Cross-border restructuring of law firms International aspects The Jamaican Bar Association Continuing Legal Education Weekend Conference Montego Bay, November 16 – 19, 2017 Hermann Knott, LL.M. (Upenn) Partner, Andersen Tax & Legal, Cologne, Germany Member of the German and New York Bar
Agenda • Why seek an international combination • Statistics • Full merger – one worldwide partnership • Swiss Verein • Company limited by guarantee (UK)
• Strategic Alliance • Best Friends • Closing remarks
Why seek international combination • Secure source of referral • International trend - fear of losing traditional referral source • Clients go global - require an integrated service offering. Therefore combinations offer A platform for joint business development Establish integrated teams (cross-border practice groups) Common client approach Common training Secondments
Why seek international combination (cont’d) • Even in domestic matters clients ask for international setting • Disadvantages – what do I give up? Traditional referral source MAY dry out Giving up (some) control Change in Costs rise Quality issue: The weakest part of the combination may set the standard for reputation
Statistics regarding cross-border combinations
Statistics regarding cross-border combinations
Source: https://biglawbusiness.com/law-firm-mergers-on-record-breaking-pace-in-2017/
Statistics regarding cross-border combinations 2007 - 2016
Source: http://www.altmanweil.com//dir_docs/resource/625FCAE9-CFF3-42E4-828A-10DC333D91E5_document.pdfS
Statistics regarding cross-border combinations 2007 - 2016
Source: http://www.altmanweil.com//dir_docs/resource/625FCAE9-CFF3-42E4-828A-10DC333D91E5_document.pdf
Statistics regarding cross-border combinations 2007 - 2016
Source: http://www.altmanweil.com//dir_docs/resource/625FCAE9-CFF3-42E4-828A-10DC333D91E5_document.pdf
Statistics regarding cross-border combinations 2007 - 2016
Source: http://www.altmanweil.com//dir_docs/resource/625FCAE9-CFF3-42E4-828A-10DC333D91E5_document.pdf
Full merger • Create one single partnership as opposed to country partnerships • Single partnerships typically are not the product of mergers, but of organically grown firms expanding into other countries • Especially shared liability and imbalances of profitability are main
reasons why ‚a merger is not a merger‘
Swiss Verein • Association under Swiss law designed for charitable purposes • May have an economic purpose – here: coordinate collaboration on
client matters, quality assurance, training, business development of member firms • Minimal formal requirements: membership meeting, board, bylaws, registration with Commercial Register • Member firms sign membership agreements to be bound by Verein purposes
Swiss Verein (cont’d) • Member firms render advice independently; Verein does not render legal advice
• In principle no profit sharing, but cost sharing through charges by the Verein • Gives flexible platform for stronger or less strict governance • Issues:
Avoid liability of other members
Conflicts of interest
• Examples: Dentons, Baker & McKenzie, DLA Piper
Company limited by guarantee • Similar purpose as Swiss Verein: serves as coordinating entity among • Structure:
Company with limitation of liability by guaranteed amount
No shares or shareholders
Owned by guarantors agreeing to pay guaranteed amount
Has separate legal personality
Registration with Companies‘ House
Flexible governance structure
Company limited by guarantee (cont’d) • Differences to Swiss Verein:
‚limited‘ status gives higher security for limitation of liability
Otherwise similar purposes
More corporate formalities to be observed
Costs slightly higher
• Examples
Big Four
Gowling WLG
Strategic Alliance • As opposed to previously described forms of cooperation less integrated combination • There is no merger, no coordinating entity and no common branding, but just a contractual arrangement to work together in the areas of
Business/ client development Teaming in client projects (practice groups) Knowledge sharing Secondment
• Could either be permanent or prelude to a ‚merger‘ • No common conflict checks required
Best Friends • Lower degree of integration • No contractual arrangements
• Just based on personal relationships • Typical traditional form of cooperation pre-globalization ‚Club de abogados‘ • Lacks creating synergies like other forms of cooperation
Closing remarks • World is globalising, integrating • Law firms need to respond by internationalizing their service offering • Fear of change and thinking of maintaining traditional referral sources should be overcome by opening up to internationalization of practice
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