Biglaw, Lateral Moves, Law Firm Mergers, Partner Issues, Partner Profits

What Needs To Happen For the Bingham / Morgan Lewis Deal To Proceed

There's good news for some Bingham partners, and bad news for others.

By  
on

Earlier this month, we reported on Bingham McCutchen and Morgan Lewis & Bockius’s agreement to merge. The 750-lawyer Bingham firm has been going through a rough patch lately, so news of the deal with 1,200-lawyer Morgan Lewis sounded like a rescue to some observers.

But rescues come with terms and conditions. What are the ones at issue here? There’s good news for some Bingham partners, and bad news for others….

Casey Sullivan of Reuters, who broke the original story of the deal, has this report (via Morning Docket):

The deal would require a select group of Bingham rainmakers to join the combined entity for the merger to go through and would call for some Bingham partners to be demoted and given pay cuts, according to the four sources [who were briefed on the transaction]….

[Bingham managing partner Steven] Browne had sent partners a voicemail last Friday saying the firms had reached an agreement to merge. Partners were told that between 20 and 30 key Bingham partners must go along with the deal in order for the combination to go through, the four sources said. The identity of those partners could not immediately be determined.

Dewey know if they’re getting guarantees? Kind of:

Two of those sources said the partners would be given bonuses in the form of “forgivable loans” by the merged firm. Those loans would essentially serve as golden handcuffs: If the partners stay with the firm for a certain period of time, they will be able to keep the money, but if they leave too soon, they have to pay it back, the sources said.

Sponsored

Smart — this avoids the Dewey & LeBoeuf problem of partners getting lucrative guarantees, collecting hefty paychecks for a while, then taking their talents to other firms. And it seems these incentives are working: according to Sullivan’s sources, the key partners have already committed to the deal.

As for the not-so-key partners, there’s a bit of bad news:

[A]n unknown number of Bingham partners who rank at the lower end of the firm’s compensation scale would be de-equitized in the new firm, three of the sources said. Bingham has a one-tier partnership, while Morgan Lewis has a two-tiered one. In the 2014 financial rankings in the trade publication the American Lawyer, Morgan Lewis’s average profits per partner were $1,565,000, while Bingham’s stood at $1,475,000.

De-equitization isn’t fun — but if it’s the price you have to pay to keep your job, you shouldn’t complain too much. You’ll get your capital back, which is nice. And depending on how much work you do and how much money you’re paid, being a non-equity partner can be a pretty good deal. You don’t have the job security of an equity partner with a big book of business, but it can be very good while it lasts — and it can last all the way until retirement, if you’re lucky.

UPDATE (10/3/2014): Actually, the “getting your capital back” argument doesn’t apply to Bingham, since the firm doesn’t require its partners to contribute capital upon joining.

Sponsored

Will these terms torpedo the deal? Probably not. For Bingham, it’s not clear that the firm has better options. For Morgan Lewis, the partner provisions — keep the key partners, de-equitize the less-profitable ones — presumably have been calculated to make this deal work financially.

The Bingham partners will vote on the deal sometime next month, according to Reuters; the timing for the Morgan Lewis vote is unclear. We’ll keep you posted. If you have info you’d like to share, feel free to email us or text us (646-820-8477).

Bingham partners briefed on conditions for Morgan Lewis merger [Reuters (sub. req.) via Morning Docket]

Earlier: Law Firm Merger Mania: Bingham McCutchen And Morgan Lewis Reach A Deal

Topics

, , , , , , , , , , , , , , , , , , , , , ,