“With this merger we will be able to say to any corporate client anywhere in the world, ‘There is nothing we can’t assist you with. You will never be able to outgrow us. We will always be able to look after you.’ This will change the legal landscape.”
Change the legal landscape? To be sure, the merger that DLA managing partner Nigel Knowles is talking about — that between his U.K. firm and the recently announced combination of Piper Rudnick and California’s Gray Cary Ware & Freidenrich — would create one of the largest firms in the world, with 2,600 lawyers, 45 offices, and revenues of more than $1 billion.
And some believe that Knowles and Piper leaders Francis Burch and Lee Miller have found the recipe for success. “The general expectation is that bigger will mean better,” says Cherry Hill, N.J.-based consultant Joel Rose, who is not involved in the merger. “Obviously the ultimate objective is to make more money and wrestle certain clients away from major law firms or other firms that aren’t that large or interested in much full service work.”
But size alone may not launch the new combined firm into the stratosphere in terms of prestige and the ability to land top-end clients. And it’s not even clear that that’s what the merger is meant to do.
By its own admission, Piper isn’t a big-ticket transactional powerhouse. And though firm managers say they want to build a bet-the-company litigation practice and the addition of Gray Cary gives added technology practice oomph, the firm’s strengths remain in less glamorous practices like real estate and government affairs.
Miller, one of the architects of Piper’s rapid growth, acknowledges that “size does matter, but it’s not the sole ingredient. We’re not looking to cheapen our franchise.”
Even without DLA, the new Piper Rudnick/Gray Cary will be a very large firm. On Oct. 18, Piper Rudnick partners voted to merge with 380-lawyer Gray Cary. Effective Jan. 1, the newly merged firm will have about 1,300 lawyers, 20 offices, and projected revenue of at least $800 million in 2005, firm leaders say.
DLA, which has more than 20 offices throughout Europe and Asia, says it will have $567 million in revenue this year. If approved, the DLA merger would also take effect Jan. 1.
For Piper, the Gray Cary merger and the DLA deal are part of a long-term strategy plotted by Miller and his co-chairman, Burch. “We knew our merger was not the endgame,” Miller says, referring to the 1999 merger between Piper & Marbury and Chicago-based Rudnick & Wolfe. Miller says merger talks with DLA started two years ago, and discussions with Gray Cary began in July.
One focus is to become a player in big-ticket litigation, Miller says, adding that the firm already does litigation work for clients such as insurance companies AIG and Chubb and telecommunications company MCI.
“Clients vote with their feet,” Miller says. “And we’re getting more and more major matters.”
But in some of the firm’s other targeted areas — real estate, government affairs, and the technology sector — Piper isn’t necessarily positioning itself to go after the kind of global mergers and acquisitions that can earn law firms millions in fees.
The firm does want to offer a full range of legal know-how for multinational companies, many of which are increasingly looking for “one stop” legal shopping, Miller says, and to build a highly diversified firm that can weather the vagaries of the business cycle. “With the merger we will be one of the top firms in number of merger and acquisition transactions — not the size of deals,” Miller says.
Back in 1999 two of the firm’s top priorities for geographic expansion were to establish footholds in California and New York. Gray Cary is the capstone of the pair’s West Coast strategy — and follows Piper’s pattern of growth through acquisitions of smaller firms or large groups of lawyers from other firms.
The firm has made other grabs at California. In 2001, merger talks crumbled with San Francisco-based McCutchen, Doyle, Brown & Enersen, which in 2003 joined with Boston-based Bingham Dana to become Bingham McCutchen.
Piper’s leaders emphasize that DLA is not an “old-line London firm” and, indeed, DLA touts a management model that seems closer to its corporate clients than a traditional law firm, prizing entrepreneurship over prestigious law school credentials, for example.
Knowles says that when he came to the United States a few years ago in search of a merger partner, he was looking for an “entrepreneurial” firm with a merit-based compensation system, not one that engaged in a “lockstep” pay system that correlates salaries with seniority, which is the norm in the U.K.
Some transatlantic law firm mergers have faltered over differences in salary structures. When London-based Clifford Chance merged with New York’s Rogers & Wells in 2000, some of the U.S. firm’s highest-earning lawyers balked at the lockstep system and eventually left the firm.