As Barclays sifts through the wreckage of King & Wood Mallesons‘ European practice and claims of fresh departures swirl around Ashurst, you have to say that the marriage of Herbert Smith and Australian leader Freehills could have gone worse. A lot worse.
Having hooked up in 2012 when Herbert Smith had just opened a Pandora’s Box of strategic issues that had been contained for the preceding 15 years, it was a difficult start. Plenty of City partners, many in the firm’s high-billing City disputes practice, looked on aghast as the storied institution tied its fortunes to the heavily-serviced Australian legal market, even with a suitor as potent as Freehills.
It was hard to tell if Herbert Smith was genuinely grappling with strategic issues swept under the carpet too long or merely on the verge of an outbreak of the collective dysfunction that had on occasion threatened to erupt under the David Gold years. The merger had a solid but not compelling case to back it; the criticism that Herbert Smith had made an oddly-timed move given its resilient profitability and ultimate hopes of a US merger held some weight. HSF looked as if it would fare worse than some of the other Anglo/Australian unions.
Nevertheless, as we address this month in our interview with HSF’s c-suite, the firm has played its post-merger hand with skill. Morale has improved, its crucial European roll-out has gone respectably and its disputes practice has been robust in the face of some very significant losses. As important, one of the less slickly-organised City firms has become a more unified operation, benefiting apparently from Freehills’ cohesion and entrepreneurial instincts. Financial performance – even allowing for its cute way of announcing numbers on a constant currency basis – has been respectable during a period in which investment and integration inevitably slowed its pace.
Evidence of the firm becoming comfortable in its skin also came last autumn with the decision to elevate co-chief executive Mark Rigotti (pictured) as its sole chief executive, putting a legacy Freehills hand in over Herbert Smith counterpart, Sonya Leydecker.
The well-regarded Rigotti evidently did an excellent job of winning around HSF’s City partnership, deploying deft social skills and an ability to keep the management jargon to an acceptable minimum. You can have some sympathy for Leydecker, who had a respectable run in the c-suite, having been one of the drivers of the reinvention of HSF’s low-cost ‘nearshoring’ hub into a 24/7 global operation. While there are more fluent communicators in law firm leadership roles, it’s still harder for female lawyers to wrangle male-dominated partnerships.
The pledge from HSF is that the firm is now moving onto the front foot, with the core integration behind it. Obviously, challenges remain for the firm, which is yet to close the profitability gap between its litigation and corporate teams. In truth, HSF is yet to conclusively prove it can compete at the highest level of the global deal market. The firm also concedes there are no easy answers for how to develop its 12-partner New York office and the loss in the autumn of a £20m-plus Australian projects team to White & Case was ominous, no matter how over-lawyered the local market may be.
But having gotten a lot of post-merger calls right, and with a strong duo of Rigotti and senior partner James Palmer at the helm, HSF is considerably better positioned than looked likely three years ago. You only need to scan the recent headlines to know how big a difference that can make.