Mega-Firm - Hogan Lovells

The mega-merger of Lovells and Hogan is almost complete. Today was the final voting day for each firm’s partners on whether to proceed or not. Come May 1, 2010 there will be a new “global” firm of 2500 lawyers and combined revenues of just under $2 billion. That is a mega-firm to be certain.

Now I am not privy to any details of this deal nor I am even in the same universe as these two firms. However, I am both an active participant and observer of the legal industry and come from a perspective gained from over ten years being immersed in it. So when I look at this merger the one question I have: truly the only one that matters I argue, is, what is the reason for this merger?

No doubt I would get many answers from those polled inside the two firms and I would hear things like, “it makes sense,” “it is either grow or die,” “our clients are global so we need to be,” “we need to create critical mass in certain international market,” and “the timing is right for a strategic risk.” These all may be fine reasons and they may actually be part of the overall reason. But I would like to know if anyone asked the question, is this merger good for our clients? If so, for which ones and if not, for which ones? Fair enough this is not one question but it is one theme –it is client focused.

I am sure the firms would state that they have asked. In fact Warren Gorrell of Hogan stated that “[w]e have got a lot of positive feedback” from clients. That may be true but what was the negative feedback and were clients either for or against it or were many clients conflicted – they see value but also see potential issues. What will the two firms do to address these issues? It has been witnessed time and time again with large law firm mergers that the “be bigger” approach will eclipse the finer points of client centric service –with focus on scale and volume there is a lack of organization around what serves clients best versus what serves the firm. Further, as has been documented and mentioned countless times, law firms are not managed well, certainly when compared to other services organizations and businesses. Yet there seems to be this proclivity to keep getting bigger. If you cannot manage what you have well what makes you think you can manage something larger?

Further rapid expansion comes the economic pressure to make the merger work is enormous. Certainly in the formidable years of the merged firm there is considerable overlap of services and costs existing within the former firm’s operations. With such a focus on new business I hope there is an equal amount if not more on retaining and serving the existing clients.

My point here is not to bash law firms and certainly not to bash Hogan or Lovells. My point is this – if a client’s billing gradually lowers from say $3 million to $500,000 what will the firm see as the reason, if they see it at all. In a smaller firm, that $2.5 million loss will have a much greater impact than in a larger $2 billion firm. Will there be less attention paid or if attention is paid will the tendency be to attribute it to a down cycle in the client’s legal matters or some other client business issue. Will a mega-firm have the sensitivity to ask the client why? The better question is to ask that client what percentage of their legal work is the firm getting. And who would ask? What happens to the relationship partner the client once had prior to the merger once he or she is shifted to become a transitional partner who will need to focus on the integration issues of the firm? Does the client get shifted to another partner, get less time of their original partner, or some other alternative? As the saying goes, clients hire lawyers not law firms. How do two merging firms reconcile this notion?

David Harris managing partner for Lovell’s stated in Legal Week that “[t]his proposition is unique – we will be able to attract new business going forward. We will have scale and a profile that will be much more powerful.” Powerful for who - the firms, the partners, or the clients? Lawyers using terms like “powerful” typically make me nervous. It makes me wonder just what end they are trying to serve – their own or their clients’.

The smart mergers will serve client interests first. The mega mishaps will not. So perhaps the real question is which type will this merger be?
Joshua KubickiComment