It is not quite 1000 wikileaked US cables, but the intelligence that has been sent to Firm Spy over the last week regarding the looming merger of DLA Phillips Fox and DLA Piper is compelling and apparently high-level.
We reported in early September the rumour that DLA Piper would officially arrive in Australia on 1 January 2011. We based that claim on the following comments from anonymous DLAPH spies:
- Everyone I have privately spoken with about [severing DLAPF Adelaide from the broader firm] regards it as the most significant step in the integration by DLA Piper into Australia. We’re all expecting something official to be announced before year’s end. From what I have heard from DLAPF partners, DLA Piper regards our transactional groups as being attractive enough to formalise an alliance, but a major stumbling block was the Adelaide office which is/was constituted primarily by smaller groups like insurance and DR…
- DLA Piper to announce formal merger in a few weeks, with actual merged entity to commence 1 January 2011.
For the reasons that follow, Firm Spy is now very confident that DLA Piper will officially arrive in Australia slightly later than we first reported. We received the following comments from anonymous DLA Phillips Fox spies in the last week:
First this:
DLA Phillips Fox is holding its annual partnership conference this weekend. More than 20 DLA Piper partners from international offices will be attending the conference, including DLA Piper CEO Nigel Knowles. The agenda for the conference includes presentations on how DLA Phillips Fox has:
- changed its structure;
- increased efficiencies by “thinning out” many back-office functions;
- increased lawyer utilisation over the last 12 months; and
- increased its profitability to the point where it is now competitive with the broader DLA Piper group.
The business case for DLA Piper gaining an official foothold in Australia will also be canvassed at great length. The attendance of the 20-odd international partners will give them an opportunity to “report back” to their local offices before the vote takes place on the merger.
Then this, apparently from a different DLA Phillips Fox spy:
The January 2011 date you claim will be the arrival of DLA Piper is wrong (but points for trying!). Three individual ballots in relation to the merger between DLA Piper and DLA Phillips Fox must be taken, none of which has yet occurred.
A vote in favour of the merger must be passed by: (1) the Europe/Middle East/Africa/Asia Pacific offices; (2) the North America offices; and (3) DLA Phillips Fox.
Although I dont know when the votes will take place, I’ve been told by Phillips Fox partners that the result will be known by late April or earm May 2011. The very strong speculation is that, if successful, an announcement will be made in mid-May and DLA Piper will officially arrive on 1 July 2011.***
For those still questioning whether the merger will take place, we remind you that:
- Chief Exectutive Partner Tony Holland expressed in March 2010 that “financial integration is one option“;
- The less profitable domestic arm of DLAPH – its Adelaide office, was given financial independence in March this year, before the office became completely separate from the DLAPH group by merging with Tox F*cker Fox Tucker;
- In May, the New Zealand office of DLAPH was also cut from the profit pool of the Australian-based offices;
- Over the first six months of the year (approx) we believe DLAPH orchestrated a carefully calibrated plan to “trim the DLA Phillips Fox fat”, under the auspices of which smaller teams like the firm’s media and entertainment group were cut, while new employees were added in transactional-type practices;
- We believe many non fee-earner positions have been cut from the firm in the last twelve months, this includes the rumoured departure of an 18-year veteran of the firm. This claim is supported by the fact that according to BRW the firm’s headcount reduced 1.5% in the last financial year; and
- It is rumoured that several “senior” senior associates have left the firm and been replaced by new senior associates who are paid significantly less than their predecessors.
If you know more, send your info to news@firmspy.com
Send the Firm Spy your news and views!
***Firm Spy has also heard repeatedly that May 1 2011 may also be the arrival date of DLA Piper, in which an announcement might come in early April, however on balance we regard the comments in this post as more compelling
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This alliance has never made sense to me. Minter Ellison always seemed the logical target for DLA Piper. DLAPF, by comparison, has a pretty ordinary transactional pedigree, and by slimming down its strong niche practices (insurance, media etc) without recruiting some serious transactional stars to replace them, I think the firm is devaluing itself. Also, I can’t see how a firm like DLAPF could be profitable enough to appeal to DLA Piper on a financially integrated basis.
DLAPF partners are welcome to challenge these statements.
PS – there’s a typo in the heading…
The devaluation of the euro/USD has added something like 20% to the profitability of Phillips Fox, not to mention the many other recent changes within the firm that have improved profitability.
One tweak – Phillips Fox Adelaide didn’t merge with Fox Tucker – it merged with a firm called Rankine Tucker, becoming Fox Tucker.
@ sceptical – what typo?
One other tweak I would add is that if the merger proceeds, Australia will go into the euro/african/middle eastern profit pool, which is distinct from the more profitable North American profit pool.
And no, Minters wouldn’t have made a better target. Minters currently spreads its equity across something like 30% more partners than its nearest 4 or 5 competitors in terms of revenue. This makes it much less profitable for individual partners than most other major firms
Save the Date – 1 July 2010 implies the merger vote has already taken place…
There are some seriously poor analytical skills at work here. I am glad that you guys are lawyers rather than strategists.
1 The typo is the reference to 1 July 2010. I would save that date, but it has passed.
2 Believer, do you really think that a merger would take place on the basis of short term exchange rate movements? Lawyers are intrinsically short-termist, but that is ridiculous.
3 Applicable, you’re mixing your target space. The list of the nearest 4-5 firms in terms of revenue doesn’t include DLA PF. Yes, Minters has a broader equity pool than, say, Mallesons, Allens and Freehills, but it plays in a different space to those firms. It is a solid but unspectacular firm in all areas (like DLA Piper, in fact). DLA Phillips Fox has serious holes in its practice, particularly in the B&F and corporate areas, which, together with general sluggishness in terms of financial performance, makes it an unattractive merger target. For example, DLA PF can’t generate the same referrals that, say, Minters can and if I was DLA Piper I’d be concerned that referrals to DLAPF wouldn’t be successful because of concerns regarding quality (a problem you wouldn’t generally have with Minters). DLAPF going into a lesser profit pool mitigates against these issues a little but doesn’t solve them. And you are having a bath if you think that DLAPF’s PEP (the only metric that actually matters) is higher than Minters’. Some simple figures – Minters’ revenue is over $500 million, and it has 280 odd partners. DLAPF’s revenue is just over 200 million, and it has about 160 partners. The numbers speak for themselves, really.
Beats me why anyone would want to merge with DLA Piper, ever. They have a reputation as the nastiest big firm in the UK when it came to multiple, brutal rounds of redundancies, they’ve got a Bi-Lo type market position (cheap and commoditised) and the only reason their PEP figures are even remotely decent is because only 26% of the “partners” are actually on equity.