November 8, 2010 12:18 PM
Squire Sanders, Hammonds Partners Approve Merger
Posted by Brian Baxter
After more than two months of official talks, British firm Hammonds and Squire, Sanders & Dempsey have agreed to merge in the latest transatlantic law firm combination. Partners at both firms approved the merger in a vote held over the weekend. The union will take effect on January 1, 2011.
The merger will see Squire Sanders chairman James Maiwurm become global chair and CEO of the combined firm. Hammonds managing partner Peter Crossley will become the firm's managing partner for Europe. There will be two additional managing partners for the Americas and Asia-Pacific regions. A 13-member global board comprised of partners from both firms and elected by the general partnership will govern the new firm.
"It's been a busy few months," both Maiwurm and Crossley say almost in unison when reached by The Am Law Daily in London on Monday. The partnership vote at both firms closed on Sunday with more than 90 percent of voting members agreeing to approve the combination.
"All precincts are in and there are no contested elections," Maiwurm says. "It was overwhelmingly supported on all sides."
The merged firm will keep the Squire, Sanders & Dempsey name. In jurisdictions where Hammonds has a presence, such as the U.K., Europe, and Asia, the firm will be called Squire Sanders Hammonds. It will have roughly 1,275 lawyers across 37 offices in 17 countries. Combined gross revenue totals $625 million, based on the financial data from both firms for 2009. (Click here for additional background on Hammonds from U.K. legal publication Legal Week.)
Crossley says the new firm wants to put its combined lawyers under the same roof in as many cities as possible to speed up the integration. Office overlap in Beijing, Brussels, Hong Kong, and London will be evaluated and decisions will be based on moves that will provide the minimal disruption to clients and the new firm, Crossley says. Only in Hong Kong has the combination issue remained unresolved.
"In each of the [other] places we can move into the space with the other party," Maiwurm says. "But in Hong Kong we just can't fit everyone into the same space, so we're working on that and we'll get there. Physical integration is important."
As for partner compensation--a frequent bone of contention in mergers between British firms using lockstep models as opposed to their merit-based U.S. counterparts--Maiwurm and Crossley say they're on the same page. Crossley says Hammonds already had plans to adopt a merit-based system in 2011.
"By the time I became managing partner six years ago, we'd become a sort of modified lockstep firm and then took what was quite a decisive move towards more merit-based compensation," Crossley says. "We were going to make a further move had it not been for this merger. So the move we're going to make after a short transition period is not going to be as dramatic as it would have been had we been more of a pure lockstep firm."
Crossley says it was essential for the new firm to operate under the same compensation system.
"Jim and I struggled to see how you could make this into one integrated law practice if you had partners marching to different drum beats," he adds. "Having everybody on the same compensation system is fundamentally at the heart of preserving and retaining the one-firm [philosophy] that is very important to both sides."
Maiwurm says that since "compensation systems drive firm behavior," he knew the chances of realizing a successful merger were greater given the relative ease with which he and Crossley came to an agreement on compensation.
Crossley and Maiwurm first discussed a possible combination of the firms in late April; the talks got serious over the summer, the two say. Once Squire Sanders and Hammonds officially announced they were in merger negotiations in August, Crossley says lawyers from each of the firms approached clients with joint pitches, to gauge client reaction to a possible combination. The feedback was positive.
"We had joint discussions with clients on how they would react to the possibility of a combination...and they understand why we're doing this and why it's in their interest and our interest," Maiwurm says. "It was a uniformly favorable reception and nice to get that market validation in advance."
Client conflicts are usually complex in international tie-ups and require examination on several levels, but Crossley says the issues between Hammonds and Squire Sanders have been "minimal" overall. Adds Maiwurm: "We've done a couple of combinations over the last decade and this has few of those [conflict] issues than any of the other ones."
The combined firm will use a Swiss Verein structure used by many large international law and accounting firms when combining global operations. The structure was adopted by SNR Denton and Hogan Lovells after the completion of their transatlantic mergers this year.
Maiwurm sees some distinctions in this particular transatlantic union. "You're dealing with two firms that have a long history of being outside their countries," he says. "We both have 20-25 percent of our revenues outside of our home countries and while this is in some sense a U.S./U.K. merger, the hard fact of the matter is when you look at the global footprint of these two firms, they actually fit together [perfectly]."
Squire Sanders is interested in boosting its presence in the U.K., Paris, Berlin, Brussels, and Madrid, while Hammonds was looking to expand in the U.S., Latin America, and Central and Eastern Europe. Maiwurm and Crossley say that both firms are interested in expanding in Asia and through the merger are doubling their size in Hong Kong.
"It's an incredible cliché, but this is where business is going. Globalization is an unstoppable force," Crossley says. "This is increasingly what we believe clients expect and want and there are an increasing number of entities that are forming global law firm panels where you have the general counsel at the [headquarters] in the U.S., U.K., wherever, who says that unless you have coverage over most of where they want it, you don't even get invited to pitch [for work]."
Both Maiwurm and Crossley plan on having a drink (or several) on Monday night to toast the completion of the merger talks. Maiwurm touts the common industrial roots of both firms--Squire Sanders started in Cleveland, while Hammonds began in Yorkshire and the West Midlands in England--that will help make the merger successful.
"There's an unusual level of compatability between these two firms," Maiwurm says. "We have the practice and geographic strengths to make this work."
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