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You’ve signed the merger deal, notified the press and toasted the marriage of two firms. Now the hard part begins. Making a law firm merger succeed takes much more than pre-merger planning, meeting and schmoozing. Although managing partners may be tempted to heave a sigh of relief once they finally ink the agreement, closing the deal is just the start of a post-merger process, the point when the newly formed firm begins making big changes and-it hopes-big money. With 45 mergers so far this year and last week’s announcement of a deal between Piper Rudnick and Gray Cary Ware & Freidenrich, consolidation activity continues ahead of 2003, according to industry observers. But it was a wave of law firm mergers two years ago that had some calling 2002 the Year of Merger. In total, the bigger deals in 2002 involved more than 3,200 lawyers practicing in dozens of cities. Many saw the merger announcements back then as marking a fundamental shift in the legal industry, a movement toward big-box lawyering. Good news, bad news But perhaps more telling about any long-term changes in the legal profession than the announcements is the aftermath of those deals and how the firms handled the inevitable starts and stumbles during the two years that followed. Managing partners from the 2002 merged firms today are quick to say that the joining of practices has done nothing but improve client services and made their operations more efficient. But others less enchanted with the new arrangements say that creating a megafirm impersonalized their practices and left the smaller, acquired firm feeling disenfranchised. The bigger mergers in 2002 included Bingham Dana with McCutchen Doyle; Bryan Cave with Robinson Silverman Pearce Aronsohn & Berman; Hogan & Hartson with Squadron Ellenoff Plesent & Sheinfeld; and Katten Muchin & Zavis with Rosenman & Colin. One of the first deals in 2002 was Washington-based Hogan & Hartson, which had 800 lawyers, with New York’s Squadron Ellenoff Plesent & Sheinfeld, which employed 104 attorneys. The firm name remained Hogan & Hartson. With a focus on capital markets and mergers and acquisitions, Hogan liked Squadron’s New York presence, and Squadron, particularly its corporate tax attorneys, needed the practice diversity and national platform that Hogan provided. Much of Squadron’s practice was centered on News Corp., the giant media conglomerate headed by Rupert Murdoch. Ira Sheinfeld, former managing partner of Squadron and now managing partner of Hogan’s New York office, said he misses the old firm’s moniker. “Because my name was in it,” he explained. But he rejects the idea that an identity crisis for the old Squadron attorneys occurred after the merger. “We are the office we used to be, but we have the bigger support of Hogan, a worldwide network,” he said. Benefits from the merger, he said, are “nicer” facilities at the firm’s new New York office in Midtown Manhattan and fewer management duties. Know your people Not everyone, however, thought the merger was a good idea. Litigation partner Ira Sorkin decided to leave Squadron when the merger became final. A recognized criminal defense attorney and former director of the U.S. Securities and Exchange Commission’s New York office, he is now a partner with Carter Ledyard & Milburn of New York. Four litigation partners and several associates also left Hogan at the time. Sorkin had worked at Squadron since 1977. He said he left because big-firm practice was not his style. “I like to see all my partners at lunch,” he said. “You’ve got to know your people. You’ve got to know who they are.” Integrating firms, particularly when one is much bigger than the other, is a formidable task, said law firm consultant Richard Zakin. Executive managing director of Strategic Legal Resources in New York, he is a former managing partner of Bryan Cave. “Small- and medium-sized firms merged with large national practices can be frustrated by a more bureaucratic environment,” Zakin said. “They feel less empowered.” The fallout from a merger, which can include the departures of both favored and disfavored practitioners, plus some grousing from attorneys who choose to stay, lingers longer than many firms anticipate, he said. “It’s not quite like turning a battleship, but you’re meshing two very disparate cultures,” he said, adding that an adjustment period of four years is not uncommon. Firm retreats, face-to-face meetings, transparency in compensation and firm performance, and plenty of communication in general can help quell unrest, Zakin said. KMZ Rosenman, which was created by the merger of Chicago’s Katten Muchin & Zavis with New York’s Rosenman & Colin, had its share of adjustments after it merged in March 2002. Like Hogan & Hartson, Katten’s strategy was to strengthen its New York practice. Rosenman’s