Editor’s foreword

As 2007 speeds along its course it seems there is little time to reflect on the opportunities or challenges ahead before the moment has already passed. Only two months into the year, and we are already seeing some major developments in the legal space. Probably most dramatic was the announcement of the collapse of the near-complete merger of Orrick Herrington & Sutcliffe and Dewey Ballantine. The combined firms would have been a legal juggernaut, not just in the US but worldwide. And there were plenty of reasons for it to work, including a good financial fit and complementary practices. Even culturally, where many otherwise good mergers fall apart, the two firms were considered a good match combining both respected leadership with long and respected legacies.

Despite such obvious synergies, however, the merger fell apart at the last moment. A statement from the firms has said that no one issue led to the collapse of the discussions and that both firms leave the negotiating table with “great respect” for the other. There is every indication that many challenges arose to scupper the deal, including organizational incompatibilities and the perhaps harmful impact of intense media coverage, but the chief lesson of the whole affair is surely the difficulties of making mergers work, particularly if it is a combination of such equals.

And with a merger failing at the last moment, questions will be raised as to how far the process has damaged the standing of the two firms. Dewey Ballantine, for instance, has lost 14 partners since the proposed merger with Orrick was announced. While it is difficult to draw conclusions as to the motivations of the individuals concerned, there can be little doubt that the impending merger would have at least partly influenced these career decisions. That leaves the management of the firm with serious work to do to instil confidence in the remaining partnership, particularly now that the future is more uncertain.

Given the standing and relative strengths of each firm, it is unlikely that even this eleventh-hour collapse will seriously harm each firm’s long-term prospects. Given Orrick’s merger and acquisition history, in particular, it seems likely the firm will be back in the fray before too long. Dewey, meanwhile, will likely give more attention to its internal structures, avoiding any plans for the time being at least, of alternative merger possibilities.

But for other firms considering a merger strategy, there is a salutary lesson in this latest collapse. While merger might be the best option to quickly meet strategic goals, it is also and inevitably the most risky method of expansion. And firms need to be well aware of just how badly things can go wrong at any stage of the process before they embark on this potentially most perilous of paths.

Caroline Poynton
Editor

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