Listen for the wedding bells.
The spring-time romance that has been blossoming between the storied New York law firm of Rogers & Wells and the London “Magic Circle” firm of Clifford Chance has grown so strong that 23 senior partners from both firms sneaked away April 17 and 18 to a hideaway weekend at the Boca Raton Resort & Club in Florida to quietly discuss marriage.
It was the first time many of the partners had seen each other aside from on a videoconference screen. So over rounds of golf and during tennis, sans spouses, the British and American lawyers met to talk about what it would take to form the first true trans-Atlantic law firm in history–a megafirm that could offer one-stop shopping for any company’s global legal needs.
The partners are now eagerly awaiting Clifford Chance’s merger proposal, which should arrive any day now, complete with financial and other business terms. But the commitment will have to be made soon if it’s to happen: The target date for the two firms to say Yes is the day after Mother’s Day, May 10, two partners told The Observer . “I don’t know of any issue that is a deal-breaker,” one partner told The Observer , a sentiment confirmed by two others.
At an estimated 2,400 attorneys, the new globo-firm would challenge Skadden, Arps, Slate, Meagher & Flom as the highest-grossing firm worldwide, and would boast about 1,200 attorneys more than Skadden. (The world’s largest law firm at present is Chicago’s Baker & McKenzie, with 2,300 lawyers.) It would have offices in 20 countries, and carry as clients the multinational owners of such imprimaturs as Mastercard International, Honda Motor Company Ltd., Siemens A.G. and the Hearst Corporation. The two firms already share Merrill Lynch & Company as a client. Revenues of the combined firm would start at $816 million.
The firms have been talking at least since November. Rogers & Wells managing partner Laurence Cranch and the chairman of Clifford Chance’s New York office, Robert Finley, declined to comment about the talks, but three sources familiar with their progress said that everyone now is feeling optimistic.
The merger could turn into the legal equivalent of the Beatles arriving in New York in 1964: Expect a swarm of British and Continental lawyers to invade other New York firms’ conference rooms to discuss launching a Clifford Chance-Rogers & Wells competitor. Those most likely to feel the heat will be Weil, Gotshal & Manges and Shearman & Sterling. “If this goes through, a lot of firms are going to be spending a lot of time at their next partnership meeting talking about this,” said Jonathan Lindsey, a principal at the legal consulting firm Major, Hagen & Africa.
With Europe consolidating around NATO and the euro and the economy becoming increasingly global, such mergers make sense. James Asher, who as managing partner left Rogers & Wells in 1997 to become an executive at Hearst Corporation, asserted that riches will go to the first firm that has large columns of native lawyers in both New York and London. “I think there’s the potential here to create a very distinctive law firm that does not exist today. And if it’s done right, and that message is conveyed and marketed and of course delivered upon, there’s no reason why this combined firm won’t be at the top of the highest end of the legal market,” said Mr. Asher.
A merger, however, would mean the end of the institution that is Rogers & Wells, a 128-year-old gentleman’s firm that still includes players like William Rogers, Richard Nixon’s first Secretary of State, and Anthony Essaye, executive director of the Clinton Legal Expense Trust. Once the roost of choice for the well-to-do, pinstriped WASP gent who didn’t really want to shuffle papers late into the evening, it has recently diversified. Its sense of grandness, however, has remained.
The firm’s strength resides in antitrust and intellectual property litigation, international financial transactions and real estate securities. It is not, however, considered a corporate powerhouse: It rarely handles the largest industrial mergers. With 363 lawyers, it has offices in five other cities (Paris, London, Hong Kong, Frankfurt and Washington, D.C.) and a good reputation in Europe, better than all but a few other American firms. Here in the States, though, the firm is just solid second-tier.
Becoming part of the 2,000-lawyer Clifford Chance universe, though, would add some pizzazz to the life of a Rogers & Wells barrister. International cachet, travel, bigger deals–who could write a better script?
Maybe this: While conducting talks with Mr. Cranch and others at Rogers & Wells, Clifford Chance leaders Keith Clark and Tony Williams have simultaneously been negotiating mergers with a 100-lawyer firm in Frankfurt and an 800-lawyer firm in Sydney.
