GMT: The Podcast For Globally Minded Law Firm Leaders
GMT: The Podcast For Globally Minded Law Firm Leaders
GMT is joined by the incomparable Zulon Begum, partner at UK powerhouse, CM Murray
In this episode Rob and Murray are joined by Zulon Begum, oneof the world’s leading law firm merger and governance experts, and partner at UK powerhouse CM Murray for a conversation that spans the globe in about 30 minutes. Zulon, Rob and Murray provide their take on the pitch perfect communications around the putative Allen and Overy and Shearman and Sterling merger. Hear Zulon and Rob dissect the somewhat halting march towards liberalization in the Indian legal services market. And Rob tells us about a novel way for some firms to improve their Chambers rankings (hint, be bought out by the same PE fund that owns Chambers.) A big thanks to Zulon Begum for joiningus and sharing her prescient insights. We will definitely invite Zulon backsoon.
Contact Rob and Murray:
Robert C. Bata, Founder and Principal, WarwickPlace Legal
Email: rbata@warwickplace.com
Murray M. Coffey, Founder and Principal, M Coffey
Email: murray@mcoffey.net
Robert, welcome to GMT, the podcast for globally minded law firm leaders with your host. Robert Bata, principal of Warwick place legal and Murray Coffey, principal of M Coffey, between them, Rob and Murray have about three quarters of a century's experience working with some of the most notable law firms on the planet. This podcast is designed to help those law firm leaders tasked with growth make great decisions about whether and how to implement cross border expansion for their firms and what it takes to succeed and now. Rob Bata,
Rob Bata:hello, everybody. It's great to be back. I'm Robert Bata, and I'm here with Murray Coffey. As you know, we have the GMT podcast that talks about all kinds of interesting things that happen in the legal sphere, both from the point of view of law firms internationalization, law firm development, as well as marketing and business development, and how all of those things intersect. And today, we're very happy to have Zulan Bagon of cm Murray, which is a UK firm that specializes in partnership issues, and Zulan particularly has a great reputation, not just in the UK but around the world, as a not just a partnership expert, but an expert on law firm mergers, and because she does all the kinds of things that are really relevant to What we do, this should be a very interesting discussion today, and we're going to touch on a whole bunch of different topics. We are going to be concise, but at the same time, as thorough as we possibly can be, and keep it to a reasonable period of time. So
Unknown:and welcome Zulan to GMT. We're really thrilled to have you with us. Thank you, Rob and Murray, really great to be here. Thank you for having me super well. Why don't we jump right into it? And you know, talk about the 800 pound gorilla that is, is that is that it's kind of sucking up all the oxygen, and that is some recent, a recent, significant cross border merger. And maybe we'll talk a little bit about a failed merger, but, but I think it's, I'll turn it over to you, Rob to kind of kick us off on this. And really interested in hearing what what you and zule have to say about about this, about the gorilla,
Rob Bata:well, it's certainly fair to say that the discussion has sucked a lot of the oxygen Out of commentary and in the legal commentators field, in in principle, obviously, the ano Sherman Sterling merger, if it goes forward, will be a real game changer, in the sense that it will be one of the truly Successful, integrated global enterprises that really, so far hasn't happened. You know, we've obviously, there are many global firms. A number of those are varieties. They don't have full integration. Sherman and ano both have tremendous practices. It, it's, it's really a home run, if you will, for all for mergers, there are some real questions as to how many people may yet depart. People have been departing, mostly from Sherman. I think there's a real question about whether they're going to be overlaps, and how that will affect the various practices, practice groups, practice leaders, the vote, as far as I can tell, has not yet been scheduled. The expectation is that the two partnerships will vote through the merger. And I think the great significance of this merger is that it will get a lot of other firms thinking, especially in my view, the larger independent firms, including the independent firms in Europe, which have been fairly reluctant to do mergers other than perhaps best friends, kinds of situations. And to that extent, I think that this could really begin a process of major international consolidation in the legal field. Zulan, do you think that's, that's accurate assessment? I
