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WASHINGTON � Law firms typically advise Fortune 500 companies, not emulate them. But that’s exactly what DLA Piper Rudnick Gray Cary did last November, when 47 lawyers on its leadership team met for a weeklong seminar at Harvard Business School. Just 10 months after creating a massive, 3,100-lawyer worldwide operation, the firm reassessed its undertaking by using case studies of investment giant Morgan Stanley and advertising behemoth Ogilvy & Mather to examine the daunting issues of globalization and integration it currently faces. The seminar was emblematic of the firm’s strategy as a whole. It has spent millions of dollars (most recently, $5 million to shuttle more than 900 lawyers to Orlando, Fla., for a firm retreat) in order to try to reap the benefits of its newly implemented international network by conquering significant logistical hurdles. The January 2005 merger of more than 1,000 lawyers on each side of the Atlantic catapulted Piper Rudnick from its status as a middle-market regional firm to the second-largest law firm in the world after the additions of California-based Gray Cary Ware & Freidenrich and U.K.-based DLA. According to The American Lawyer, the firm’s U.S. operations ranked 10th in the 2005 AmLaw 100 survey, grossing $890 million in revenue, a significant increase from Piper Rudnick and Gray Cary’s combined 2004 revenue of $793 million. And DLA Piper hasn’t paused to catch its breath. The firm continues to move into new markets such as Atlanta and build its presence in target cities including Washington and New York. But despite its sweeping ambitions, the effects of the merger have yet to play out. DLA Piper continues to face major integration hurdles, client-conflict issues, and a management shake-up, both at the practice group and managing partner levels. “It takes a long time to get the benefits of a merger,” says Bradford Hildebrandt of Hildebrandt International, who helped broker the deal. “[Firms] have to go into it with their eyes open that it doesn’t happen overnight. Real [merger] successes are if they are doing work in each of those firms that they would not have done if they had not done this deal.” The conglomeration also faces a wall of skepticism from rival managing partners who routinely (if not openly) deride the firm’s Starbucks-like approach. How DLA Piper responds to its global challenges and combats its critics will be a drama that will continue to unfold in the years to come. “There is no way you can do as much as they’ve done and do any real integration or strategic cross-selling,” says one U.S. managing partner experienced with law firm mergers. MERGER MANTRA Firm leaders Francis Burch Jr. and Lee Miller laid the foundation of DLA Piper in 1999, when the pair joined Chicago-based Rudnick & Wolfe and Baltimore-based Piper Marbury to form Piper Rudnick. The regional middle-market firms had niches in corporate and real estate work but commanded little national attention. As part of the new firm’s mission to have a national platform, it merged with venerable D.C. power broker Verner, Liipfert, Bernhard, McPherson and Hand. At the same time, it opened a Los Angeles office, doubled the size of its New York outpost, and created a strategic alliance with former Defense Secretary William Cohen’s firm. Yet no one predicted the growth that would come in two titanic leaps in 2004 as Piper and U.K.-based DLA courted each other. The firms worked jointly on projects in 2004, but while currying favor with DLA, Piper also wanted to expand its California presence. In a period of three months the firm accomplished a rare double play. Piper first acquired Gray Cary, a tech-centric firm out of California. And then, three months later, it fused with DLA, creating an international linkage of 49 offices in 18 countries. Like predecessors such as Reed Smith and Morgan Lewis, which have revamped their management structures as they have grown, DLA Piper has opted to move away from the standard firm hierarchy, albeit even more dramatically. “A firm like DLA just in the U.S. has a billion in revenue,” says Peter Zeughauser, a law firm consultant who recently signed on to consult for DLA Piper. “You don’t run that with just a managing partner. That’s not how the business world works.” While keeping the top management in place, the firm opted for a nonexecutive chairman, former Senate Majority Leader George Mitchell, D-Maine, and a board similar to a corporate management structure (the U.S. partnership has its own executive board). Former managing partners Burch, Miller and Nigel Knowles act as chief executive officers, while Jeffrey Liss and former Gray Cary Managing Partner J. Terence O’Malley operate like chief operating officers, overseeing the U.S. concern. Partners still vote, but usually based on the recommendation of the board or the executive committee. Burch, Miller, and Knowles organized an umbrella partnership for the entire firm, but they kept the U.S. and U.K. operations as largely financially independent. DLA Piper also kept many of its foreign offices as separate corporate entities, although the firms take the DLA Piper name. Law firm consultant Hildebrandt says that firms with this structure