The last decade or two has seen unprecedented consolidation in BigLaw. Moderate-sized regional firms have joined forces (think Syracuse’s Bond Schoeneck & King and Buffalo’s Jaekle Fleischmann & Mugle); larger firms have devoured smaller and medium-sized practices (think Arnold & Porter and my own dear departed Howard Rice); and we’ve even had a bit of an international orgy among the giants (while you’re trying to get that image out of your head, think DLA Piper; Hogan Lovells; Dacheng Dentons).
I don’t intend to write today about whether these combinations are a good idea. (As an aside, I would say that some are, and many are not; and among the some that are, many have been executed in ways that throttle much of the value the combination might have created. Along with a number of others, Steve Harper (for example, here) and Bill Henderson (for example, here and here) have written about this problem thoughtfully. I’ve addressed the issue obliquely (for example, here at pages 14-18, 70, and here) and I intend to get back to it someday if I ever conclude I have anything useful to add.) What I do intend to comment on today are the organizational mating rituals with which BigLaw firms are so familiar from playing wingman to their clients, and more recently have begun to indulge in themselves.
In an atmosphere from which record numbers of lateral hires and law-firm mergers have emerged most years since the turn of the century, some big-on-big courtships inevitably fail (think Pillsbury Winthrop and Chadbourne & Park; Dickstein Shapiro and Bryan Cave; Orrick Herrington and pretty much everybody). There are, of course, all kinds of reasons that partnerships don’t partner: The conflicts of interest that arise from combining two large firms’ client lists can prove unmanageable; differences that emerge during discussions about firm economics or culture may sour the mood; even status issues about who will be considered primus inter pares in the often talked-about but rarely seen Merger of Equals can kill the deal.
The customs of the aftermath are fairly well understood. Occasionally both firms say nothing, leaving the trade press to speculate from murmured rumors until a manager reluctantly confirms. Sometimes the firm with fading ardor (or that has altered in its appetites to cherry-picking from devouring the entire tree, deadwood and all) matter-of-factly reveals that discussions are over, or in some odd cases suggests they never began. More often, the two firms issue joint or coordinated statements declaring the end of the affair, expressing—whatever frustrations they may actually harbor—mutual respect and regret at what they were unable to achieve. Whether unilateral or cooperative, the announcement almost always has the clubby feel of having been delivered in a paneled conference room. Strictly business, old chap; pity.
So imagine my surprise when I read about Pepper Hamilton & Sheetz’s press release announcing that Reed Smith (in the Eagles’ timeless formulation) was going to have to eat its lunch all by itself:
Today, Pepper Hamilton decided to end our discussions with Reed Smith. While we were intrigued when Reed Smith approached us, we determined that moving forward is not in the best interest of Pepper. Pepper prides itself on talented people providing premier legal services to our clients. These core Pepper values are what we do best, and it is why our firm is held in such high regard by our clients and the entire legal community.
In contrast, Reed Smith’s contemporaneous (and apparently slightly earlier) press release adhered closely to the conventionally polite: “[I]n order to better serve our global clients,” the firm stated, it “periodically has discussions with other firms regarding joining forces.” Reed Smith said it had had “preliminary” discussions with Pepper Hamilton, a firm it said it knows well and respects.
In case you missed it, let’s compare: Reed Smith said “[w]hile our conversations with Pepper Hamilton were positive and informative, both firms have concluded that for a variety of reasons those discussions should end.” Pepper Hamilton proclaimed that it had broken off discussions because a merger was “not in the best interest of Pepper,” which after all has “talented people” who provide “premier legal services” and is held in “high regard by our clients and the entire legal community.”
Wow. What prompted Pepper’s little outburst? I have no idea, and have spoken to no one at either firm about it. Maybe Pepper considered Reed’s expectations for the combination overreaching given the disparity in their recent financial performance—Reed’s profits per partner fell 8% last year and it recently laid off 45 lawyers. Maybe Pepper thought folks at Reed were whispering things inconsistent with the equable tone of Reed’s press release. Or maybe Pepper is just plain arrogant or tone-deaf.
To be clear, there is nothing tortious or unethical about the substance or tone of Pepper Hamilton’s announcement so far as I can tell. It just wasn’t very classy. Some of us expected more from a firm we are assured is held in such “high regard by . . . the entire legal community.” O tempore; o mores.