Unknown:think so. I think Robert, you've really captured it all. I think it's a major strategic goal for you know, obviously they've been looking for. Opportunities in the US market for quite a long time, and I understand they've been looking for a merger for quite a long time as well. I mean, Melvin ear Myers a few years ago, which didn't go through, and Sherman probably was the right place at the right time, having come through a failed merger with Hogan Lovells and having had some problems over the last few years around its leadership and its strategic direction, where it's seen quite a few partners actually leave. So it was, it was, it was a great strategy decision by, you know, and also opportunistic in that Chairman was available. It's a great brand, but we're in a slightly weakened position, and therefore that allowed Ana to sweep in. And sounds like this merger will be one that will go through. I understand the vote is imminent, and it requires a, I think, to a 75% majority vote on both sides, but I'd be very surprised if it didn't go ahead, given the dynamics involved. And I also have to say that I'm pretty impressed with the way it's been handled, the marketing and communications around it. I understand that the merger talks themselves were kept with a very tight group, and that meant it wasn't leaked and it was only announced for the partners on the morning that they made the announcement to the market, which was, I think, on a Sunday. And, you know, they had a website ready. They had a, you know, press releases go out all at the same time. It was all it looked like they had all their ducks in the road. And it seems like, you know, looking at it from the outside, the perfect merger execution strategy, which we always advise firms to do when, when we're advising them on going going ahead with merger that have a very good, you know, keep, keep the information within the tight group to avoid leaks as far as possible. Obviously, sometimes it's outside of your control, but you can do as much as you can in order to control it. Also have a strategy around consulting partners at the right time, because obviously you'll need to have a partner vote at some point. And also have a really good PR and communication strategy all lined up right from the outset, so that if there are leaks, or when it become, you know, the time is right for it to announce it you're, you're absolutely ready, and you have everything to push button on, which seems like done. I'll add, from my perspective, I've been watching this from, from, you know, from a distance, pretty closely, because I it has from, from jump. Seem like it's been a very well executed in terms of the communications and in terms of the media relations. It looks like, I don't know this for sure, but it looks like they're working with at least one pretty significant media consulting agency and my question, and I don't know this, so I just lay this out there is, is, did they hire this agency to represent the merged entity? Because I've heard about, you know, heard about that from a financial standpoint, but from a communication standpoint, having a hiring a third party seems, there seems to be some benefit to that, if that's indeed what they did. But you're right, everything they did on this was was executed perfectly. I was really pleasantly surprised to see that, you know, their website was up, you know, almost contemporaneous with the announcement. And there's been a fairly decent stream of communication coming from both firms, you know, in the interim. So, you know, Rob You and I have talked about when the when the when the message gets out before the firms are ready to which maybe leads us to maybe a brief look at a recent example of a of a merger here in the states that that didn't quite go as as as all the parties had expected?
Rob Bata:Yeah, I would just add on the Sherman thing. Not only was that really well executed, they were incredibly well prepared. And one thing that I understand happened was they accelerated the announcement and everything that went with it by just three hours because they got wind of the possibility that there was going to be a leak, and they were ready to do that. And the fact that they could jump in and say, Okay, we're going to we're going to move three hours sooner than we expected, but we're ready. I think that, in a way, encapsulates how well they did this. So the rest remains to be seen, but picking up on what you've said here in the States anyway, kind of the big the big non news in. Merger world is the firm of stroke and stroke and Levan, and the potential merger with Nixon Peabody that had been put out had been leaked as a possibility that they were perhaps merger discussions and so forth. And as you and I, Murray, know that the our mantra is, when there are leaks and if they, if they, if they persist, that's often the death knell for mergers. And in this case, it's not even clear whether those merger discussions were going on, there is some speculation that one of the parties put that out in order to suggest that something is happening, or something is a little bit more concrete than it really was. I don't know the answer to that, but I think it's fairly clear that the result of this, these leaks, or if you will, the placement into the news of of a potential merger is going to put a lot of pressure on stroke, which has been consistently losing large practice groups and as well as just individuals through rival firms, and while Nixon Peabody seems to be doing quite well and is in a very strong position, there is a sense, I think, in the legal community, that if stroke doesn't do something Soon, there might be some dire consequences for the firm. So it's too soon, of course, to predict the demise of any firm, but one does have to question, after knowing how many firms they've already spoken with for potential merger and where this kind of cut across cut across their their bow. It it's not looking good for stroke, and that's just part of it is, again, a lesson learned. Don't Don't talk too soon. Don't leak too soon. Don't have things out there. Maybe this was something that nobody was responsible for. Somebody got wind of something and it became news. But if somebody saw fit to leak this in order to perhaps create some impression that stroke was actually doing something in order to to preserve itself, it was a bad strategy.
