Hamish McNicol and Thomas Alan canvass the market on the latest UK/US tie-up
‘Next year all our troubles will be out of sight,’ sang Judy Garland in the 1944 film Meet Me In St Louis. You wonder whether the leadership of Berwin Leighton Paisner (BLP) was singing those words from ‘Have Yourself A Merry Little Christmas’ in December before the firm’s quest for a US merger ended with St Louis-bred Bryan Cave. Because apart from a press release lauding the aspirations of the transatlantic tie-up, first floated publicly last October, there has not been much singing since.
Surprisingly, given the merger ‘brings together two organisations widely recognised for their innovative approaches to client service, into one global, fully financially integrated law firm’, multiple BLP partners declined an opportunity to wax lyrical about the union, bar a couple of murmurs that it is good. Instead, ex-partner and peer comments ranged from praise as vague as ‘it takes each firm to a different place’ to questions about what it means for BLP’s strategy. In some cases, there was frank disregard: ‘I have absolutely no concern or care about it.’ Another added: ‘You’d think they’d be explaining it more.’
Indeed, this merger has been met with bemused shrugs and questions over strategic rationale before. Here is what we know: the new firm will be called Bryan Cave Leighton Paisner (BCLP), will officially launch in April, and it will be a financially-integrated practice spanning 32 offices across 11 countries, with combined revenue of more than $900m pushing it into the Global 100 top 50. BLP managing partner Lisa Mayhew will lead the firm as co-chair alongside Bryan Cave’s Therese Pritchard.
A request to interview Mayhew was declined, while questions about whether the new firm will adopt the US calendar year-end and cash accounting and what the tax implications will be were met with ‘no comment’. We do know partnership remuneration will align from day one with a single BCLP profit pool, however.
When the merger was confirmed, Mayhew told Legal Business: ‘Together we are already proving our ability to work together as one firm, with hundreds of cross-firm introductions already being made before we have even formally merged. It is too early to announce any specifics but we are committed to rolling out and launching innovative new client services and products.’
BLP is well-known as an accomplished property and mid-market operator in the City, while Bryan Cave is more corporate and retail-focused. The US firm is considerably larger, but BLP has the more prominent brand in its home market. As a coming together of relative equals, certainly compared to BLP’s failed deal with Greenberg Traurig two years ago, questions remain about what this means for BLP’s strategy, described as ‘real estate, real estate, real estate’ by one former partner. ‘BLP was very much focused on expanding the international real estate brand – how does Bryan Cave fit into that? Does that mean BLP has changed its strategy?’
Another former partner thinks the move signals BLP will widen its net – something it has tried with mixed results previously in London – while a rival partner suggests BLP might be looking to reduce its reliance on property.
‘The thing with BLP is, I don’t know what else it does: everything feeds into real estate. I was surprised by it, with some (mergers) you can see what their strategy is, but I can’t here.’
Another point of interest is the rare decision to opt for full financial integration. BLP’s revenue rose 7% to £272m last year, while profit per equity partner (PEP) fell to £630,000 from £683,000. Revenue at Bryan Cave, meanwhile, fell 2.5% to $592.6m in 2017 and PEP fell nearly 7% to $804,000 – below that of its new UK counterpart. The US firm says its financials are ‘extremely strong’ and the tie-up will help grow revenue and profitability.
One legal consultant says the touted benefit of combining profit pools to incentivise collaboration is a fair argument but not a given: ‘Getting lawyers, whether in the same office or different countries, to act like adults is difficult as it is.’
Having a single profit pool from the first day is also a chunky undertaking, but BLP has a strong ‘one-firm’ ethos, adds another former partner. A senior leader at a rival firm suspects BLP will change to cash accounting, as Bryan Cave is the larger firm. But this effectively accelerates BLP’s tax liability for the year and will likely result in a significant bill. One side or the other has to take the hit, however, although it is probable each side will contribute to any burden.
Aligning remuneration structures can work when profit levels are similar, as is the case here, although any big discrepancies between the legacy compensation systems could create a ‘prickly’ exercise: ‘There’s a risk they get diverted by internal restructuring.’
BLP was a star performer in the 2000s, and as recently as mid-2017 the firm re-established property as its rock with Mayhew’s stated aim for the firm to become the world number-one brand in real estate, while also building a more balanced practice. There is no doubt the merger provides scale, but beyond that, external communication remains largely imprecise: ‘This merger will result in an expanded presence and set of service offerings in key markets around the world and accelerate our utilisation of technology and innovation to redefine efficiency and value in the practice of law,’ Pritchard said when the merger was announced. Areas specifically pointed to in a statement are M&A, real estate, financial services, litigation and corporate risk.
As one rival partner says, the deal takes BLP to a different place and strengthens Bryan Cave, but where exactly BCLP is going is unclear. It brings to mind the penultimate line of the Judy Garland song: ‘Until then, we’ll have to muddle through somehow’.