As we've known since October 19, Reed Smith reached agreement to merge with Richards Butler Hong Kong, nearly a year after completing its merger with Richards Butler (UK) in London. The agreement will add about $60-million in revenue and a little over 110 lawyers in Hong Kong and a small office in Beijing (with a license application pending to open in Shanghai), and, most importantly for Reed Smith, puts it on the third of the three continents where global firms needs to be in today's Flat World.
I wanted to get a fuller perspective on the deal than just the facts and figures, however, so a couple of weeks ago I spoke with Tom Todd in Hong Kong, a senior Reed Smith partner who has been driving the integration and who relocated from London, where he had been working on the Warner Cranston and then the Richards Butler integrations. Tom originally is from Pittsburgh, but evidently hasn't been spending too much time there lately. Tom joined Reed Smith straight out of Harvard Law in 1967, and thus has been with the firm 40 years. His undergrad degree is in history from Williams, Phi Beta Kappa.
A bit of background for those perhaps unfamiliar with the players: Tom was part of the senior management team at Reed Smith for many years through 2000, and, as of the mid-1990's, the firm's strategic plan had been to gain stature and scope in the Mid-Atlantic and Northeast states—all in one time zone. While this may sound unambitious, it was not to last for long, and the firm at least was one of the first to link all its offices through a single computer network, demonstrating a commitment to multi-office operations and management.
A consensus began to emerge that the firm needed to be in London, the ultimate result of which was the 2001 merger with Warner Cranston, a UK firm with 60 lawyers in London and 10 in Coventry.
As Reed Smith's strategic plan has evolved, one pillar has remained unchanged: To ensure that it revolves around its clients and their needs, particularly to ensure that Reed Smith has a significant presence in markets important to those clients. Historically, key industries for the firm have included financial services (Tom is a partner on the relationship with Mellon Financial, and continues in that role following its merger with the Bank of New York in July 2007) and life sciences. The Richards Butler/London merger added a focus on shipping, trade finance, and media.
Getting down to the Hong Kong Richards Butler deal, Tom's first observation was to cut through the swirl of media clutter (well, at least for those of you who follow these things) that has surrounded the extended period of uncertainty following Reed Smith's merger with Richards Butler/UK (London) and its conspicuous non-merger with Richards Butler Hong Kong. [There are tax reasons why the two pieces of Richards Butler had been set up formally as separate legal entities, which are both too obscure and too irrelevant to go into, but that was why a merger with one was not automatically a merger with the other.]
Suffice to say that immediately upon announcement of the London deal, the question on every observer's lips was, "So, when is Hong Kong? Or is Hong Kong?" Tom's rebuttal to this is that all deals take time—which he believes is a good thing—and even the UK deal had taken about a year to bring to fruition. The Hong Kong deal was not much different, at bottom, "except that we were doing it in a fishbowl—which, let's just say, never makes things easier."
So what has Tom been actually doing to advance the prospects for the merger and now the integration of the two firms? First, simply getting to know all Richards Butler/Hong Kong lawyers, their practices, and their clients. Second, facilitating introductions back and forth between Richards Butler/Hong Kong and Reed Smith in the US and UK. Third, meeting with clients to reassure, inform, communicate, and seek their thoughts. And finally, sitting in on, but, he notes pointedly, not leading or running the activities aimed at combining the two firms. (A formal integration committee will be established now that the merger is approved.)
And what exactly is so special about this? Isn't that the way any well-run firm would do it? Perhaps, but Tom reports, and I have no basis for disagreeing, that he's not aware of any other large firm that puts a senior lawyer on the premises of the merging firm for the explicit and dedicated purpose of facilitating integration. He notes that his role is manifestly "not to run anything, and not to change them, but to provide the glue between the two firms and help them get to know each other." I ask if he was involved in the negotiations leading to the merger and he reports firmly that he was not. I gather he thinks it an advantage to have stood back from the process of negotiation per se and only to step in when the firm's leadership believes he could be helpful as a partner on the ground going forward.
"And how do you know that integration has been a success?" I ask.
"Well, our philosophy has always been to try to pick people we want to combine with because of their talents and their capabilities and their knowledge of their own local marketplace (and we don't believe we have all the answers). Our intention, our hope, and at least in part our experience, has been that if you've made the right decision you will find out there are both people and processes that will improve Reed Smith.
"And on that score I think our track record speaks for itself: Just look at the key people now in positions of senior management at Reed Smith that came initially from other firms:
- Dave Duckhouse, our CFO, came from Warner Cranston
- Mark Dembovsky, our Chief Strategy Officer, also came from Warner Cranston
- Roger Parker, our Managing Partner for Europe and the Middle East was the Managing Partner of Richards Butler
- Colleen Davies, head of our Litigation Department (nearly 800 lawyers) came to Reed Smith from Crosby Heafey in that 2003 merger.
"And I could go on."
I'm sure you have heard the same objection I have to putative mergers, or even to the very thought of a merger: "Our firm's culture is such that we could never stand for being taken over."
I submit that mergers done right are the antithesis of takeovers. Can your firm do them right?
November 17, 2007 12:55 PM
Leave a comment