25th in the world by revenue. Impressive. 20th by head count. Even better.
81st in the U.S. by profit per partner. Oh. 141st by revenue per lawyer. Ouch!
These are the rankings Herbert Smith Freehills and Kramer Levin would face if their merger was voted through today, according to Law.com Compass analysis.
As HSF may soon find, cracking the U.S. is no simple matter. Kramer Levin is a fine firm but the union is only a first stepif 'HSF Kramer' wants to compete in America the same way it competes in the U.K. and Australia.
What should the second step be?
There are two clear options: build in targeted ways to make the U.S. operation ultra profitable and trim down in other parts of the world in order to radically increase global PEP; or build build build the global HSF Kramer brand globally with lots more hires and possibly another merger to try to get closer to the Kirklands of the world.
Herein lies the Great Debate. I recently asked a well-known law firm leader what they would do if they were running Linklaters, a firm at a similar crossroads of having to decide what it wants to be: big or small; Europe-focused or global; high profit or high revenue.
Their response was they would slim the firm right down, focusing only on the most profitable practice areas, in a bid to push its PEP much closer to elite U.S. firms. The alternative view is that Linklaters should prioritise a U.S. merger to boost its presence in the world’s largest legal market and compete with other dominant M&A firms such as Skadden, Arps, Slate, Meagher & Flom and Latham & Watkins. The idea is this would then lead to higher profits.
Both strategies have the same goal—higher profits—it’s just a matter of how you get there. The case for pursuing scale is that a larger firm can funnel money into key areas. Think of Latham and Freshfields and how some of their most significant non-U.S. operations appear to be taking a back seat while the stars in America are rewarded. The scale of each firm allows that.
This is the argument for transatlantic mergers. But there is another crucial part of it that leads to high profits: a focus on star individuals...