The benefits of a merger for Clifford Chance are clear: The firm–which has 2,000 lawyers, including a New York office with 55 lawyers, and a six-lawyer office in Washington, D.C.–would expand its reach in financial markets into New York, and be the first British firm to do so in a big way.
Already some of the rough spots have been smoothed. Compensation, for example–the most obvious hindrance to a successful Clifford Chance, Rogers & Wells merger–is not emerging as an obstacle at all, said Mr. Asher and two other sources familiar with the talks. Rogers & Wells’ partner pay is based on billings and contributions (significantly so), while the pay scale at Clifford Chance and most other top British firms follows a lockstep progression based on seniority. Yet, with the exception of a few Rogers & Wells hotshots, those with similar experience at both firms seem to be paid within 10 percent of each other. According to The American Lawyer , the average partner take at Rogers & Wells is $645,000.
Also resolved: Everyone concluded that Rogers & Wells’ top 10 or so earners–antitrust hotshots Kevin Arquit and Steven Newborn lead the ranks at $2 million plus–would have to be paid a hefty sum if they are to stick around and generate profits for everyone.
The bigger question–one sure to guide any upcoming partner vote at Rogers & Wells–is whether this merger is the best way to make that paycheck grow. Rogers & Wells indisputably has been doing better financially, ascending on The American Lawyer ‘s profit rankings from 48th in the nation in 1990 to 24th in 1998. According to one of the firm’s partners, the deal with Clifford Chance pretty much depends on whether the 85 partners of Rogers & Wells believe they would make more money by risking it alone.
Just as likely to break up the romance are life-style jitters–fears of too many changes, too many compromises, too little control. At Rogers & Wells, the younger and midlevel partners, those next in line to rule their firm, had not anticipated life as pawns to be moved around the globe at a moment’s notice by a London lord.
Lawyers at both firms also face the question of anonymity–one lawyer among legions in one of the world’s largest firms.
Some decisions remain until after that proposal arrives. The British custom of inducing partners to wind down after age 55 (to take paying board positions at companies and philanthropies, harder to snare in the States), would trip up such Rogers & Wells millionaires of a certain age as intellectual property litigator John Kidd and German practice head Klaus Jander.
The details of compensation, too, will surely be discussed further. The pay spread among partners at Clifford Chance is said to be 1 to 2.5, while at Rogers & Wells it is around 1 to 7.
And there’s been no agreement as to whether the Clifford Chance name might have Rogers & Wells tacked onto it in New York.
At Rogers & Wells, the partners are trying not to get too worked up. Only a few have really seen Clifford Chance’s accounting data.
But firm namesake William Rogers, 86, has told partners that if everyone else is for it, he’ll go along, according to one partner.
One current Rogers & Wells partner decided that the best argument for voting in favor of Clifford Chance is the inevitability of the first 2,500-lawyer firm. “If you’re a top-notch lawyer, you’re either going to be a partner in this one, or you going to be in another one in the future,” said the partner.
News You Can’t Use: U.S. News ‘ Funny Figures
New York University broke into the top five for the first time, pushing Columbia down lower than it has been in eons–to fifth. The University of Chicago dropped from fourth to sixth. Cornell and Georgetown tied for 12th last year, but this year they split: Cornell rose to 10, Georgetown fell to 14. The annual U.S. News & World Report ranking of law schools–the ultimate expression of that journalistic mantra, “news you can use”–is out once again, unleashing the fury of deans and backbiting within the legal class. But this year, it’s also unleashing charges of fraud.
Law school administrators and U.S. News editors are investigating whether the numbers fed to the magazine to calculate the annual graduate school rankings were … well, doctored. The editor who oversees the number-crunching at U.S. News told The Observer that some of the vital statistics sent in for their rankings by America’s top law schools now appear questionable and that there doesn’t seem to be any clear explanation other than that the schools inflated their figures.
