Two senior Dentons partners told Law Blog on Tuesday afternoon that a proposed tie-up between that firm and U.S. law firm McKenna Long & Aldridge LLP is off. While the executive boards of both firms had recommended to their partners that the firms combine, McKenna was not able to muster enough votes to approve the deal, according to those partners.
Many rank-and-file McKenna partners supported the transaction, but apparently some heavy hitters revolted:
More than 99% of Dentons’s approximately 900 partners approved the deal, those partners said, with only six worldwide voting against. But while about 75% of McKenna’s partnership also voted in favor, the firm weighs votes by equity interest, not by headcount, and the vote was called off when it became clear that it would not pass the required 66 and 2/3 % equity-stake threshold, the Dentons partners said.
And what were the worries of these rainmakers? Per the WSJ:
The objectors included a group of “prominent, high-profile practitioners who didn’t believe at the end of the day that it was the culture of their firm” to merge, one of the two senior Dentons partners said. “They simply tried to engage in fear about globalization, fear about loss of brand.”
And cultural fit and branding weren’t the only issues stressing McKenna partners:
Among their concerns: that the Dentons structure, known as a verein, where firms share one brand but separate profit pools, was something new and untested. A number of global firms employ that structure, including DLA Piper and Hogan Lovells.
Maybe we should set up an Above the Law consulting arm. Is your firm thinking about a possible merger or other combination that it would like some feedback on? Feel free to drop us a line and tell us what’s going on.
“We are not in a position to successfully bring our firms together at this time,” a spokeswoman for McKenna Long said on Tuesday afternoon. “We look forward to maintaining the many friendships and working relationships, including with shared clients, that partners in both firms have forged.”
But later on Tuesday the firm disputed the Dentons partners’ account, saying talks had been called off “in advance of a previously scheduled partner vote” and that “any statements ascribing even approximate percentages to the number of our partners who supported the tie-up are inaccurate.”
The firm declined to provide its view of what would be an accurate percentage to the Journal.
Biglaw firms have a problem. They can’t get their senior partners to retire. Or to pass along their clients to younger partners fast enough.
The reasons for this unwelcome phenomenon are straightforward. First, today’s Biglaw senior partners are making too much money. Would you retire if you were making seven figures and billing 1200 to 1500 hours a year? Of course not. Especially if you are helping to support your children. Or in this age of the 70-year-old rainmaker, a grandchild’s “education” as a communications major at the top party school in this year’s rankings.
Kidding aside, I know that many senior partners have very valid reasons for continuing to maintain their Biglaw practices. But that does not mean that what works for them at an individual level is what is good for Biglaw as a whole. In fact, I think the “sticky senior” issue is the greatest long-term threat to the continued viability of many Biglaw firms….
In fact, many of the non-lockstep global behemoth (modern?) Biglaw firms already treat their senior attorneys with the same level of consideration as they give their junior partners. As a partner in those firms, you are welcome as long as you are producing, and unwelcome within two or three quarters of you not producing. Simple. In contrast, the uber-prestigious lockstep firms have done the best job of holding the line on enforcing mandatory retirement ages, even in the absence of hard and fast rules on the issue. It is a lot easier to get your partners to retire early when you have been paying them very well throughout the duration of their partner careers. (Remember how much better partners at lockstep firms do than at closed-compensation shops. The primary beneficiaries under the lockstep system are service partners, who tend to be either new-ish or old-ish partners in firms that follow that model.) It is much harder to get a rainmaker to retire at 55 when you made him wait until he was 50 with a solid $3 million dollar book before you started paying him anything close to the firm’s “reported” profits-per-partner figure.
Like many things in Biglaw, things are murkiest for firms in the middle of the pack. Particularly if the firm’s partnership is diffuse, and decisions are primarily made through some form of centralized management. In such a “culture,” especially in this “Leaden Age” of Biglaw, any arguments about preserving the long-term viability of the firm that even smell of being anti-rainmaker (senior or not, but at many firms seniority and rainmaking go hand-in-hand) are anathema. Simply put, the idea of doing anything that would convince a senior rainmaker that they would be more “appreciated” at another firm is a toxic one. But that fact does not make the conversation any less necessary for Biglaw firms to have with their partnerships. Nor does it provide a wholesale excuse to the senior Biglaw partners of today, for the betrayal of trust they have perpetrated on some level to the profession as a whole.
