Law Firm Insight: Bryan Cave Leighton Paisner (legacy BLP)

[Jaysen]

Bryan Cave Leighton Paisner
Initial thoughts on the merger between BLP and Bryan Cave
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Full financial integration
Law firm combinations are on a spectrum. On one side, you’ve got alliances (Linklaters and Allens) and best friend networks (Slaughters) where firms refer work, clients and maybe marketing initiatives. In the middle, you’ve got Swiss vereins, where firms operate under one united brand but they keep their businesses financially separate. Finally, you’ve got full financial integration. So that’s what BLP are doing and what Hogan Lovells did in 2010. It's a full integration because the firms share one profit pool and also have a single system to divide up the profits.

Full financial integration doesn’t happen very often. It’s not easy for firms to work out profit sharing and partner remuneration. That’s especially true when trying to merge with a US firm because they often pay partners using a different system (performance-based rather than a lockstep). That was one of the reasons BLP’s last merger attempt failed; the US firm Greenberg Taurig had a black box compensation system (Jones Day has it too), which means partners don’t know how much others get paid, and that’s a hard thing to integrate into your firm culture. You also need a firm with similar levels of profitability – often that’s a problem for top UK firms because the NY elite tend to be much more profitable. BLP ‘s profits per equity partner (“PEP”) is not far from Bryan Cave so that’s not much of an issue. That was not the case with Greenberg Taurig who had higher PEP. If they went for the full financial merger then BLP would have had to restructure – probably remove equity partners or put more of them on a fixed salary.

The decision to opt for a merger rather than a Swiss verein (NRF/DLA) or a company limited by guarantee (Eversheds/Wragge) is also a big move. A lot of firms go for the latter two because you get to tell clients you’re a united firm but you don’t have to worry about sharing revenue or liabilities. It’s easier to gloss over issues of integration because you’re not sharing the same profit pool. And you're not as vulnerable to currency fluctuations or big tax fees.

But BLP went for the full merger. I'm not sure what compensation system Bryan Cave has but they probably need to spend some time resolving any disparities in partner remuneration. Hogan Lovells got rid of Lovells' lockstep system so they might do the same here. If it works you can really say you have a united firm. You share the same clients, culture and values. Fee earners are encouraged to share work because if the whole firm does well then everyone benefits. The compensation system is the same so that limits tension about partner remuneration. And clients get to see a seamless service on both sides of the Atlantic (and everywhere else). Swiss vereins don’t have that level of integration; you’ve got to work hard to incentivise partners to refer work and clients because they’re not sharing all the rewards.

The international shortcut
Bryan Cave is huge in the US but hasn’t made much progress in the UK or the rest of Europe. It only has a small presence in Asia with offices in Shanghai and Hong Kong. By comparison BLP is pretty big in the UK and has a few offices in Europe. The firm has a decent size in Asia – after 2007, the firm invested a lot to make its real estate practice international. BLP hasn’t made much headway in the US.

The merger is a shortcut to global expansion. It’s quicker and significantly cheaper than opening up offices, and much more integrated than an alliance. After the combination, Bryan Cave gets a strong European base and some extra Asian offices to complement its US presence. BLP gets to tap into Bryan Cave’s 19 domestic offices in the US. The firms will share valuable knowledge about the markets they operate in and the clients they work with. Trainees are likely to get more international secondments and lawyers will work on more cross-border deals. There will be more management, which means fancy titles for partners who have to manage different parts of the business.

BLP's selling point
Bryan Cave’s revenue is almost double BLP’s, so you’d be forgiven for thinking it’s an odd combination. But BLP’s main selling point is its real estate practice. It has the 14th largest real estate practice in the world and more real estate partners than any other firm in the UK. The firm realised it could win big mandates for real estate and then cross-sell to other departments. It also invested heavily in private equity, finance and tax back when it was trying to become a full service firm, but now they mostly support real estate. Now, thanks to the merger, BLP gets access to a huge US real estate market. That’s great for the real estate team and keeps valuable partners from leaving – because they know the firm is going places. It’s exciting for lawyers because they’ll get access to top tier work and a new market. They’ll be opposite many of the big firms in the practice areas and there will be plenty of opportunities for career development. The combined practice will also mean there’s a big support network and knowledge base.

Bryan Cave does a fair amount of real estate work too. So combined, they’ll have the fourth largest practice in the world. The firm can offer clients a global real estate capability and also cross-sell work to other departments. Bryan Cave does a lot of high volume M&A work, which will complement BLP’s corporate team. Its biggest practice is litigation and again that’s an area BLP has invested a lot in – litigation and corporate risk. Lawyers will get to work in new departments and sectors, and get to meet new clients.

Catching up to competitors
Post-merger the combined revenue of the two firms will be close to $1 billion – most of that will be from Bryan Cave. It means BLP will catch up to competitors like Eversheds Sutherland, CMS and Dentons who’ve all pulled off Swiss vereins to expand globally. It looks like more mid-market to upper-mid-market firms will have to follow suit or they may be left behind (I’m looking at you Simmons). Bigger revenues means more money to spend on training and development, open up new offices, and invest in technologies.

Technology
Speaking of technology, BLP can share its successful Lawyers on Demand business with Bryan Cave and they can open it up to the US. Meanwhile, Bryan Cave has its own tech incubator and a business advisory unit called BCXponent. Both firms seem innovative and lawyers will have the opportunity to both share and work on new technologies.

The challenges of a merger
Can they integrate their cultures? Can they keep partners? Can they combine client relationships? Can they integrate branding and systems? Only time will tell.