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<blockquote data-quote="Jaysen" data-source="post: 2234" data-attributes="member: 1"><p>Here is what I said about this question:</p><p></p><p>Law firm combinations are on a spectrum. On one side, you’ve got alliances (Linklaters and Allens) and best friend networks (Slaughters) where firms refer work, clients and maybe marketing initiatives. In the middle, you’ve got Swiss vereins, where firms operate under one united brand but they keep their businesses financially separate. Finally, you’ve got full financial integration. So that’s what BLP are doing and what Hogan Lovells did in 2010. It’s a full integration because the firms share one profit pool and also have a single system to divide up the profits.</p><p></p><p>Full financial integration doesn’t happen very often. It’s not easy for firms to work out profit sharing and partner remuneration. That’s especially true when trying to merge with a US firm because they often pay partners using a different system (performance-based rather than a lockstep).</p><p></p><p>You also need a firm with similar levels of profitability – often that’s a problem for top UK firms because the NY elite tend to be much more profitable. BLP ‘s profits per equity partner (“PEP”) is not far from Bryan Cave so that’s not much of an issue. That was not the case with Greenberg Taurig who had higher PEP. If they went for the full financial merger then BLP would have had to restructure – probably remove equity partners or put more of them on a fixed salary.</p><p></p><p>The decision to opt for a merger rather than a Swiss verein (NRF/DLA) or a company limited by guarantee (Eversheds/Wragge) is also a big move. A lot of firms go for the latter two because you get to tell clients you’re a united firm but you don’t have to worry about sharing revenue or liabilities. It’s easier to gloss over issues of integration because you’re not sharing the same profit pool. And you’re not as vulnerable to currency fluctuations or big tax fees.</p><p></p><p>But BLP went for the full merger. I’m not sure what compensation system Bryan Cave has but they probably need to spend some time resolving any disparities in partner remuneration. Hogan Lovells got rid of Lovells’ lockstep system so they might do the same here. If it works you can really say you have a united firm. You share the same clients, culture and values. Fee earners are encouraged to share work because if the whole firm does well then everyone benefits. The compensation system is the same so that limits tension about partner remuneration. And clients get to see a seamless service on both sides of the Atlantic (and everywhere else). Swiss vereins don’t have that level of integration; you’ve got to work hard to incentivise partners to refer work and clients because they’re not sharing all the rewards.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 2234, member: 1"] Here is what I said about this question: Law firm combinations are on a spectrum. On one side, you’ve got alliances (Linklaters and Allens) and best friend networks (Slaughters) where firms refer work, clients and maybe marketing initiatives. In the middle, you’ve got Swiss vereins, where firms operate under one united brand but they keep their businesses financially separate. Finally, you’ve got full financial integration. So that’s what BLP are doing and what Hogan Lovells did in 2010. It’s a full integration because the firms share one profit pool and also have a single system to divide up the profits. Full financial integration doesn’t happen very often. It’s not easy for firms to work out profit sharing and partner remuneration. That’s especially true when trying to merge with a US firm because they often pay partners using a different system (performance-based rather than a lockstep). You also need a firm with similar levels of profitability – often that’s a problem for top UK firms because the NY elite tend to be much more profitable. BLP ‘s profits per equity partner (“PEP”) is not far from Bryan Cave so that’s not much of an issue. That was not the case with Greenberg Taurig who had higher PEP. If they went for the full financial merger then BLP would have had to restructure – probably remove equity partners or put more of them on a fixed salary. The decision to opt for a merger rather than a Swiss verein (NRF/DLA) or a company limited by guarantee (Eversheds/Wragge) is also a big move. A lot of firms go for the latter two because you get to tell clients you’re a united firm but you don’t have to worry about sharing revenue or liabilities. It’s easier to gloss over issues of integration because you’re not sharing the same profit pool. And you’re not as vulnerable to currency fluctuations or big tax fees. But BLP went for the full merger. I’m not sure what compensation system Bryan Cave has but they probably need to spend some time resolving any disparities in partner remuneration. Hogan Lovells got rid of Lovells’ lockstep system so they might do the same here. If it works you can really say you have a united firm. You share the same clients, culture and values. Fee earners are encouraged to share work because if the whole firm does well then everyone benefits. The compensation system is the same so that limits tension about partner remuneration. And clients get to see a seamless service on both sides of the Atlantic (and everywhere else). Swiss vereins don’t have that level of integration; you’ve got to work hard to incentivise partners to refer work and clients because they’re not sharing all the rewards. [/QUOTE]
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