Unknown:I agree. I see that happen in a number of mergers, actually, especially where there's a distress or a slightly distress firm, and it becomes weaker as a result of, you know, being talked of as being in, being in potential merger talks, which never take off. And then it becomes viewed as being the one that's been left on the shelf, and therefore there must be something wrong with it. So you have to really, really plan for this scenario and make sure that you're controlling the narrative around it. And again, part of that is making sure you have good NDAs in place, that you reiterate to your partners their confidential, confidentiality obligations to the firm and the fiduciary duties to the firm around leaks, because most leaks tend to come from individual partners, and as I said before, trying to keep the lines of communication to a very small group so you can control that. Obviously, as I said, you would need to go out to a wider partner vote at some point. But it sounds like stricken Nixon people he wasn't, weren't at that stage, and the leaks were very premature. So trying to prevent those is, you know, absolutely especially for a firm that's in distress,
Rob Bata:I usually tell my clients, in fact, I invariably tell my clients to think in terms of concentric circles. Have a very, very, very small group, or sometimes just one individual who who is involved in getting a merger discussion going, and then slowly expand the circle, but very slowly, and ultimately be ready to to go to the press and to go to the public with something that's pretty close to a finished product, and but sometimes it's inevitable. And as you've said, it's very often a partner who will leak, and usually that's in order to sabotage it. And it's very rarely a leak because you want to be seen as an insider, or because you want to be seen as you want the world to show that your firm is doing something really important. It's, usually, it's, it's a means of basically giving, giving it the coup de grace. Yeah,
Unknown:sorry. Go ahead zone. Go ahead please. And. Mean it. There's also an issue around whether management in a firm feels they have the sufficient mandate to go out and negotiate the merger. And it's important that you have that, whether that's through your business plan, ensuring that you as your one of your strategic objectives, you you've just, you know, mentioned it or discussed it with partners, that merger is on, potentially on the cards, and that you have the, you know, the mandate in order to go out and have those discussions with other firms without going immediately to some kind of partner vote. And then that may require some changes to your to a firm's constitutional agreements, for example, around governance and what, what powers the board or the managing partner might have to do that? Yeah, a lot of advanced planning, I think, if that's something that a firm wants to explore,
Rob Bata:but the point about having the right documentation, I that's so crucial. So many partnership agreements really don't have proper provision for how to deal with with confidentiality, and, yeah, I mean, there'll be some boilerplate language, but, but those are the and I'm sure that you've seen and you've probably crafted many very good ones, but, but that can be a problem. I want to go back for a second to the point earlier, about Sherman and A and L, in terms of what this means for the law firm world, and what it's motivating. And I definitely contend that that internationalization is unstoppable and not withstanding politics and wars and so on and so forth. We live in a global and globalized world, and law firms of varying degrees of sophistication are deciding, and will be deciding, to get bigger or to do mergers or to be more global. Almost all business is global. If you're going to represent businesses, you need to be fairly International. But you know, not, not, not everyone has to be everywhere, and also depends on, on, on certain types of practices. So, you know, there are boutiques that don't have to be global or very big, but others, others do so an interesting development. Just the other day, I saw that there is a probably one of the leading Polish firms, vardinski and Partners, is it's a fantastic firm, and ski is a good friend of mine, and I respect what he's accomplished. Notwithstanding all of the international firms in Poland and polish legal business is pretty good, he's managed to grow his firm and remain independent, and yet, just the other day, 27 of his people left to join wolf Tice, the Austrian firm, because as as the group, the departing group, has said they feel the need to be part of something much larger. And I think we're going to see more and more of that. We're going to see independent firms having to defend the decision to remain independent. And of course, there are good reasons that many of them have for remaining independent, but I think they're going to be working harder to defend those positions when lawyers with successful practices, say I could do so much more for my clients if I were with a larger firm, or if I were incredibly able to say that I have an office in Paris or an office in Brussels or an office in Kazakhstan, or whatever it may be. And so I think it's an itch. I can't quite say that it's the beginning of a trend, but it's just an interesting kind of development that's just happened that when you put it up against the Sherman and A and O thing makes you, makes you wonder a little bit.