are afforded large tax benefits and can allow for measured integration. The downfall: It can be difficult to establish a single, firmwide culture. Of the 20 foreign offices, 13 of them are individual entities that may have taken the firm’s name but do not participate in its compensation system. Liss says that DLA Piper has “good friend” relationships with the firms but does not plan on acquiring them. Though the firm plans on “fully integrating,” there is no set date by which it expects to finish the process, Liss says. In Washington, the merger meant putting together lawyers from each of the U.S. legacy firms under one roof. The management challenges and cultural issues were considerable, and the firm’s progress has not been entirely smooth. DLA Piper continues to try to elbow its way into higher-end deals while maintaining some of its more price-sensitive practices such as trademark and real estate. Lawyers in the Washington office say it took at least a year before they began seeing the benefits of the merger in their practices. “Before 2005, my clients did not have a significant amount of international touch,” says Jeffrey Lehrer, a former Gray Cary partner whose work focuses on emerging technology companies. “Now I would say it was almost unusual for a company not to have international touch.” After the merger the Washington office’s overall head count slumped from 220 to 211. Former DLA Piper partners say compensation, conflicts, and increased billing rates played into their decision to leave. Lawyers in key practice areas such as government contracts, white collar, and labor and employment exited, including Adam Hoffinger and Robert Salerno to Morrison & Foerster and former Gray Cary Washington managing partner Margaret Kavalaris, Michael Marinelli and Tami Howie, who moved to Cooley Godward. Most recently, the firm lost longtime tax partner Susan Temkin to Patton Boggs. Those absences left a dent in the firm’s overall gross revenue in Washington, which despite higher billing rates dropped by $3 million to $133.7 million in 2005. The office also shrunk its equity partnership from 45 to 38 in 2005. Despite losing partners, the D.C. office’s revenue per lawyer was up slightly at 2.4 percent to $632,000. And profits per partner moved up 3 percent to $952,000. Recently installed office managing partner Ann Ford attributes part of the revenue decline to a “decreased head count.” Ford also points to long-term growth as a better measure of the office’s performance. Since 2001, the firm has increased revenue by almost 10 percent. She hopes to increase the office size by aggressively hiring in the lateral market, focusing on corporate lawyers. She has been given a mandate to expand DLA Piper’s D.C. presence. So far, the firm’s numbers have rebounded to 219, and in 2007, new office space that can hold as many as 300 lawyers will open. THE WORLD IS FLAT In the face of their critics, DLA Piper’s leaders say they didn’t have much choice to grow so precipitously. Ever-increasing globalization in the corporate world was forcing their hand. “If we weren’t there, we weren’t going to be able to help [clients],” says Ford. “We already had relationships with firms around the world that we would partner with, but it wasn’t us. We couldn’t control the quality.” In the past year and a half the firm has done work in Asia, Europe and Africa backing up its business plan. For example, using lawyers domestically and in foreign outposts, DLA Piper brokered international deals for companies such as Danaher Corp. in its takeover of German-based Leica Microsystems and former Gray Cary client JDA Software Group Inc. in its $293 million acquisition of Manugistics Group Inc. Yet skeptics remain. The firm has struggled to get conflict management under control after merging. Its conflicts division operates out of its Chicago office, and the firm is spending even more money on trying to speed up conflict issues next year. “There are issues of dealing with conflicts of interest clearly because the client base is so large,” says Jay Epstein, U.S. co-chair of the firm’s real estate practice. “Each of the mergers further complicates those situations.” There has also been a high amount of turnover among senior leadership. The firm has installed four new managing partners in Chicago, Los Angeles, Philadelphia and Washington in the past four months. In Washington, the firm also has placed new chairs in its communications, e-commerce and privacy and antitrust practice groups. That hasn’t stopped the firm from taking a bullish approach to new markets. Most recently, it poached 12 lawyers from Hunton & Williams and Jones Day to open an office in Atlanta. Abroad, the firm pounced on international lawyers from the now-defunct Coudert Brothers and has quickly moved to develop a stronghold in the Middle East by opening an outpost in Dubai; it expects an Abu Dhabi office to follow shortly. Chairman Mitchell characterizes the firm’s future growth strategy as slowing its merger pace but continuing to incrementally hire laterals and trying to “integrate what we’ve already done.” Anna Palmer is a reporter with Legal Times, a Recorder affiliate based in Washington, D.C.

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