Dentons vows smooth integration with Dacheng

Multinational companies appear to be reacting favourably to the merger of Dentons and Chinese firm Dacheng to create the world’s largest law firm by lawyer headcount.

“You can’t ignore the fact that Dentons is now a meaningful player in all things Chinese,” says Daniel Desjardins, the Montreal-based general counsel at Bombardier Inc. “We would surely take a closer look at them for any significant transaction involving China than we would have before the merger.”

But, Desjardins cautions, the extent to which the new firm’s potential becomes a reality depends on how well the legacy firms integrate.

“Dentons will have to spend the time and resources necessary to create the changes in firm image, cultures, and value that are essential to creating a seamless offering worldwide,” he says.

“Doing that is a challenge in any merger, let alone one of this scope.”

The new firm, whose name embraces both legacy firms in a bilingual logo that carries the Dentons name and the Chinese characters for Dacheng, boasts 6,550 lawyers and professionals in 120 locations in 51 countries. Some 4,000 of the lawyers come from Dacheng, which has 35 offices in each of China’s 34 administrative districts and eight global outposts.

When it comes to integration, however, Dentons’ global chairman has a novel, if controversial, perspective on the issue.

“We refute the idea that China is different,” says Britain-based Joe Andrew.

As Andrew sees it, integrating the two firms is primarily a “mechanical” obstacle.

“The challenge is in standardizing services and rationalizing things like the conflict-checking process and the IT systems,” he says. “And we already have the framework of the required back-shop operations as a result of the merger that created Dentons in the first place.”

That merger involved SNR Denton, itself the product of a combination between a U.S. and British firm; Paris-based Salans; and Canada’s Fraser Milner Casgrain LLP.

“Culturally speaking, then, we’re also set up to adapt,” says Andrew. “But unlike other law firms, we see the differences as a strength and a market advantage and we’re not setting out to make people the same or have them speak the same language.”

In other words, Dentons has every intention of continuing with the polycentric approach that its leaders feel has worked well for them so far.

“We have quite a bit of experience in bridging and building a law firm that is very much able to be culturally diverse,” says Elliott Portnoy, the firm’s Britain-based global chief executive officer.

Nor does Andrew have any concerns that the differences in their approaches to business will make it difficult for Chinese and western lawyers to work together seamlessly.

“The realpolitik of how to do a deal ultimately becomes nothing more than a marketing distinction,” he says. “That’s especially true in an Internet age where most people with a laptop can learn about the nature of a business in just a few clicks.”

It’s also true that the practices of many Dacheng lawyers won’t change markedly.

“Only a few hundred of Dacheng’s lawyers will be involved in international deals,” says Tony Williams of Britain-based Jomati Consultants LLP, a global legal consultancy. “The rest will just continue with their domestic practices.”

As well, many of the younger generation of Chinese lawyers have trained in the West.

“I would say that 80 to 90 per cent of the Dacheng lawyers who are under 35 are fluent in English,” says Andrew. “In fact, it won’t be that long before there will be more lawyers speaking English in China than anywhere else in the world.”

Finally, Dentons isn’t new to China with 46 lawyers practising in Beijing, Shanghai, and Hong Kong before the merger with Dacheng.

Quite apart from those considerations, the efficacy of the due-diligence process leading up to the merger is one reason why Andrew believes so strongly that integration efforts will be successful.

“Dacheng was formed [in 1992] with the intent of operating on a best-practices basis, so it is more similar to western firms than other Chinese practices,” he says. “As well, the firm has grown by merger and acquisition and, as such, has had to have fairly transparent economics.”

But some critics suggest there will be a limit to the possibilities for integration because the various firms in the Dentons mix won’t be sharing profits; rather, they’ll continue to operate on the Swiss Verein model, an approach that allows member firms to join internationally under a single brand without sharing revenues or profits and thereby maintaining their independent status for liability and regulatory purposes.

Not surprisingly, Andrew takes issue with that analysis. “If you use the Verein in its least integrated form, it is merely a tool to limit risk,” he says.

“But our goal is to be the most integrated of all Vereins.”

As a result, the firm will have a unified compensation system that recognizes partners for attracting work done internationally as well as domestically.

“Our system creates an incentive to track and share work on a global basis,” says Andrew.

“It’s an approach that leads to more seamless service for clients.”

However that may be, the merger with Dacheng significantly advances some of the thinking behind the Canadian firm’s combination with Dentons in 2013.

“The desire to expand in a material way our outreach to the Chinese economy and the Chinese legal professions was very much a part of our strategic focus when we joined Dentons,” says Toronto-based Chris Pinnington, chief executive officer of Dentons Canada LLP.  

This article orginally appreared in Law Times, Feb. 2, 2015.

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