real estate work was particularly attractive to Katten. At the time of the merger with Rosenman, Katten had 435 lawyers, but only one attorney in New York. The first year after the merger, profits per partner remained flat, at about $640,000, said KMZ Rosenman managing partner Vince Sergi. He pointed to the expenses in integrating administrative systems and practice areas as some of the reasons. In 2003, profits per partner jumped to about $745,000, and he estimated they will be in the “eights” this year. That increase, he said, is a “direct result” of the merger. At the time of the merger, Katten’s 435 attorneys averaged $645,000 in per-partner profits while Rosenman & Colin’s 240 attorneys were bringing in $545,000 in profits per partner. “When we did our merger, a number of people said KMZ merged with a weak firm in a recession, but it takes a couple of years of profitability for people to say maybe those concerns were wrong,” Sergi said. Troubling defections Stagnant profits immediately following the merger were not KMZ Rosenman’s only hurdle. Within weeks after the deal, 16 former Katten partners left, including several from the firm’s bankruptcy practice who went to Jenner & Block of Chicago. Other defections came from Katten’s antitrust, litigation, intellectual property, bankruptcy and health care practices. Sergi said that attrition “is natural in any merger,” and that the departure of some attorneys was expected and even encouraged. Still, one former Rosenman attorney who has resigned from KMZ Rosenman said that a change in firm culture prompted the attorney to leave. The attorney is practicing with another firm in New York. “What became more important was numbers, what you could bill and what you could collect, without emphasis on making sure the client is getting the highest level of work,” the attorney said. The attorney also said an absence of firm identity became a problem. “Rosenman had a very strong and well respected name and reputation in New York. Nobody knew who KMZ was. Rosenman lost its independence, identity and uniqueness,” the attorney said. The art of cohesiveness But Sergi said KMZ Rosenman made a strong effort to bring the two firms together after the merger, just as both sides did before the consolidation. He pointed to retreats that lawyers in certain practice areas have attended and continued meetings among the firm’s offices. Creating cohesiveness between merging firms wherever they are located can be a tough task, but acquiring a coveted New York presence can have its own set of difficulties, said Walter Metcalfe, former chairman at Bryan Cave in St. Louis. Metcalfe, now a partner in the firm’s St. Louis office, helped orchestrate Bryan Cave’s merger in May 2002 with New York’s Robinson Silverman. At the time, Bryan Cave had 650 lawyers and Robinson Silverman had 120. The Robinson Silverman attorneys were a “fairly New York-centric” bunch who needed some coaxing to participate in integration efforts, Metcalfe said. “They didn’t actively resist it, [but] they didn’t see the need for it.” Face-to-face contact and “retreats, retreats and more retreats” are what Bryan Cave is using to bring cohesiveness to the firm, he said. In addition, the firm has kept intact its 14-member integration team since the merger, said Don G. Lents, Bryan Cave’s current chairman. The amount of personal contact with the various offices required by managing partners after a merger was something Jay Zimmerman did not anticipate. As the managing partner of Bingham McCutchen, an 865-attorney firm created by a May 2002 merger, Zimmerman’s agenda these days is a dizzying schedule of West Coast, East Coast and trans-Atlantic commutes. “I’m tired,” he said. Yet Zimmerman said he is committed to an ongoing integration effort. He said that the last two years have been the “bearing the pain” phase following the merger. “You go quickly from euphoria to the tough period where everyone is complaining about having to do everything different,” Zimmerman said. The phase can be especially difficult if some of the attorneys are operating within a probation period to pull their numbers up, said Zakin, the consultant. For attorneys whose performance has been less than stellar prior to the merger, a merged firm may require them to hit a certain performance level or hit the road, he said. Some firms will give attorneys a year or two after the merger to improve their performance, he explained, adding that attorneys who see their days as numbered at the merged firm have problems finding other employment during a slump. And even in firms that do have “like-minded culture,” Zakin said, mergers are not easy. “It is still a change in clients, billing rates, collecting payment,” he said. “It’s tension-inducing.” Jones’ e-mail address is [email protected].

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