Money talks, but culture counts in transatlantic law firm tie-ups
A merger between a notable US outfit and a UK-headquartered legal firm used to be a rare event, but with the focus on global dominance, these strategic moves are now attracting more attention – as more firms begin to follow suit.
This week, London-based Ashurst agreed to merge with Seattle-based Perkins Coie, and overnight it became a $2.7bn law firm, moving into the top 20 of the largest law firms by revenue. Quite the leap compared to where its legacy firms featured, in the top 50 area.
Known as Ashurst Perkins Coie, the firm now has over 3,000 lawyers across 23 countries.
Large transatlantic tie-ups in the legal sector seem to be the shiny new thing.
Back in 2023, when the senior leaders of legacy magic circle law firm Allen & Overy and US firm Shearman & Sterling held calls with journalists on a Sunday to break the news of their merger, the story was on everyone’s lips.
A&O Shearman went live in May 2024.
Then Herbert Smith Freehills dropped an announcement (deep in the evening) in November of that year, revealing that it was merging with New York-based Kramer Levin to create a £1.6bn law firm.
While not transatlantic, McDermott Will & Emery, a Chicago-based firm, merged with New York-based Schulte Roth & Zabel last month to create a $2.8bn ‘powerhouse’.
However, that doesn’t seem to be enough for McDermott, as it was in the news last week, exploring a complex restructuring to allow private equity firms to buy a stake in it. If they go ahead with this, it could be a significant move in the legal market, with such a law firm being propped up by PE.
The race to join the ‘Global Elite’ is driving significant change in the legal market.
With Kirkland & Ellis, the firm at the top of that table after generating nearly $9bn in 2024, big moves are needed to try to even compete with the beast.
Some of Britain’s elite firms, such as Freshfields and Clifford Chance, have opted to go all guns blazing into the US market themselves, through significant mergers, rather than trying to recruit partners with some name in the market; they have also expanded into several notable cities.
While these firms make ambitious moves, the trend for the rest seems to be mergers.
However, mashing two large firms together is not easy, and, other than the legal work (which I’m sure they can handle), the new logos and names are far from the main Achilles’ Heel of this deal: it comes down to the culture clash.
Bruised egos lead to bad vibes
A&O Shearman is not the first transatlantic merger. Back in 2010, Washington DC firm Hogan & Hartson merged with London-based Lovells to create Hogan Lovells, with recent global revenues nearing $3bn.
Though now known as a successful firm, there were plenty of bumps in the road during the early days of its merged entity, including its compensation system, lots of departures of high-profile people at the start, and integration issues.
One issue with big mergers between the US and the UK is the stark cultural difference.
“It is hard enough merging two domestic firms, but when the merger is of a transatlantic nature, then there are so many factors involved,” explained Nick Woolf, partner at Woolf&Co.
An example of this is Bryan Cave Leighton Paisner (BCLP), a 2018 merger of St. Louis-based Bryan Cave and the notable London firm Berwin Leighton Paisner.
The new firm’s culture was the talking point. Following the merger, it experienced a loss of rainmakers and high turnover after leadership was shifted to Missouri, a problem that it is trying to fix.
There aren’t many things that can affect an English lawyer’s ego more than an American lawyer thinking they are more important.
Notably, Ashurst Perkins Coie has not opted for a headquarters, instead choosing ‘flagship hubs’ in Seattle, London, Sydney, and New York. The firm has also picked co-CEOs: Bill Malley, the managing partner of Perkins Coie and Paul Jenkins, chief executive of Ashurst.
Having leadership across the Atlantic, or having HQs in New York, can really show the London lawyers where all the eggs are being placed.
Money, money, money
Elsewhere, money is the tricky point. UK law firms have historically opted for the lockstep system, a method of compensating lawyers, particularly partners, where pay is determined almost entirely by seniority. At the same time, US firms opt for the merit-based (also known as eat-what-you-kill) model, in which partners’ compensation is based on individual performance.
There is no escaping the fact that US lawyers, especially in New York, charge a whole lot more than their London counterparts.
Woolf added: “The autonomy that partners have differs greatly. Compensation structure, which generally drives culture, can be very different, and some firms manage their partners closely and drive them hard, while others are more benign.”
Even the pay at the junior end of US law firms is generally more transparent. Ria Karnik, managing director at Major Lindsey & Africa, said, “We hear from many associates who have made the move from the UK to US firms that there is more transparency around what ‘good activity’ looks like, alongside a clearer pay scale and bonus structure.”
For all the talk of big revenues and global ambition, it’s the human factors of a firm that will determine whether these new giants will truly thrive, or struggle to unite.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.