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Dentons buzz dizzying as firm seeks aggressive expansion

|Written By Julius Melnitzer

The media buzz around Dentons is dizzying and, in many ways, confusing as the firm advances aggressive expansion plans.

‘Because Dentons are trying to build an empire so quickly, the thing to watch is lawyer churn,’ says Bruce MacEwen.

It’s not that Dentons hasn’t made its intentions clear. Being the biggest law firm won’t do, and Dentons has left no doubt that it aims to keep growing.

Two weeks ago, Dentons confirmed to the media that it had signed non-disclosure agreements with 21 firms in Europe, Asia, and Latin America with two goals in mind: first, to establish a presence in places where it has none such as Australia, Japan, and Latin America; and second, to create depth in certain places where it already has offices such as Germany, the Netherlands, and Spain. Management has also said it’s planning to fill practice gaps through lateral hires as well as mergers.

All of this comes on the heels of Dentons’ combination with Chinese firm Dacheng and the fairly recent merger of SNR Denton, Salans, and Fraser Milner Casgrain in 2013.

“Dentons is seeking global coverage as quickly as possible and probably aiming to be the first firm with 10,000 lawyers and US$3 billion in revenue,” says one prominent international legal consultant who spoke on condition of anonymity. “If the firm can put that together, it will achieve an upper mid-market position that is insurmountable. That won’t necessarily draw the bet-the-farm work but it will produce a very good range of clients.”

Dentons also intends to create a firm it claims will be fundamentally different from any other. Management calls the model “polycentric,” one that eschews global headquarters in favour of a localized but seamless approach that takes into account regional differences in the way both lawyers and clients work.

“The idea is to reorganize itself to provide clients with really good service by incorporating the most advanced systems and project management,” says the source. “What they say is interesting and credible, but whether they’re able to achieve all that is another matter and represents a considerable challenge.”

Where there’s consensus is that no one will be able to fault Dentons for lack of trying. Last month, the firm announced the launch of NextLaw Labs, a technology company that will develop systems and processes not only for itself but for sale to other law firms. NextLaw Labs will also invest in legal technology startups and companies that are already operating.

Heading the effort is Dan Jansen, who led the media and entertainment division at the Boston Consulting Group for 17 years.

From a Canadian perspective, the advantages of a global connection of Dentons’ intended magnitude are obvious. But the greatest impact on Dentons Canada LLP is likely to come from the firm’s push for growth in the United States, a development already in the works following its announcement in April of a long-delayed merger of its existing U.S. presence with McKenna Long & Aldridge LLP.

As Law Times reported in May, McKenna Long’s powerful connections to Canada, spearheaded by former U.S. ambassador to Canada Gordon Giffin and nurtured over two decades, will greatly strengthen Dentons Canada’s cross-border practice. From all appearances, this relationship will not only continue but will feature a renewed emphasis on growth.

But McKenna Long today isn’t what it was when the merger talks started with Dentons in late 2013 as the 520-lawyer firm is now down to about 320 lawyers. The 100 lawyers who had already left in 2014 include 32 people from McKenna Long’s powerful government contracts practice in Washington and Los Angeles, 27 from the firm’s health-care practice in Atlanta, and five corporate lawyers.

Still, both Dentons and McKenna Long have said throughout they knew the two teams would leave.

Indeed, Tony Williams of Britain-based Jomati Consultants LLP says it’s a mistake to make too much of the departures.

“Most firms experience losses on mergers and some of the McKenna losses are neither a surprise not unexpected, although the extent of the departures is probably a bit disappointing,” he says. “My belief is that the moves represent both the hot nature of the current U.S. legal market and the fact that many people prefer the certainty of an established firm to the uncertainty and opportunity that a combination involves.”

Bruce MacEwen, president of New York-based legal consultancy Adam Smith Esq. LLC, says the hullabaloo about the departures is much ado about nothing.

“The only story here is that people seem to think it is a story,” he says. “Whenever there are mergers, there are departures, and in this case we were dealing with a shotgun wedding because there were already reports of difficulties at McKenna.”

But MacEwen also says it would be a mistake at this point to make too much of the 21 non-disclosure agreements Dentons has entered into.

“There are negotiations and there are negotiations and so far there are no indications of how serious these talks are, how big the target firms are or what the conflict checks — if Dentons gets to that stage — may reveal,” he says. “What they have succeeded in doing is getting a lot of press, but on the other hand, there’s no reason to doubt them when they say they want to keep growing what is already the world’s largest firm.”

From MacEwen’s perspective, there’s nothing unique about Dentons’ polycentric approach.

“It’s a snappy and catchy word but it’s nothing new,” he says. “Firms like Latham & Watkins, K&L Gates, Jones Day, and Hogan Lovells would all tell you they have no head office.”

Because Dentons has made it quite clear the firm won’t release financial performance metrics, it becomes harder to gauge the success of its expansion efforts. Unlike Williams, MacEwen believes observers should keep a close eye on movement to and from the firm. “Because Dentons are trying to build an empire so quickly, the thing to watch is lawyer churn,” he says.

“It’s one thing to gobble up a lot of firms but it’s another to count who’s staying on after the mergers.”

Indeed, MacEwen is somewhat skeptical of Dentons’ overall strategy.

“I don’t see how it makes sense but I’m of the prove-it school,” he says. “Ultimately, the only vote is that of the clients and the whole thing may still surprise us.”

Still, MacEwen insists the legal market affords limited room for global firms.

“The notion that there was room for a couple of dozen has now been recognized as false,” he says. “It’s hard to escape a much lower ceiling if for no other reason than the difficulties that conflicts present.”   

For more, see "A closer look at Dentons merger with U.S. firm."


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