When the music stops

2008 was meant to be the year of the global merger. In the first few months it seemed that some quarters of the market were talking about nothing else. UK-headquartered firms with booming London businesses and newly profitable international networks were suddenly more successful than ever, whilst some US firms, the traditional suitors, were beginning to look decidedly unbalanced in the context of a global economy. With the financial horizon looking less certain, at best, it seemed as if 2008 would be the perfect time to strike a transatlantic deal. That, at least, was the logic.

One leading mergers consultant told Legal Business in March that he knew of five current merger discussions between large US and UK firms. Another said that he had never seen so many US firms looking for mergers at one time.

But so far it hasn’t happened. Although the rumour mill has been awash with speculation about possible mega-mergers – Ashurst and Latham & Watkins and Fulbright & Jaworski and Norton Rose being two of the biggest, erroneous, rumours – the only people not talking about merger seems to have been the partners at the firms themselves.

New levels of profitability at UK firms have, of course, given them and their partnerships a heightened sense of their own worth, which may make them less likely to merge in the near future. And while mergers are relatively easy to work out on paper, they’re fiendishly hard to pull off in practice. Ashurst and Latham continues to look like a dream pairing, as indeed it did when they actually had discussions in 2000. But, talk to either firm and it is clear that there is no appetite for a union, even though it could potentially create the largest firm in the world, with a profit margin in excess of 48%. So-called cultural differences, which in this case boil down to a clash of egos, continue to be insurmountable. Privately, Latham views its discussions with Ashurst eight years ago as a seminal moment in its history, teaching the firm that transformational mergers were not desirable in the short term.

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