And a betrayal of trust it is. Many of the senior denizens of Biglaw today have achieved their positions thanks to precisely the sort of institution-sustaining behavior that they are now turning their back on. They have benefited from senior partners who preceded them at the firm turning over the reins of client relationships, in addition to the mentoring that was part and parcel of the partner experience perhaps just a generation ago. Firms today ignore the cost of this betrayal of trust at their peril. For many firms, it is fair to say there exists an inverse relationship between the “stickiness” (in terms of addiction to compensation and hoarding of clients) of its senior partners and the “stickiness” (in terms of loyalty to the firm as an institution) of its largest clients.
Put another way, a good way to assess the long-term viability of a firm or practice group is to analyze the depth of the relationship that firm or group has with its largest clients. Barring a well-thought-out and executed succession plan, the more those client relationships are dominated by senior partners, the more susceptible those relationships are to being lost. We could learn a lot from firms just by getting some disclosure regarding the age distribution of the firm’s equity partnership. (The fact that such information is not readily available speaks volumes about how Biglaw truly operates when it comes to disclosure.)
Perhaps the problem is not the presence of senior (55+, but even drawing the line at particular age can surely spur serious debate) attorneys at firms, but rather the fact that they tend to dominate the equity partnership ranks. As a litigator, I have personally benefited from the training of older lawyers, and continue to enjoy watching (usually with envy, but in a healthy inspiring sense) masterful senior litigators practice their craft in open court. But as much as we have to respect the contributions of the older Biglaw generation, and search for ways to allow them to serve their firms with dignity and while being compensated fairly, we also need to seek out ways to give the next generation of partners its chance.
Many Biglaw firms are grappling with this issue, with varying success. What I find interesting it that while many firms are caught in a bit of inertia when it comes to a real strategic plan that looks at what the firm will be even five years hence, some firms are trying to write their futures for themselves. In this group I put firms like Orrick and Dentons, which may not share much in common other than a lot of lawyers under management and being the subject of ongoing merger talk. They also, however, share something else in common: firm leaders who are young by Biglaw standards, with horizons for their own careers that are forcing them to take near-term steps to ensure the viability of the enterprises they run. Their dissatisfaction with the status quo is undoubtedly shared by a lot of younger Biglaw partners.
The heads of Orrick and Dentons are now in a position to act, and they are doing so. Biglaw firms need to get more serious about addressing the sclerotic effects of failing to transition senior partners, and their clients, out of their equity partner roles so that the younger generation can advance. If they don’t, they can expect to see more younger partners look for alternatives to practicing in Biglaw, just as they can expect clients to look for alternatives to their current Biglaw firms. The firms that get this issue right, with appropriate sensitivity for all involved, will be in a much stronger position as Biglaw tries to exit this leaden age for a new golden one.
What incentives should be offered to senior partners to encourage them to pass along their clients? Let me know by email or in the comments.
* Judge Victor Marrero orders MF Global to pay over $1 billion to customers. Serves those MFs right. [CNBC]
* The Second Circuit has punted on the question of whether defunct firms in New York have an ownership right to fees earned by former partners who took work to new firms. [Am Law Daily]
* Howard Morris, the former co-chief executive of SNR Denton, is joining MoFo as the head of the bankruptcy and restructuring group in London. [DealBook / New York Times]
* NBC has a new show about a criminal court judge who is a hard-living, sexually unapologetic woman. So basically a documentary about Justice O’Connor’s early years. [Deadline]
* So Detroit might be the worst place to work. Even with that caveat, it’s hard to believe this ad seeking someone to do, “whatever other crazy type stuff this (bastard) lawyer of ours thinks up.” A screenshot is provided after the jump in case the ad comes down…. [Craigslist]
* The rocky relationship between McKenna Long & Aldridge and Dentons is being doubted by everyone, and it looks like Dentons may be on the verge of receiving the “it’s not you, it’s me” speech. [Daily Report]
* Stephen DiCarmine, Dewey & LeBoeuf’s former executive director and resident fashionista, just hired a criminal defense attorney. We trust this man — jailhouse stripes must be so hot right now! [Am Law Daily]