Unknown:And verdinski is has historically been a very strong, maybe the strongest, firm in in Poland, actually had the good fortune of meeting, meeting pan bardinski In Warsaw many years ago. Quite a, quite a, quite a, interesting and an engaging gentleman, that's for sure. He's
Rob Bata:a good friend, and I just spent quite a bit of time with him so that I was
Unknown:just going to add to that, Rob, that I completely agree with what you've said. I think it's especially if you're a full service firm, full service independent firm in a jurisdiction, it will become increasingly difficult to stay independent and stay a certain size, given the move towards consolidation on an international level. And obviously, I. Clients have needs in various jurisdictions, and preference, often is for one stop shops. And how do you kind of manage that with the desire to stay independent? That's going to be what firms are going to have to weigh up. Yeah,
Rob Bata:absolutely, I think that's right. So, so speaking of that, what's the what's the marketplace looking like out there. What's been going on in the in the great big world out there?
Unknown:Well, I guess in the UK over the last six months, I guess the probably the biggest merger story was the distressed acquisition of Inspire, an outfit called axiom dwfm, who went were not really, again, seemed like a reverse takeover, similar to what Gordon dads did when it acquired in. Again, it was a much bigger firm that that was acquired by a small, smaller firm, and that firm has now been acquired for another, by another smaller firm. And I think there's a various factors involved. So, you know, it's originally before it was acquired by Gordon dads. It was in distress for various reasons, and it was a traditional law firm, and then it went into an ABS, a listed firm. And obviously, listed firms in the UK have their own challenges, and the market hasn't been great over the last few years, and being listed brings its own kind of additional reporting requirements around profitability. There's much more transparency around that that you don't get in a partnership where you're able to keep some of that information private and then therefore protect, preserve some of the firm from effectively public scrutiny, which kind of gives you the breathing space to maybe sort things out. That's much more difficult in a listed environment. Obviously, in school and dads had issues with changes in management and some turmoil around that, which probably all of which contributed to where it's got to now, having been acquired by axiom. And so there was that news story in the UK only yesterday, dwf, another listed firm. It was reported that they're in talks with PE firm, inflection on potentially being acquired by private equity, and I assume maybe delisting, though it's not quite clear. Again, it goes to show the difficulties of being in the listed environment, and that it's probably a big culture shock for some of these law firm partners going from a private partnership or ILP, governance model, remuneration model, to being partly owned by external investors. In a in a listed environment where you have to share quarterly information, have to allow external governance within your structure, where remuneration has is held by you know, external stakeholders as well as your partners. All of that is, is still fairly new in the UK market. And we have, at the moment, I think, still six listed law firms. I wouldn't say any of them are, have been outstanding successes so far. But again, it may be a combination of things that are going in the mark on in the on in the market, capital markets at the moment around difficulties in raising investment, etc, but it's also partly down to individual management and what is going on in each each of those firms?
