson, restructuring partner Emma Riddle, and oil and gas veteran and National Grid regular Robert Lane.

Conversely, critics contend that Olswang has lost considerable clout in its media and IP heartlands, while Camerons’ strength in energy and banking in recent years has been offset by lost ground in life sciences.

The firm’s board will have 26 members: four from Olswang, five from Nabarro and 17 from Camerons (see box above), reflecting the reality that this is more takeover than merger. Its eight sectors will feature several joint heads from different firms, while Carvalho will also sit as joint global head of real estate. Other developments include a ‘disputes matrix’ run by arbitration partner Guy Pendell, which will co-ordinate disputes lawyers distributed as specialists across sector groups.

While the combined firm will have much larger corporate and disputes practices, the mood music is that pushing industry credentials will take precedence over the predictable post-merger push to upgrade general M&A and litigation.

On revenues, Camerons’ UK LLP top line for 2015/16 of £267.3m will see the addition of Nabarro’s £130m business. Less clear is how much will transfer from Olswang, which generated £112.5m, a figure expected to be heavily impacted by the loss of foreign offices and the 2016 departures.

Cost savings are also obviously a major element to the deal. Camerons is expecting to save more than £30m in costs across the businesses (the Dundas union has saved more than £8m in costs since the union).

Olswang is expected to see its European offices split off, though officially there are negotiations about joining respective CMS firms. Comments Stevens: ‘A three-way merger is very complicated. Bringing on board non-UK bits of our business was going to add another layer of complexity. We did effectively a two-stage process. The second stage is still ongoing for all sorts of reasons.’

As Legal Business went to press Fieldfisher is understood to be in talks with partners in Munich and Gowling WLG is set to take a number of the firm’s French office, where staff are currently in temporary accommodation after the lease expired. On 18 January, Olswang’s Paris head Guillaume Kessler departed for Orrick, Herrington & Sutcliffe.

Stevens concedes the deal has resulted in losses for Olswang, stating that ‘in excess of 65’ of its current 81 partners will join. ‘There have been some conflicts and some people have made other choices.’ Nabarro will contribute 108 partners, including 73 full equity.

The trio will also see rationalisation in back-office staff, though no cuts in lawyer numbers are expected. Camerons outsources many functions to Integreon, as well as further relationships with Xerox and Interserve, overseen by Camerons’ influential strategic projects director Barbara Mendler. The Integreon arrangement has had a mixed reception but is seen to have been improved after some tinkering and has delivered much improved financial management. Comments Warne: ‘We outsource more than [Nabarro and Olswang]. There will be some rationalisation.’

New space has been secured for the combined law firm in Camerons’ existing Cannon Place HQ, bringing the firms efficiently under one roof on favourable terms from 1 May. Camerons had struck a good deal on the open-plan site when it moved there in 2015, getting a six-year rent-free period over the term of the lease, which initially equated to £47 per sq ft. In its 2015 LLP accounts, the firm reported £19.6m in cash and other incentives over the life of the lease. The additional space for Olswang and Nabarro staff comes with a five-year rent-free period, equating to a rate of around £66.50 per sq ft. This does still leave the matter of subletting the offices of Nabarro and Olswang, which will be pressing in the latter case given its relatively high office costs.

None of the three partnerships have been asked to inject additional capital under the merger and Camerons is not expected to take on additional debt beyond a possible bridge loan to cover the additional fit-out of Cannon Place.

The deal has effectively ring-fenced the Nabarro pension issue. Comments one Camerons partner: ‘We left Nabarro to sort it out itself. But it was already on it. These are relatively small sums involved.’

A major challenge will be to galvanise three firms that have struggled to sustain growth. While all three have strong teams, as a whole none could be described as the most driven partnerships.

Conflicts have been a minimal issue thanks to the limited cross-over between the firms’ practices, with Camerons partners noting it had more significant conflicts with the Dundas takeover.

While the tripartite deal brings to a close Camerons’ long hunt for UK mergers, another issue that will define its future will be its success on making good on its pledge to bring a major US partner into the fold. Conceding that Brexit has muddied the waters, Weston plays down any expectation of an early deal, while maintaining that the firm aims to bring in a US member to CMS within five years. He says: ‘Wherever you position yourself in the States with a merger is where you stay forever. You can’t compromise.’

Nevertheless, the CMS grouping as a whole looks to be in good shape, with its firms collectively sustaining robust growth over the last decade, particularly Hasche Sigle. In January, CMS also made good on its aim to expand in Latin America by signing up three new members: Carey & Allende (Chile); Grau (Peru); and Rodríguez Azuero Contexto (Colombia). CMS also has substantial joint offices in Turkey and Russia and recently launched a Hong Kong practice to complement its Beijing and Shanghai branches.

While there is no doubt that Nabarro and Olswang have come to this effective takeover in part because of a series of setbacks, it is striking that the union is viewed by most observers as a good result, including sceptical peers and former partners.

While some question if the deal will provide a fresh momentum – and some old Olswang hands lament how the firm was backed into a corner – for most, the UK’s largest legal merger is a credible and even daring move in the face of a turbulent legal market beset by price pressure, uncertainty and quite possibly on the cusp of wrenching tech-driven change.

Says one former Olswang veteran: ‘Putting it candidly, it’s a reasonable result for a firm that’s lost collegiality and cohesion. The firm they are joining and creating is a powerful and substantial business.’

Alison Kay, group general counsel at major Camerons client National Grid, welcomes the deal: ‘There are some mergers you look at and think you cannot understand why they would have thought of doing that, but on paper there does seem to be a good strategic fit between the three.’

Bringing in scale, solid operations, international coverage and excellent industry coverage, a major challenge will be to galvanise three firms that have struggled to sustain growth. While all three have strong teams, as a whole none could be described as the most driven partnerships.

For some, confusing branding thanks to the promotion of the CMS tag – a reaction in part to Camerons’ inability to persuade its European partners to more fully integrate – risks under-selling the scale of the deal. Says one former partner: ‘If you were being unkind, you could call CMS the biggest firm you’ve never heard of.’ Likewise, the attempts to position CMS as comparable to fully integrated law firms remain unconvincing.

Part of the firm’s success may be to find ways to more potently position its strengths, building on a trailblazing merger. For example, Warne observes: ‘We really want to lead on the use of technology and delivering law Apple style – top quality service in a slick fashion. No-one is there yet.’

Millar picks up the point: ‘Clients are impressed by the ambition that we are doing something to shake up the sector and that we are a new player at the top. Lawyers are normally conservative – but we have been able to do it.’

It will take a few years yet before this emerging legal giant can be credibly judged on that rhetoric. But against the odds, the emerging CMS UK can at least be said to have come up with one of the most emphatic and comprehensive responses to a fast-shifting legal market. Right now that looks like a bargain. LB

matthew.field@legalease.co.uk

madeleine.farman@legalease.co.uk