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When New York’s Rogers & Wells announced it was merging with London’s Clifford Chance last spring, industry watchers widely predicted a flurry of transatlantic mergers would soon follow. But they were wrong. One year after the news broke, there has not been a single top-tier New York firm, or even second-tier firm, to combine with a top United Kingdom firm. Instead, stymied by differences in profitability and culture, the London-New York merger movement has lost momentum, replaced on both sides of the ocean by a wait-and-see attitude. One of the main reasons, not surprisingly, is money. The top New York firms are both more profitable and smaller than their English counterparts. At Slaughter & May, England’s highest-earning firm, the profits-per-partner in 1998 were �728,000, according to the British legal press (which comes to slightly more than $1 million at last week’s exchange rate). By contrast, the five highest-earning New York City firms had profits-per-partner of more than $1.5 million in 1998, according to the American Lawyer’s 1999 AmLaw 100 survey. While plenty of New York firms have profits-per-partner comparable to the top London firms, those New York firms tend not to have the high-quality, high-volume corporate finance practice that the top English firms want in a merger partner. “London firms would like to do it, but the people they’d like to do it with aren’t interested,” said David Temporal, a partner in the London office of the legal consulting firm Altman Weil. “What the U.K. firms want, really, is a top-tier New York capability,” added Temporal. Instead, it is the “second-tier” New York firms that appear most interested in merging with the British, but these firms are also least appealing to London because they lack a sufficient high-end corporate finance practice. The result, according to Temporal, has been a transatlantic “standoff.” Culture Gap The very real cultural differences between English and New York firms create another hurdle to merging. These differences encompassing everything from how partners are compensated and how clients are billed, to the fuzzier — but equally significant — differences in lawyers’ interpersonal styles. Many New York firms pay partners based on their rainmaking, with the ones who bring in the most business earning the most money. English firms, on the other hand, tend to compensate in a lockstep manner, where partners with the same seniority take home more or less the same pay. At Rogers & Wells, for instance, the pre-merger partnership was an unequivocal “eat-what-you-kill” system. “We had a rather extreme objective, performance-based system,” said Laurence Cranch, managing partner at Clifford Chance Rogers & Wells in New York. However, the partners unanimously agreed to shift to a more lockstep system as part of the merger. “We had taken it [the rainmaker system] to the limit we could in terms of benefits,” Mr. Cranch said. But other New York firms are more wedded to their compensation structures, making merging especially problematic. OLD BAILEY BILLING English firms are also known for billing fewer hours, but at higher rates, than American firms. In London, the norm is between 1,400 and 1,800 billable hours per year, compared with New York, where it runs upward from at least 2,000. To some New York partners, the smaller number of billable hours is taken as a sign of a weaker work ethic. Others, such as Cranch, chalk up the difference to accounting methods. “They are more conservative about recording their time,” he said. Another East Coast lawyer who has worked closely with the English agreed that the British firms do not charge for the same work as American firms do. For instance, the English might not charge a client for research time if a question can be answered after only a few hours of work, because the English attitude is more “we’re getting paid to know, not to find out.” More intangible cross-cultural differences have to do with how law is practiced. New York firms have a reputation for acting as business as well as legal advisers, but English firms are not as “proactive” when it comes to commercial concerns, according to Altman Weil’s Temporal. Robert Dell, managing partner of Los Angeles-based Latham & Watkins, adds that another cultural difference is that in England, the associates and partners often share the same office. While the arrangement might assist associates in learning how to practice, it is unthinkable to most American lawyers. LAST AMONG EQUALS? In New York, another factor working against cross-border mergers is that many view the Rogers & Wells and Clifford Chance union as more of a takeover than a merger of equals. For different reasons, the common wisdom in New York’s legal community is that Rogers & Wells was acquired. This may be because Clifford Chance was larger than Rogers & Wells (pre-merger, Clifford Chance had around 1,900 “fee-earners,” which includes lawyers and paralegals, compared with Rogers & Wells’ approximately 400 lawyers), or because Rogers & Wells was the one to change compensation methods, or even because of the firm’s new name: Clifford Chance Rogers & Wells in New York and Clifford Chance abroad. Cranch of Rogers & Wells disputes that view, saying the new firm is “very different organically than Clifford Chance was before the merger.” At around the time of the merger, Clifford Chance also merged with the German firm Punder, Volhard, Weber & Axster. The result, said Cranch, is a newly created, stronger, global firm that operates differently than any of the individual members previously did. “The firm today is not Clifford Chance, the big firm, with a New York branch.” He added that the new arrangement has opened up possibilities that were unimaginable before. For instance, Merrill Lynch & Co. hired the firm to handle a $1 billion joint venture with HSBC Holdings PLC to create a global banking and investment services company that will operate on the Internet. Cranch said that his firm got this work because Rogers & Wells had a close relationship with Merrill Lynch in New York, but also had the infrastructure in London for a large team of lawyers. Rogers & Wells profits-per-partner also increased from $760,000 in 1998 to more than $1 million in 1999, according to Cranch, largely because of the impending merger (which took effect on Jan. 1 of this year). ALTERNATIVES ROUTES While Rogers & Wells attributes some economic success to its new position in London, other New York firms have staked out market share in England without merging. Richard Levick, who advises law firms on media issues, believes some New York firms are looking to Weil Gotshal & Manges as a model, asking, “Is it less expensive to offer �1 million for a high-profile lateral and bring them over with a book of business?” which was how Weil Gotshal founded its London office. Levick added that in the last year, the British attitude towards finding a New York merger partner has lost its urgency, and that London is instead actively looking, towards other areas of the country. In fact, the two most public recent courtships between England and America both involved California firms. Latham & Watkins, a firm of around 1,000 lawyers, is in talks with Ashurst Morris Crisp, which has more than 1,100 “fee-earners,” although the British press has reported that some American partners are strongly opposed to the merger. Dell, who practices out of Latham’s San Francisco office, declined to comment on the state of discussions. San Francisco’s Orrick, Herrington & Sutcliffe was also in talks for months with Bird & Bird, but that deal fell apart when Bird & Bird wanted to expand in Europe more rapidly than Orrick did. Still, in some ways a London-West Coast merger might make more cultural sense than a London-New York merger. Although the English are known as reserved, some think they would get along better with mellow Californians than gruff New Yorkers. “Reserved and casual are more complementary than reserved and cynical,” is how one East Coast partner at a West Coast law firm put it.

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