(Illustration via iStock)
Continental Breakfast: your daily update on what’s happening in Europe.
The $1 billion merger between Arnold & Porter and Kaye Scholer is somewhat of a novelty.
Almost all of the largescale combinations involving U.S. law firms over the past few years have been cross-border. DLA Piper, Dentons, Hogan Lovells, Norton Rose Fulbright, Squire Sanders…the list goes on. The deal to create Arnold & Porter Kaye Scholer, as the firm will be known from Jan. 1, 2017, bucks that trend. In fact, it is the first tie-up between two Am Law 100 firms since Locke Lord and Edwards Wildman Palmer got together in January 2015.
Unusually, this latest combination lacks much of an international angle. In fact, it is almost entirely domestic. The vast majority of the new firm’s 1,000 lawyers—more than 90 percent, according to my calculations—will be based in the United States. Kaye Scholer does have outposts in Frankfurt and Shanghai, and Arnold & Porter in Brussels, but they’re tiny, collectively housing less than 30 attorneys.
Both firms also have offices in London. This is where it gets a little more interesting. Kaye Scholer has a relatively small presence in the U.K. capital, with its 18 lawyers largely focusing on funds and midcap private equity work. Arnold & Porter’s London office is comfortably the larger of the two, at just under 50 lawyers. The practice is much broader than Kaye Scholer’s, covering everything from corporate and antitrust to intellectual property, but is best known for its strength in the life sciences and pharmaceuticals sectors—particularly in product liability defense work.
Post-merger, the firm will have over 60 attorneys in the U.K. That might not sound much, but it will actually make London one of Arnold & Porter Kaye Scholer’s largest offices, after Washington, D.C. (400 lawyers), New York (325 lawyers) and California (175 lawyers in three offices).
It will also make it one of the largest London offices of any U.S. law firm. While American firms have collectively had a massive impact on the London market—particularly when it comes to the recruitment of leading partners—few have managed to individually impose themselves across the Atlantic. So while the latest NLJ 500 data shows that around 90 U.S. firms now have offices in the U.K. capital, employing more than 6,000 lawyers, most of those practices remain small. In fact, excluding the products of large-scale trans-Atlantic mergers, just 10 U.S. firms have more than 100 attorneys in London. Most have fewer than 60.
Global Firm Spinoff Merges…To Become More Global
The same day that Arnold & Porter and Kaye Scholer announced their union, a smaller but no less interesting deal took place between London-based Fieldfisher and Hill Hofstetter, a 18-partner firm headquartered in Birmingham, the U.K.’s second-largest city.
It continues a period of sustained growth for Fieldfisher. The firm’s revenue passed 120 million pounds ($150 million) in the last fiscal year and it combined with Italy’s Studio Associato Servizi Professionali Integrati in July.
It also represents somewhat of an about turn for Hill Hofstetter, having spun out of Reed Smith in 2008. Founding partner Chris Hill said that the firm merged with Fieldfisher as “we wanted to increase our international capabilities.” Fieldfisher has around 600 lawyers in nine offices across the U.K., Belgium, France, Germany, the U.S. and China. 1,600-lawyer Reed Smith has almost 650 attorneys in 15 international offices across Europe, the Middle East and Asia.
More Drama At KWM As Global Chief Stands Down
It seems that King & Wood Mallesons’ global managing partner Stuart Fuller has finally had enough, with the firm announcing that he will stand down by the end of the year.
I can’t say I blame him: the past few months must have been absolutely hellish.
With the firm until recently lacking any European management after its regional senior and managing partners both resigned their posts, Fuller has been busy firefighting a practice that has been rocked by widespread layoffs and a steady stream of exits
KWM recently had to halt an $18.4 million recapitalization program following the shock resignation of four senior partners in London, including former managing partner Rob Day and U.K. investments funds head Michael Halford. (Day and fellow corporate partner Andrew Wingfield have now joined the London office of Proskauer Rose, which six years ago held merger talks with KWM’s legacy European arm. Halford and the fourth member of the group, private equity partner Jonathan Pittal, are yet to surface.)
The planned capital injection, which also included salaried partners for the firm’s time in the firm’s history, was designed to boost the firm’s capital after partners had been subjected to repeated delays to profit distributions. But it was put on hold to allow the firm time to assess the impact of the loss of the four partners’ estimated $11.3 million in annual billings. KWM partners met yesterday to decide how to proceed.
The worsening position led to KWM’s new European management team flying to Asia last week to speak to the Sino-global firm’s leadership about possible steps to revive the struggling practice, which may include a financial bailout from its Chinese partnership.
Morgan, Lewis & Bockius must be increasingly convinced that it made the right decision to cool its interest in a merger with KWM. That said, the U.S. firm has in the past shown a willingness to complete deals under difficult circumstances, having taken on the bulk of Bingham McCutchen’s lawyers shortly before that firm’s collapse in 2014.
After a decade in management—he spent five years in charge of legacy Australian firm Mallesons Stephen Jaques and has been global head of KWM since the combination in 2012—Fuller will now return to full time practice as a specialist finance lawyer in securitization and structured finance. Long hours on highly complex transactions for demanding clients…it will probably feel like a vacation.