* Skadden cares about its people. The firm is trying to prevent a man who killed one of its legal secretaries, got high, and then ate six waffles from collecting any of the funds from her 401(k). [New York Daily News]
* Just imagine if this great profile were written in true BuzzFeed listicle style. It’d probably be called something like “3,742 Words on Why Mary Bonauto Is the Most Awesome Marriage Equality Lawyer Ever.” [BuzzFeed]
* “I think it’s fair to say the hiring plan is kaput.” As we previously reported, the Law Clerk Hiring Plan is dead, and the heat is on to figure out a way to lure federal judges back to OSCAR. [National Law Journal]
* Justice Sandra Day O’Connor has joined Justice Ruth Bader Ginsburg in being one of the only justices to perform a same-sex marriage. No divas here: the wedding ceremony was held at the high court because “[t]hat’s where she was.” [BuzzFeed]
* “Proceed with caution.” David Kappos, the former director of the U.S. Patent and Trademark Office, isn’t too keen on the latest patent reform bill that’s currently before the House Judiciary Committee. If only the man still had a say. [National Law Journal]
* Dentons and McKenna Long & Aldridge have released a joint statement to ensure the public that the proposed merger is still on. Good news, everyone! The firm won’t be named McDentons. [Am Law Daily]
* Ralph Lerner, formerly of Sidley Austin, has been slapped on the wrist suspended from practice in New York for one year’s time after improperly billing car service to clients to the tune of $50,000. [Am Law Daily]
* It’s been a year since Superstorm Sandy, and lawyers are still counseling their clients on how to muddle through the mess. Volunteer some pro bono hours and help out those in need. [New York Law Journal]
* Career alternatives for attorneys: rescuer of nerd relics. Head to this Brooklyn book store (of course it’s in Brooklyn) if you’re desperately seeking long lost science fiction tales. [Wall Street Journal (sub. req.)]
* We bet that folks in Australia would like to tell the the High Court to bugger off after overturning this ruling. Sexual injuries that occur during work-related trips don’t qualify for workers’ compensation. [Bloomberg]
* Trouble in paradise, so soon? The proposed merger between Dentons and McKenna Long & Aldridge has been delayed. McKenna has postponed its partnership vote, and Dentons says no partnership vote was ever planned. [Daily Report]
* Wherein a firm fails to Latham an ex-employee’s baby mama drama: a legal secretary who was allegedly told her pregnancy complications “were not [the director of HR's] problem” will see her case against L&W move forward. [Blog of Legal Times]
* You know that relations have grown bitter between opposing counsel when attorneys from one firm refer to lawyers from the other as “Monday Morning Quarterbacks.” The legal fee dispute in the BARBRI antitrust case rages on at the Ninth Circuit. [National Law Journal]
* Paging ProudCooleyGrad: Kurzon Strauss, the firm that sued Cooley Law over its allegedly deceptive job stats, is trying to get records unsealed in the school’s defamation case that’s now on appeal. [MLive.com]
* Convicted murderer and jailhouse hottie Jodi Arias is accepting donations for her appeals fund. It could be worth your while — if you donate enough, maybe she’ll consider turning you into her next victim. [HLN TV]
Why go big when you can supersize? As has been reported recently, one of Biglaw’s most aggressive firms in terms of growth, Dentons (née Sonnenschein Nath & Rosenthal and some foreign counterparts cobbled together just a few years ago), is now in serious discussions about a combination with McKenna Long & Aldridge. Both firms are products of recent tie-ups themselves, and the combined firm should the transaction go through will be instantly one of the world’s largest, at least in terms of number of lawyers. Welcome to the age of the global Megalaw franchise, in which a firm can raise its profile by connecting with other firms in the interest of getting bigger, all the while creating a new global brand in the process. Dentons is sure giving it a try.
It is actually unfair to say that Dentons is the Biglaw equivalent of McDonald’s, or even Burger King. Biglaw brands of that stature would be Baker & McKenzie or even DLA Piper, and not only because they are bigger….
Name recognition matters, even in foreign markets, and it is fair to say that both Baker & McKenzie and DLA Piper carry more weight than Dentons at the current time, no matter the locale. Nor can Dentons hope to touch, at least for now, the global credibility of a Jones Day or Latham & Watkins, despite the fact that there are a good number of world-class lawyers already at Dentons.
But I am not sure that is their goal. What we are seeing, rather, is a bit of an experiment: a mega-firm created out of whole cloth almost overnight, composed of “component” firms that on their own might have had difficulty distinguishing themselves in their home markets, much less on a global scale. At the very least, it would take quite a bit of time to unravel this new big ball of yarn. Nothing wrong with buying time to see if the grand experiment will work.
