Assessing the Latest Possible Large Law Firm Combo
You might think the leaders of the firm now known as Dentons would pause to take a breath after completing the tie-up that brought together SNR Denton, Paris-based Salans, and Canada's Fraser Milner Casgrain. But according to published reports, almost immediately after closing the March 2013 deal that created the 2,700-lawyer mega-verein, Dentons began discussions to add yet another piece: McKenna Long & Aldridge and its 500-plus attorneys.
As I wrote almost a year ago, the leaders of what was SNR Denton boasted that they had used no strategic legal consultants or advisers in the process that led to its French-Canadian three-way. But they did have “branding and advertising advisers” who recommended the entity's new name, Dentons.
I don’t know if Dentons’s leadership is getting advice on the combination now under consideration, but if it does go through, the McKenna Long & Aldridge brand seems likely to disappear—as did the Sonnenschein, Salans, and FMC names before it. Then again, the Luce Forward Hamilton & Scripps brand vanished after that firm merged with McKenna Long in 2012.
The venerable McKenna Long brand won’t be the only casualty. The combined firm would have two offices apiece in five cities—Brussels, Los Angeles, New York, San Francisco, and Washington, D.C.—all of them with significant numbers of lawyers. In touting the prospect of creating the world’s third-largest law firm of more than 3,100 attorneys, no one is estimating the number of likely near-term departures.
Who Is Being Served? Is It Clients?
The rhetoric accompanying most big law firm combinations is usually the same. In response to inquiries about its discussions with McKenna Long, Dentons issued this statement: “Since creating Dentons earlier this year, we have been very clear in our determination to always deepen our capabilities to serve clients in the U.S. and around the world.”
But clients aren’t asking their outside law firms to join with other firms. In fact, most clients understand that no single firm—nor any collection of firms combined in a verein structure—could or should house every attorney most appropriate for their needs throughout the country, much less the world.
Who is Being Served? Partners of the Merging Firms?
Perhaps it's a prospect of financial gain for individual partners that underlies the discussions between Dentons and McKenna Long. For the Dentons partners who haven’t yet lived through a full year since the tie-up with Salans and FMC, the suggestion that that is the movitating factor seems like a triumph of hope over what is, at best, profound uncertainty.
Maybe the myth that economies of scale accompany the growth of law firms is driving this deal and others that have preceded it recently. But according to law firm management consultants Altman Weil, getting bigger doesn’t make law firms more efficient. It usually works the other way.
On the McKenna Long side, the possible financial motivation for joining forces with Dentons is even less evident. According to The American Lawyer's most recent Am Law 100 rankings, the firm's average profits per partner last year were $930,000, compared to SNR Denton's $785,000. McKenna Long also had a healthier profit margin: 26 percent, compared to SNR Denton's 22 percent.
Maybe McKenna Long partners are relying on the verein structure of the combination to preserve their relatively superior economic position. After all, individual firms in a verein retain their financial independence. But as Edwin B. Reeser and Martin J. Foley suggest in their recent ABA Journal article on undisclosed fee-sharing agreements, such structures may also create thorny ethical complications when client referrals across a verein's member firms become factors in partner compensation.