When the combination of 1,600-lawyer Herbert Smith with 1,200-lawyer Freehills was first announced in June, according to sibling publication The Asian Lawyer, the firms began the process of integrating profit pools and an estimated $1.35 billion in gross revenues. In July the firms named new practice group leaders and unveiled a 13-member global management team to oversee the integration process, which included combining duplicate bases in cities like Singapore.
Although Herbert Smith Freehills took shape too late to qualify for inclusion in The American Lawyer‘s Global 100 list when it was published earlier this month, the combined firm would have ranked third globally by number of lawyers and 13th by gross revenue, according to the magazine’s most recent data.
As a result of the merger, Herbert Smith CEO David Willis delayed his exit from management to help oversee an integration effort that will eventually result in his Freehills counterpart, Gavin Bell, assuming control of the combined firm next year. The Am Law Daily caught up with Willis via email to discuss his new firm’s international aspirations as he traveled throughout Australia last week.
Willis says that full financial integration between London-based Herbert Smith and Sydney-based Freehills was a critical component in the merger discussions between both firms. Issues with integration and cross-selling practices have plagued many a merger between international firms, and Willis was keen to avoid some of the pitfalls that befell his predecessors.
The creation of a single profit pool for Herbert Smith Freehills’s 460 partners was “central to establishing a strong and collaborative one-firm culture across our global platform,” he says, noting that such a pool “will incentivize our people to work together toward the same goals and to use all the firm’s skills and resources.”
The combined firm has made a major priority of ensuring that the clients of both legacy firms experience the combined entity as one international legal practice, Willis says. The integration, whether in such support systems as cloud computing and e-discovery services, are critical for branding purposes, and Willis expects the vast majority of this work to be done over the next few years.
Herbert Smith had long recognized the benefits of expanding into Australia, a natural resource-rich region where other leading London-based British firms such as Allen & Overy, Ashurst, Clifford Chance, Linklaters, and Norton Rose have established operations in recent years.
Willis says that a strategic review of Herbert Smith’s operations showed that the firm needed to follow suit, as a result of Australia’s growing significance in the global economy. A number of Herbert Smith clients were investing Down Under, particularly in the booming energy and natural resources sector, with the inbound and outward bound deal flow spilling over into the financial services, insurance, and manufacturing industries, according to Willis.
The merger with Freehills, which had four offices in Australia, an outpost in Singapore, and associated offices in China and Vietnam, gave Herbert Smith one of the largest presences in the Asia Pacific region by attorney head count. But the combined entity isn’t stopping there.
In August, six commercial litigation partners from Chadbourne & Parke, including longtime litigation department head Thomas Riley, defected for Herbert Smith. Five of those partners are based in New York, where Herbert Smith opened an office last month ahead of its official merger with Freehills. (Riley did not respond to a request for comment on his decision to leave Chadbourne, where he had spent more than 25 years.)
Willis says the Chadbourne hires will handle cross-border disputes work, specifically international arbitrations and other investigations to support litigation for the firm’s existing clients. While Willis didn’t elaborate on the identity of those clients, one of them is London-based British American Tobacco, according to our previous reports.
“We are confident that having a New York presence will help us win a range of new mandates across our network,” Willis says. “While we envisage the office will gradually grow, we are not planning to expand either our remit in New York or our coverage in the U.S.”
Herbert Smith Freehills has no former referral relationships or alliance agreements with major U.S. firms, but does maintain informal relationships with a number of leading firms, some of which are based in New York, says Willis, who adds that his firm is looking at expansion opportunities elsewhere around the world.
The firm expects to open in Seoul next year, joining the parade of foreign firms heading into South Korea following the liberalization of the country’s legal market last year. Willis says Herbert Smith Freehills’s predecessor entities have handled outbound investment work for the Korea Electric Power Corporation and Korea Gas Corporation, and the Seoul office will seek to follow the model of focusing on M&A, projects, and disputes work in the energy sector used by the firm’s Tokyo office, where Herbert Smith opened a decade ago.
Earlier this year, Herbert Smith also assembled a team to head up the launch of a trio of German offices in Düsseldorf, Frankfurt, and Munich next year after failing in its effort to merge with former European alliance partners Gleiss Lutz and Stibbe, according to British publication Legal Week. Willis notes that Germany is Europe’s largest economy and having an “on-the-ground capability in the country” is critical for his firm’s plan to become a leader for global transactional and dispute resolution work.
Another region where Herbert Smith has previously sought to expand is sub-Saharan Africa, with Guinea emerging as a leading contender, according to a report earlier this year in U.K. publication The Lawyer. Willis confirms that Herbert Smith Freehills is eyeing Guinea as a possible area to enter for work in the energy and infrastructure sectors, noting that both legacy firms have been Africa for three decades. (The American Lawyer looked at the burgeoning African legal market as part of its 2012 Global 100 issue.)
Herbert Smith Freehills is continuing to recruit “internationally minded lawyers with strong analytical skills,” says Willis, noting that the crux of the combined firms’ expertise for their clients are its antitrust, corporate, disputes, finance, labor and employment, projects, and real estate practices.
Willis adds that the growing ranks of international legal giants, which includes up-and-comers like King & Wood Mallesons and Norton Rose, have made antiquated the notion of what was once the Magic Circle of elite London-based firms.
“The ‘Magic Circle’ is a somewhat outdated, U.K.–centric term that doesn’t reflect the internationalization of the legal sector in recent years,” Willis says. “The top [London firms] now compete on the global stage with a number of leading non–U.K. international firms, and we think over the next few years a new grouping will emerge, comprising a small number of global elite firms.”
While Willis also believes that there will be some room in the market for top regional, national, and boutique firms, he expects Herbert Smith Freehills to find success in the new ranks of global legal giants.