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Two large mergers late last month were additional evidence of the law firm consolidation juggernaut. But a simultaneous move of potentially far greater significance, according to three legal consultants, was the bold advance into California by the global firm Clifford Chance Rogers & Wells. “The Clifford Chance move is really the move to watch,” said law firm consultant Lynn Mestel of Mestel & Co. “It’s the transformational deal, no question,” said Peter Zeughauser of The Zeughauser Group. Ward Bower, a principal at the consulting firm Altman Weil, added: “They are firing a shot across the bow of American firms, saying ‘We’re not only going to be in New York and compete there; we’re going to compete on a national basis.’” The two mergers were straightforward affairs. Boston’s 500-lawyer Bingham Dana joined with San Francisco’s 320-lawyer McCutchen, Doyle, Brown & Enersen in an effort to fashion a national player. And Bryan Cave, with 650 lawyers, bulked up its New York presence by agreeing to merge with New York’s Robinson Silverman Pearce Aronsohn & Berman and its 170 lawyers, all in New York. Robinson was scheduled to vote on the deal on June 7, after press time. By contrast, Clifford Chance’s move was neither a merger nor straightforward. One of London’s “magic circle” firms, Clifford Chance is the world’s largest law firm, with about 3,000 lawyers worldwide, and the largest foreign firm in the United States, with 500 lawyers in New York and 100 in Washington, D.C. It swept into California by acquiring not a full firm but a small cadre of high-profile defectors from San Francisco’s Brobeck, Phleger & Harrison. The group is led by Tower Snow, the recently expelled former Brobeck chairman, who is bringing along at least 15 of his former partners. And the defection unfolded in a particularly messy way: News of the deal leaked out two weeks in advance, which caused a furor and led to Snow’s expulsion. Mestel suggested that the soap opera quality, which made a predictable splash, may have caused some people to miss the point. “It signifies that the British are not coming; the British are here,” she said. “U.S. firms that have dismissed the British as noncompetitors ought to rethink their assessment. It’s a very important move.” Clifford Chance has made no secret of its ultimate goal. “We have not hidden in any way our ambition to be the world’s premier global law firm,” said James Benedict, managing partner of the firm’s North and South American operations and global head of litigation. “In order to claim that, you have to be a leading law firm in the United States — and to achieve that you have to have a presence in Northern California.” California, he said, has the world’s sixth-largest economy. According to Snow, his new employers already have a San Francisco office up and running. The firm will open offices in Palo Alto, Los Angeles and San Diego within 30 days, Snow said, and in addition to the 15 Brobeck partners, five more may sign on in mid-June. Within two months, he added, 60 or 70 associates will be on board. The departing lawyers represent some of Brobeck’s biggest and most desirable clients, but it will be a month or more before it’s known whether the latter group will follow. Among the big prizes: Cisco Systems, Sun Microsystems and Intel. “The legal industry is going through a classic industry restructuring,” Snow said. “Just as the New York elite are trying to build their presence in Europe and Asia, where the magic circle firms have a huge advantage, at the same time Clifford Chance is taking the battle to the home turf of the elite American firms.” Not everyone is convinced the strategy makes sense. A lawyer at a large London firm who asked not to be identified questioned how the deal will affect Clifford Chance’s culture, its remunerations, which were already “under a strain,” and its “increasingly difficult integration problems. They will have to work out whether they can solve those problems and, if they can’t, how much that matters.” Benedict dismissed the criticism as uninformed. Compensation was never an issue with the new lawyers, he said. He has known Snow and some of the other Brobeck partners for years, he added, and feels certain that integration will be seamless. Taking aim at the unnamed competitor in London, he pointed out that Clifford Chance’s U.S. contingent will soon be 10 times larger than its next closest competitor from the magic circle, “thereby placing significant clear blue water between us, to use a British expression.” Asked which firms he sees as his competition, Benedict echoed Snow, naming the big New York firms. In the view of consultant Bower, the threat is real. U.S. firms don’t realize that the magic circle firms are better managed, largely as a result of the fierce competition, he said, and are better at managing across distances because they’ve been doing it longer. It behooves American firms to take stock. “If not, you’re likely to lose clients or lawyers or both to law firms that are actively pursuing a strategy.” Zeughauser agreed. Clifford Chance has “redefined what it means to be a global competitor,” he said. “They’ve now established a model, and some firms, in order to compete, will have to follow suit. Others will have to redefine the market in which they choose to compete.” Some will be content to be national powerhouses; others, like Wachtell, Lipton, Rosen & Katz of New York, will survive as boutiques, but they will have to further hone their niches, he said. The “massive shift” toward nationalization and globalization of law firms is merely an extension of what is happening to their clients, Mestel said. And “they have to follow their clients.” Increasingly, she said, “all business is global. That means that any client that you service, if the client has multinational interests, you have the potential to get that client’s business anywhere in the world.” In other words, she explained, for an international firm, a relationship with a client in Spain can lead to inroads in England or the United States. ‘CLIENT-DRIVEN’ MERGERS The same concepts, on a smaller scale, drove last month’s mergers. Bryan Cave Chairman Walter Metcalfe described his deal as “basically client-driven” for each firm. “The needs of clients require that their financial, commercial and litigation issues are less and less local and more and more global,” he said, noting that his big clients include Boeing and Anheuser-Busch. McCutchen Doyle Chairman Donn Pickett, who will be vice chairman of the merged firm Bingham McCutchen, summed up his firm’s motive for merging: “It’s all about competition and client services. The law firm that is not thinking about expanding and better meeting the needs of its clients is the law firm that does not understand the realities of the marketplace.”

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