Rob Bata:Yeah, I think it's interesting. The market seems to have responded pretty positively to the news about dwf, but it remains to be seen whether, whether that that goes forward. It's It's also interesting to me that well, as you say, the market has not been kind to these and dwf, of course, has been in the market and and maybe there it, it's probably not as difficult to transition for the lawyers within dwf to to to go through another transaction like this, because they've, they've already been exposed to that, that way of life, but, but it is interesting that dwf, which I think for a long time, was seen as kind of being in distress with lots and lots of debt, and now there's a perception that maybe they're actually doing a little bit better, and now they're sellable. I have some skepticism about that, but it's also the other interesting thing, of course, is that the private equity firm that may be acquiring them also happens to own chambers and partners. No,
Unknown:really, I didn't know that directory. Improve their rankings along
Rob Bata:Absolutely. Yeah, maybe so. You know, everybody will be in band one all of a sudden. So outside of the UK and the US, I think we're seeing expansion into different jurisdictions. Some of it, I see, has been driven and on the patent side, because the unified patent court has now begun to function as of June one. So you've had two UK firms that have opened up in Dublin in order to to make it easier for them to handle UPC cases. There have been some openings elsewhere in Europe. I think that it looked just kind of doing our little summary around the world, the Middle East remains strong. Kirkland and Ellis now has finally decided to open in Saudi Arabia. I think that was widely expected. I noticed, though, that Simmons has announced that they're they're pulling out of Qatar as of but that's not terribly surprising to me. I'm not sure that that's been such a great jurisdiction for for foreign law firms. I think it's they're much more tightly regulated there. And I just don't think that the fees there or the projects there are as attractive or have as much potential as, for example, in Saudi Arabia or in or in the UAE, with Abu Dhabi and Dubai firms keep pulling out of China, mainland China. It's not, not surprising. I think that China is turning inward a lot, and foreign firms are struggling. On the other hand, firms are opening in the new Greater Bay Area of China, which is essentially the Pearl River Delta that contains Shenzhen, Guangzhou and Hong Kong, as well as a few other mega cities, and it's part of a larger Chinese project to create A an enormous economic zone, but I think it also has the potential and perhaps the intention of diminishing the role of Hong Kong. But just recently, home and Fennec, hfw, as well as I think Morgan Lewis, have announced that their opening offices in this Greater Bay area, so that needs to be balanced against people pulling out of the rest of China and going into this economic zone, and perhaps those who still feel that Hong Kong really still has A significant future, which I'm one of those people without. Making any political statements about it, I think that there's still a lot that Hong Kong is capable of accomplishing, and there's a lot of cash there. And the financial business, the FinTech business, crypto business, and not to mention arbitration litigation and so forth, remain very, very, very strong. So going into the Greater Bay Economic Zone is one way of keeping ties with Hong Kong for these law firms that are doing that, and at the same time kind of positioning themselves to have a greater role in the Chinese economy. So that's that's just my perception on that. Are you seeing anything else along Murray go on? Well,
Unknown:I think the other kind of big international news in the last six months was about India. Obviously, India has been a very tough market to get a foothold in, because of the regulatory environment and the resistance to change among the profession there and the government, as well, being very resistant to open up the market. So the Bar Council of India issued a announcement in March which seem to say that international law firms which have reciprocal arrangements with India. So for example, if Indian lawyers are recognized in your jurisdiction, then you would be entitled to have your lawyers open a practice in India and practice their own home jurisdiction law there. So effectively, what the announcement seemed to say is that foreign lawyers could open offices in India and register to provide foreign law services to Indian clients, which was, you know, very positively received at the time, and lots of many international law firms kind of expressed interest in it. But only a few days later, the Bar Council then turned around and issued a clarification to say, actually, you can come and open an office and register over here, but you can't advise Indian clients, which seems to be a tightening of the current regulations, because I understand lots of law firms advise Indian clients on foreign law rather jurisdictions. So it seemed to go road back on it. So it's created a whole environment of uncertainty. And I doubt that in this environment any law for international law firms will be looking to, you know, head into that jurisdiction very quickly. I think there'll be no period of wait and see and see if there's any further updates as to any more, whether any more clarification comes out on those rules, and also the rules themselves were silent on whether, more, you know, international law firms could go in and establish associations with Indian law firms or acquire Indian law firms. So it's, it's, you know, it's a very ambiguous situation at the moment,
Rob Bata:yeah, I think so much of it is in the implementation. And even in the original statement from the from the Bar Council there, it did contain a reference to the fact that, basically, they can change their mind about it anytime. So foreign firms, having already had a little bit of a difficult experience in India, and having been having been told to pack up and leave, I think are going to be very cautious about getting in. I of course, Danton did establish some kind of an association with a local firm, which they've tried to characterize as an acquisition or as a merger, but, but really is not I think these are two standalone firms, but that that may be, that may be giving us some kind of a roadmap of what may be possible down the road. But again, I think that most firms, especially firms that already have very successful India related practices, which they conduct from the UK or from Singapore or Hong Kong or wherever else, are going to think twice about whether or not they want to do that, and then whether or not they want to take on the really gigantic Indian law firms that that dominate the high value transaction and litigation space. I
Unknown:agree, and I should add that the the announcement that came from the Bar Council also said that you'd have to re register or renew your license every few years, and of course, it could change the its mind at that point, so there was no there weren't offering much certainty or permanency there.
