The Deal of the Century: A Merge or A Crash?

Rubric: Uncategorized

120 offices, 50 countries, around 7 000 lawyers — Dentons-Dacheng have formally singed a merge this week creating the largest legal firm in the world according to the number of lawyers and significant market presence in the two world economics – US and China. The forecasts both as of  failure or success are unclear, whereas scepticism in both cases is shared.  The press is full with headings like: “shocking”, “surprising”, “brave” “admirable”.

Obviously, the firms are quite different in their geographical reach, in financial indicators, profiles of major clients and most importantly in their business culture. The merge itself is a formal start of real integration into one whole organism.

According to my experience, integration is to solve three very delicate issues:

  • what part of the experience of one partner is to become a dominating pattern in the new firm, i.e. someone is to change the old set of rules and habits;
  • what is to become a common denominator, i.e. a change to be taken on both sides (e.g. system of partner remuneration);
  • what is to stay unchanged in every specific region/office/process/ i.e. accepting that diversity is inevitable and accepting all associated losses in effectiveness, misunderstandings and mismatches.

Practical and pragmatic approach of Dentons to previous merges (for the past three years they were quite frequent) is quite optimistic and intriguing at the same time. There are two intrigues:

  • the main business intrigue is about how does the merge influences the incoming flow (both in qualitative and money equivalent);
  • the main organisational intrigue – which price is to be paid by the employees and the clients for the top-management’s desire to strengthen competitive advantage andor become epic. While,  it is obvious that the integration from previous merges have not been finalized yet.

Below is the statement that the famous English analytic and reviewer of Legal Week Georgina Stanley mentioned at her article «Why it’s unfair to slate Dentons’ ambitious China merger»:

If Dentons were trying to be Sullivan & Cromwell in every jurisdiction around the world it would clearly have failed in its mission for global domination. But it isn’t. The firm effectively wants to be local, globally, with a strong brand around the world and decent profitability.

Against this ambition, it is hard to knock this latest deal. As the firm prepares to announce strong financial results for 2014, its management is keen to argue that criticism is inevitable for a firm daring to be different. Criticism would be more than justified if Dentons’ Swiss verein unravels, if its financial performance dips or if its RPL falls. But knocking its ambition is unfair.

Another analytic, Elizabeth Broomhall from Hon-Kong  is more pessimistic «Dentons-Dacheng merger triggers shock and admiration, but what are the new firm’s chances of success?»:

There is broad consensus among observers that the union presents Dentons with daunting challenges when it comes to integrating the two parties, given the size of Dacheng and pace at which it has grown in recent years.

The wishful thinking forces me to believe that the managers of the new unified merged team belong to two categories:  “They see the resource in changes” and “They simply know something”. Got to live and see!