In my view, an expanded Dentons will resemble a traditional Biglaw firm as much as a $25 artisanal burger from some Williamsburg locavore joint resembles a Big Mac. Everyone will effectively be an employee, partners included, existing at the mercy of the centralized management that will exercise serious control over individual and firm performance. While the separate member firms that compose the verein will have their own financial affairs to deal with, you can be sure that the firm’s core management team will be watching everyone’s performance quite carefully.
For starters, firms seeking to establish a brand have less margin for error when it comes to being able to reward the rainmaking partners that make the whole structure worthwhile to adopt. I have argued before that the traditional Biglaw firm exists primarily to benefit the service partner in a way that would otherwise be impossible. Firms like Dentons flip that traditional approach on its head. In a megafirm, the rainmakers are paramount, and getting bigger allows them to take an incrementally greater piece of the pie over a shorter period of time. Short-term performance is therefore of the utmost importance, as rainmakers at these firms need to see, right away, the rewards of staying in such a firm (with the requisite loss of a safety net if their own performance lags).
So the big winners, unsurprisingly, in the bigger and grander Dentons will be the firm’s current rainmakers and leadership. But there are other less obvious winners to consider — for instance, senior associates who are up for partner. The chances of elevation are greater when the firm you are at does not yet have the measure of its existing partnership. An aggressive senior associate (ideally with the right sponsor) could play the merger in their own favor, by advancing the argument that giving them the title of partner will not cost the firm anything and will open the door to immediate rate increases, if not the possibility of business development. And a mega-firm really needs to make a lot of partners on an annual basis, for marketing purposes at least. When you have a firm of 3,000+ lawyers, it looks kind of weak if your partner class is a group of ten. So if you are a senior associate at Dentons who survives the merger, make a grand push for partnership.
The other unlikely winners are existing Dentons and McKenna partners who are unhappy with their current firms. A mega-merger provides the perfect cover to shop oneself around, or even consider a graceful exit from Biglaw all together. Lawyers are such creatures of inertia that it takes a major event to get them to focus on their own happiness. I hope that a good numbers of partners will benefit from the lateral liquidity that this merger will generate.
At the same time, partners at other Biglaw firms who need a change of scenery will also benefit from having a new, insatiable firm to lateral into. It is certain that Dentons will continue to have an active lateral merry-go-round, fueled in part by a desire to project an image of growth and success. One can only assume that these partners, once at Dentons, will try and offer more flexible rates to current and prospective clients, on the argument that the size of the firm is an effective means of ensuring a successful engagement, much in the same way a smaller firm would rely on prestige to convey the same assurances. The danger, however, is that these partners (under increased performance pressure and with less loyalty to their colleagues than ever) will lean on the suicide pricing that has been Biglaw’s bane to get ahead. Time will tell.
Even associates should benefit from this merger, assuming they survive the inevitable contraction of practice groups and partners who will leave (possibly without the wherewithal on the portable business end to bring them along) in the merger frenzy. Assuming a long Biglaw career is the goal, an associate’s goal should be to develop their skills. Exposure to a greater breadth and depth of clients and practitioners should only help increase that opportunity. That is not to say that every associate will love the new firm, but being at a Biglaw behemoth in its formative stages is at least better than the associate situation at some other firms these days.
Just as some will benefit from this merger, and its creation of a bit of an alternative Biglaw firm, so will some suffer. Hopefully the collateral damage remains minimal. At the very least, everyone in Biglaw should take the opportunity to give some thought to how they would fare in a firm like Dentons. It may help you appreciate what you have, or inspire you to make a change. Either way, the Dentons experiment will be one to watch.
Could you flourish at a mega-firm? Do you think mega-firms represent a positive evolution of the traditional Biglaw firm? Let me know by email or in the comments.
* “There are no magic bullets here.” Caught in a “trilemma,” President Obama is up against the wall and is running out of options. He soon might be forced to choose the least unconstitutional solution to the nation’s problems. [Bloomberg]
* During the government shutdown, it certainly wouldn’t be worth it for furloughed employees to hire lawyers to fight their “essential” versus “non-essential” determinations — please, like they’ll be able to afford legal representation right now. [National Law Journal]
* It seems some partners at both Dentons and McKenna Long & Aldridge aren’t fans of a possible tie-up, so they’re heading for the hills as fast as they can. Perhaps it simply wasn’t meant to be? [Am Law Daily]
* It’s time for our favorite show, As the Weil Turns! Partners from various offices are departing for other Biglaw firms, and we can now confirm that Steven Peck is a new face at Proskauer. [Law360 (sub. req.)]