Rob Bata:Yeah, I think, I think this is part of what I think is a very salubrious development in India, which is that the current government, for, you know, whatever, whatever other faults it may have, I think, is definitely very interested in playing much more of a global role, and much more interested in the growth of the Indian economy, which India, I Think, will become the most populous nation in the world, not far from now, and I think they will certainly be the third largest economy, and so and and someday, I suspect they won't be the second so. So in that sense, I think this is consistent with with the political environment, but as they say, the devil is in the details. So we'll see.
Unknown:I'd like to circle back to one point you made earlier, Rob, and I'd be interested in getting your impressions on the zillion as well. You were saying that there are some firms that are opening up to with, with the with the unified IP courts that have, yeah, in the you correct? And I think, I think there was some in Dublin, maybe there was Dublin. Seem to be a spot that that firms are opening. Do you think that represents an opportunity for some of the big us, IP centered firms, to get more engaged there, or does it? Is it? Is it going to be a little bit more of a walled garden?
Rob Bata:Well, I think it does. I think you're now seeing IP patents, patent defense, patent prosecution, as being extremely vibrant practices in the US. I noticed, for example, that my old firm, which almost never takes in lateral partners, O'Sullivan and Cromwell, just brought in somebody who was, I think, the head. The US Patent Office to to to lead their patents practice in Washington. I think it's very, very important for us firms, and I would think that having access to the unified patent court in the EU is going to be an important goal, yeah, for sure. But of course, many of them, which already have offices in the EU, I think, will be able to do that. They won't really need to do anything special. If you look at the firm of Powell and Gilbert, which, which is one of the great IP practices in the UK, they didn't have any other offices. So for them, it was absolutely essential to open in Dublin now, and I think the same, same goes for for the other firm that opened, which I think was Bristow of the UK. So the answer is yes. I think people will be pursuing that for US firms, in the past, they've tended to focus on Germany, because Germany patents jurisdiction can
Unknown:All right, yeah,
Rob Bata:now, now they don't really have to do that. They can be looking elsewhere too.
Unknown:Yeah, I would agree on that if you have, as a firm, have a big IP practice, then you do need to have a presence that would allow you access to the UPC. And if that means opening an office in the in an EU member state to do that, then it becomes a strategic necessity,
Rob Bata:right? Yep, is there, is there anything else that we need to be discussing? I think this has been such a great session and and so on. Murray, both of you have such a such a great way of, sort of intersecting your knowledge in in what we like to talk about. It's been great fun.
Unknown:Absolutely. Enjoyed it. Thank you. Yeah, absolutely. And I hope, I hope so on, maybe sometime in the in the future, we can have you come on back and we'll take a look at some of these issues that we talked about and update and see what's see what's new, and hear more about what you're seeing from from your perch. It has certainly was, was really interesting. Take her there. I'd be really delighted. And there's always stuff going on and stuff to talk about, so be really delighted to join you again in the future. Thank you. It's been a pleasure and an honor to host you on our podcast. Rob as always, great. Great to see you. Great to hear from you, and we'll pick up on this a little bit later. Now we'll close Goodbye, everybody.
Rob Bata:Goodbye. Everyone bye, everyone you.