Adding Muscle—Or Fat?

, The Am Law Daily


Our valuation formula can be used to determine whether the merger of certain firms has had the desired effect in generating additional value. The following chart compares the current values of three transatlantic vereins—DLA Piper, Hogan Lovells, and SNR Denton—with the combined valuations of their premerger components.

DLA Piper $2.249 Billion DLA Piper (US);DLA Piper (Intl.) $1.69 Billion $557 Million ↑
Hogan Lovells $1.97 Billion Hogan & Hartson;Lovells $1.98 Billion  -$16 Million ↓
SNR Denton $431 Million Sonnenschein;Denton Wilde Sapte $321 Million $110 Million ↑

DLA, the most mature of the three firms (it was formed in 2005, compared to 2010 for Hogan Lovells and 2011 for SNR Denton), has seen the greatest increase. Its current valuation of $2.249 billion is more than 30 percent higher than the aggregate figures for its U.S. and international arms in 2009—the last year in which we treated them as separate entities in our surveys.

After just one full fiscal year of operation, SNR Denton also fares well, having seen its net worth rise 34 percent. The new firm's increased size gave it a higher starting multiple and diluted the poor performance of U.K.–based Denton Wilde Sapte, which in the 2010 fiscal year needed almost $4 of revenue to create every $1 of value—four times as much as the Global 100 average.

Hogan Lovells, on the other hand, has seen its value fall $16 million since its combination, due to a slowing in growth rates lowering its total multiple from a premerger average of 7 to the combined firm's 6.5. This equates to a fall in value of less than 1 percent, however.

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