Here’s one anecdote that didn’t make it into this month’s extended focus on Ashurst. Sometime soon after the firm had pulled back from its late-1990s dalliance with Clifford Chance (CC), the first of three public failed merger bids for the firm, at least one partner had second thoughts. An overture was made to the Magic Circle firm to enquire if the discussions were worth re-kindling. The response from CC: ‘The window of opportunity opens… and then it closes’.
And there you have it. Flatfooted and left behind by a thrusting Magic Circle firm.
Strategic dithering had come to define Ashurst, a painful position for a firm with such an illustrious history. A small club of firms has dominated City law for decades, certainly in the post war era but even as far back as the late 1800s when the rise of industrial and banking concerns was shifting wealth away from private individuals towards corporates. Ashurst Morris Crisp was a member of that club alongside Linklaters, Freshfields and the soon-to-launch upstart Slaughter and May.
That kind of history can weigh heavy on an institution, it certainly did for Ashurst through recent years. Now, for good or ill, the firm has at last gone through a fundamental reinvention via its merger with Australian leader Blake Dawson, which went live on 1 November, following an unusual staged integration process. The rubber-stamping of that union in September was a foregone conclusion but what was unexpected was that senior partner Charlie Geffen, the strong-willed leader that drove Ashurst towards the merger, would be voted out in favour in the relatively low profile litigator Ben Tidswell the following month.
That’s a big deal. If anyone had Ashurst running through them like the proverbial stick of rock, it was Geffen. Synonymous with the firm’s heritage in corporate and private equity and single-minded in his determination to move Ashurst forward, not since Anthony Salz ran Freshfields has there been a deal-maker as central to the brand of a major UK law firm. As such it is plain that the vote that unseated him has left Ashurst’s partnership deeply, existentially unsettled.
What caused that election result was in large part a reaction to a series of controversial measures taken on Geffen’s watch. He presided over an increasingly robustly run outfit in place of the consensual club of old (and Ashurst did too often live up to that cliché). The level of intervention Ashurst’s highly modified lockstep saw over the last five years has been exceeded among major City practices only by Linklaters (and in the larger firm’s case such tactics saw managing partner Simon Davies initially fail to be ratified for a second term as managing partner).
Like Davies, Geffen repeatedly focused on what he determined as the right course of action rather than the political role most law firm leaders rapidly adopt. Less time was spent winning hearts and minds. There was much grumbling about not working the floors or reaching out to enough of the firm, certainly beyond the spiritual heartlands of Ashurst’s City corporate finance team.
In comparison Tidswell represents a more consensual style which resonated with a partnership wearied by austerity and looking for a different message than that put forward by its spine-stiffening ‘war time’ leader. Having led the firm through the brutal post-Lehman years, there has been much talk of Churchill’s 1945 defeat, though for those favouring political allusions, the self-possession and lack of compromise made Geffen more like Ashurst’s Thatcher.
Geffen’s strength was an ability to size up the situation and take the necessary hard choices rather than accept a comfortable status quo that would probably have seen Ashurst consigned to second or three tier status globally. He took Ashurst further and faster than a more populist or diplomatic leader could have managed. Geffen’s weakness was an ability to convince himself that a credible intellectual position was the only course of action even when there were other alternatives.
Where does that leave the union? It’s more a deal of head than the heart as is fitting for an attempt to help Ashurst grow up. The reality is that there were not a lot of strategically attractive alternatives short of an outright US takeover and Ashurst had probably become too large even for that.
A solid case remains for the tie-up. The pair for once have displayed the cultural common ground typically proclaimed at such marriages (it helped that the slickly run Blake Dawson was operationally sharper in many regards than Ashurst). The staged merger structure was doubtless a product of expediency in terms of what Ashurst partners would accept back in 2011 but it worked. A firm renowned for fluffing strategic decisions ironically pulled off integration with an admirable lack of fuss and considerable polish. The much expanded investing power and shifting centre of gravity towards the Asia Pacific region are likewise valuable prizes. It will also help smooth internal nerves if the recent revival in Ashurst’s US finance practice, the troubled launch of which proved so divisive, can be sustained.
From a strategically weaker position, Ashurst has arguably pulled off a more promising deal than a string of comparable tie-ups managed by peers such as Herbert Smith Freehills, Hogan Lovells, Norton Rose Fulbright and King & Wood Mallesons. Most of these firms are still larger and have overall stronger practices than Ashurst but they also face an intimidating mix of cultural and operational challenges that have to varying degrees been kicked down the road. In contrast, Ashurst has largely addressed such issues. If Ashurst can calm a restless partnership over the next six to 12 months and avoid a run of senior departures, it looks well placed for the decade ahead.
If the obvious short-term imperative is to settle the troops, the medium term success of the deal will to a considerable extent be determined by how Ashurst performs in Australia, where it now has very substantial exposure. Here there is some cause for concern. The national economy has slowed considerably since the initial deal was agreed, which led to a drop in revenues at the legacy Blake Dawson from A$398m in 2011/12 to $390m in 2012/13. While the economic prospects look a little brighter for 2014 with a bruising general election out of the way, the going still looks soft and questions remain over the ability of Australia’s populist new prime minister Tony Abbott to build links with Asia trading partners (the G20 summit in Brisbane in November 2014 will give an indication of the current calibre of Australian statecraft).
In short, legacy Ashurst has been growing faster than its Australian partner, potentially upsetting the supposed merger-of-equals dynamic and there is no sign that the profit gap between the two halves of the business that was supposed to be closing has yet shut. There have been over-blown claims of a looming partner cull in Australia but the expectation is that the national ranks will thin modestly over the next three years.
These issues should be manageable. Geffen is understood to have taken a philosophical line on his defeat and may well remain with the firm after a period of reflection. Natural Geffen supporters are still coming to terms with the election but there is considerable goodwill for a new leader who promises more a change in style and level of dialogue that strategic direction. Even if Geffen does ultimately depart Appold Street, his leadership has given the firm a singular opportunity. It should seize it whole-heartedly because – as it has already found to its cost – the window that opens will close just as quickly.
For more on Ashurst post-merger and post-Geffen, see ‘After Charlie’s War – can Ashurst achieve post-merger prosperity under a new leader?‘