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Partners at the U.K.’s Herbert Smith and Australia’s Freehills have approved a merger that will create a 2,800-lawyer firm known as Herbert Smith Freehills.   The combination, which will become effective October 1, is the latest in a string of deals this year between Australian and international firms. In March, Mallesons Stephen Jaques entered into a tie-up with leading Chinese firm King & Wood. The same month, Blake Dawson entered into a combination with U.K. firm Ashurst and adopted the latter firm’s brand. In April, Allens Arthur Robinson announced an exclusive alliance with Magic Circle firm Linklaters.   However, the merger between 1,600-lawyer Herbert Smith and 1,200-lawyer Freehills will be a full financial merger between the two firms. The earlier deals, as well as Norton Rose’s 2010 tie-up with the former Deacons Australia, followed a Swiss Verein model in which the Australian and international partner profit pools remained distinct. Australian firms have generally had lower levels of profitability than U.K. or U.S. firms, so financial integration has been a challenge.   Freehills had gross revenues in 2010 of $471 million and profits per partner of $970,000, according to The American Lawyers’ Global 100 report. Herbert Smith’s gross revenues in 2010 were $718.5 million and its profits per partner were $1.36 million.   But Freehills chief executive partner Gavin Bell and managing partner Mark Rigotti have both been adamant that their firm was only interested in a full merger. Bell says only a true financial merger can  see the firms integrate effectively and combine to work as one.   Sources close to the discussions say there was resistance to the idea of a full merger among some London partners who feared they could end up subsidizing lower-yielding Australian practices. Likewise, there had been concerns among some Australian partners that their practices would be sidelined in a global juggernaut focused mainly on energy and litigation, Herbert Smith’s core strengths. As a result, the vote was not thought to be a sure thing. But, in the end, the firms say both their partnerships overwhelmingly approved the deal.   The merged firm will be the world’s eighth-largest by headcount, with 20 offices. Bell and Herbert Smith’s London-based chief executive partner David Willis will both initially act as joint chief executive officers of the combined firm, though a transition council will be put in place to appoint a single chief executive within the next 12 months.

Growing investment in the country from rising Asian economies has been the main driver of interest in Australia by global law firms. The Australian mining and energy sectors have been particular targets for investment by large Chinese state-owned enterprises. Energy is a major practice strength for both firms

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