* We told you last week that Matthew Martens of Fabulous Fab fame would be leaving the SEC, but now we know where he’s landing. Congrats on your new home at WilmerHale. [WSJ Law Blog (sub. req.)]
* Ohio is the latest state to offer “hazy” abortion restrictions that skirt the very edge of Supreme Court jurisprudence in order to make women feel guilty about their own right to choose. [New York Times]
* “Without makeup she looks like the Joker in Batman.” Joan Rivers is locked in a $15 million condo catfight with a Canadian socialite who isn’t afraid to pull punches. Meow! [New York Daily News]
As noted in Morning Docket, McKenna Long is in talks to combine with Dentons. The talks started four to five months ago, got serious in the past month or so, and could result in a completed transaction by January 2014. News of the talks was first reported last night by Am Law Daily.
Would a Dentons/McKenna Long combination really be a “merger”? Let’s discuss….
First, Dentons is much larger than McKenna Long. Dentons has about 2,500 lawyers, in 75 locations in more than 50 countries. McKenna Long has about 575 lawyers, and almost all of them are in the United States. So this sounds more like Dentons absorbing McKenna Long than a merger of equals. Don’t expect McKenna Long to show up in the new entity’s name (probably a good thing, since “DentonsLong” and “Long Dentons” both sound vaguely dirty).
Second, some industry observers argue that products of Verein structures — like Dentons, and presumably the entity that would result from some Dentons/McKenna Long tie-up — aren’t really unified law firms (or at least shouldn’t be treated as such for purposes of industry rankings). They’re more like separate entities loosely linked through referral arrangements, according to these critics.
Both Dentons and McKenna Long have complex lineages worthy of Game of Thrones (affiliate link). House Dentons emerged from the three-way merger of the international firm of Salans, the Canadian firm of Fraser Milner Casgrain, and SNR Denton — which was itself the spawn of the U.S. firm of Sonnenschein Nath & Rosenthal and the U.K. firm of Denton Wilde Sapte. Meanwhile, House McKenna came out of the 2002 combination of an Atlanta-based firm, Long Aldridge & Norman, and a D.C.–based firm, McKenna & Cuneo. Last year, McKenna Long absorbed the firm of Luce Forward.
Adding up the headcounts of Dentons and McKenna Long would produce a firm with more than 3,000 lawyers — enough to rank third in the world by headcount. But would all attorneys would remain on board after a deal? Probably not. Remember that McKenna Long lost some Luce lawyers after that combination. It’s not uncommon for lawyers to get laid off or to voluntarily depart in the wake of such a transaction (due to client conflicts, because they don’t like the new leadership or firm culture, because they’re not economically compatible with the new platform, or other reasons).
Would a Dentons/McKenna Long combination be a wise move for either or both firms? If you have information or opinions to share, feel free to post a comment, email us, or text us (646-820-8477).
* “The multimillion dollar question is: Is it going to happen and for how long?” Surprisingly, health care attorneys from large firms are being quite blasé about the Congressional battle over Obamacare. [Blog of Legal Times]
* The 2013 Global 100 is out, and with an 8.6 percent growth in revenue, DLA Piper was able to really show the world the benefits of churning that bill, baby! We’ll have more on this news later today. [American Lawyer]
* This is getting exhausting: Dentons, the three-way merger product of SNR Denton (a merger product itself), Salans, and Fraser Milner Casgrain, is in talks with McKenna Long & Aldridge for yet another merger. [Am Law Daily]
* The director of the Commodity Futures Trading Commission’s enforcement unit will be stepping down to spend time more with family. The countdown until he returns to Skadden Arps starts now. [DealBook / New York Times]
* Ted Olson and David Boies, perhaps more commonly known these days as the gay marriage dream team, will be working together to challenge Virginia’s ban on marriage equality. [National Law Journal]
* Should law school be two years long? Kyle McEntee of Law School Transparency (3 points) is beating the pants off Northwestern’s dean (-4 points) in this debate. [Debate Club / U.S. News & World Report]
* The Italian Court of Appeal is retrying Amanda Knox of a crime she’s already been convicted and acquitted of, and the chances she’ll be extradited if convicted again are slim to none. Buon lavoro. [CNN]