Eleven of the top 20 schools in the magazine’s rankings–Yale, New York University, Columbia, the University of Chicago, Cornell, Northwestern, the University of Pennsylvania, Georgetown, the University of Texas at Austin, U.C.L.A. and the University of Minnesota, averaging $23,188 in tuition–show lower student-faculty ratios in the magazine survey than they have on record with the American Bar Association. The U.S. News editor who oversees the rankings thought her survey clearly asked schools to provide the same figures they had given to the A.B.A. “Our goal is to basically report the same information. I’m puzzled why it’s different,” said Amy Graham, director of data research.
Different, and how: The ratios are far apart for No. 1 Yale (27 percent lower in U.S. News , meaning about 14 extra teachers), No. 5 Chicago (16 extra teachers), the two schools that tied for No. 12, Northwestern and the University of Pennsylvania (eight and nine extra teachers, respectively) and No. 18 University of Minnesota (11 extra teachers).
“Wow! That is very odd. Whoo!” said Anne Lukingbeal, a Cornell associate dean, when told about the discrepancies.
And when it comes to rankings, those numbers matter: With the A.B.A. figures, the rankings of Cornell, U.C.L.A. and Minnesota would drop outright, Georgetown probably would move up into a tie, and Yale’s decisive lead over Harvard and Stanford would be trimmed, by N.Y. Law’s calculations.
The rankings also matter to the magazine. U.S. News has used its rankings issues–best H.M.O.’s, best schools, best hospitals–to make its niche in the competitive newsmagazine business, where it has trailed in circulation behind Time and Newsweek . Law school administrators–particularly those who do poorly or who drop down in the rankings–hate them. Everyone pooh-poohs them, but everyone also reads them.
“It sucks,” Jared Grusd, a second-year student at Chicago, told his school paper, after the March 29 graduate school issue ranked Chicago No. 6. “I transferred here because I wanted to go to a Top Five school. While I like Chicago, I purposely didn’t apply to places like N.Y.U.”
Up in Morningside Heights, the headline of the student paper declared, “First Sign of the Apocalypse: Columbia Drops Down.” Quoted in N.Y.U.’s jubilant student paper, first-year student Arun Rao tried to be charitable about her school’s rise in the ranks: “It wouldn’t have affected my decision. But people unfamiliar with law school sometimes question my decision to choose N.Y.U. over Columbia. The rankings are something concrete I can point to in explaining my decision.”
Peter Wentz, associate dean at Northwestern, confessed outright to supplying different numbers to the magazine–to correct, he said, errors in what they had reported to the A.B.A. “In any event, our A.B.A. number, even considering their criteria, seems low to us. The number on our Web site is the one we gave to U.S. News , and that’s the one we think represents our faculty.”
Other schools contacted by The Observer seemed mostly puzzled by the discrepancies. Columbia and U.C.L.A., which had only small discrepancies, checked their paperwork and said they had reported the exact same numbers to both organizations. Yale, N.Y.U. and Minnesota administrators said that they believed they had supplied the same numbers but needed more time to look up what they had sent in. Cornell and Penn figured the two surveys asked for different data. Others didn’t return calls.
Misconceptions about the survey abound. ” U.S. News doesn’t ask for exactly the same data that the A.B.A. asks for,” said Penn dean Colin Diver.
Oh, yes, they do, said U.S. News ‘ deputy director of data research, Robert Morse. And it’s his understanding that the A.B.A. calculates the information the same way, using the same data. Mr. Morse said he doesn’t see how the discrepancies can be anything but the school sending in inflated faculty numbers. His colleague Ms. Graham said she hopes not. “We operate on good faith with the schools, and our assumption is that they are giving the right information. We presume there are going to be honest mistakes, because we’re all human. And we are not going to presume that they’re cheating without very vigorously exploring that theory.”
Ms. Graham said she will do whatever is necessary to fix this. “We’ll be contacting the schools, we’ll be reviewing the original surveys as they were submitted, we’ll be comparing them to the A.B.A. book, we’ll be talking to Rick Morgan again. It may take a little time, but that’s O.K. We’re in this for the long haul.”
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