‘We wish to use this mixture to forge a brand new international elite,’ Herbert Smith Freehills (HSF) CEO Justin D’Agostino tells Authorized Enterprise as he discusses the agency’s formidable merger plans with New York’s Kramer Levin.
Heralding the deliberate union as ‘the primary actual transatlantic and transpacific merger’, D’Agostino stresses that the deal presents ‘a profitable trifecta: international disputes and international transactions on day one, a high-quality US regulation agency, and alignment over ambitions for development.’
With companions anticipated to vote on the union in February, and the deal set to go stay solely a 12 months after HSF first approached Kramer again in Could 2024, D’Agostino is obvious that the merger represents a direct leap ahead for each companies, with extra formidable development to observe.
‘We’ve discovered a agency whose make-up and energy are equivalent to ours in a market the place we didn’t have it,’ D’Agostino explains.
‘Our twin engines of transactions and disputes set us in a distinct class of agency. We’ll be very robust in disputes globally, very robust in transactions globally, and then you definitely add the funding.’
‘Put the 2 companies collectively, and the market ought to be careful – that is an thrilling mixture. And that’s day one, with no funding or tweaks,’ he provides.
Accelerating US growth
HSF has lengthy been vocal about its need to increase within the US, which fashioned a central plank of its HSF Ambition technique, launched in 2022.
In Kramer, D’Agostino believes HSF has discovered each ‘high-quality scale in a single day’ and a stable base for additional growth within the US.
HSF already has a small disputes-led workplace in New York, however along with considerably ramping up its Manhattan presence with the addition of Kramer’s near-300 legal professionals, it is going to additionally acquire a presence in Washington DC and Silicon Valley. ‘This deal offers us three of these [priority cities] instantly, however the actual prize is what we’re going to construct over the subsequent 5 years,’ he explains.
Each companies are dedicated to vital funding within the US and subsequent on the agenda is Texas, with an extra merger one potential path to entry.
‘All choices for a way we launch in Texas are on the desk – together with one other mixture,’ says D’Agostino, mentioning the necessity to strengthen the merged agency’s power apply within the US.
‘Our power sector apply is a jewel in our crown, I suppose we are able to declare to be one of many world’s main regulation companies in that house. Kramer doesn’t have that, however we’ve agreed that we’re going to construct it collectively, which is able to contain us taking a look at Texas,’ he continues.
Extra development priorities embrace strengthening its personal fairness apply in New York; increasing the agency’s chapter capabilities globally to align with Kramer’s top-tier US place; and enhancing class actions, antitrust and tech-sector practices within the US, significantly in Silicon Valley.
As soon as mixed, the agency will likely be one of many largest non-US headquartered companies within the US by accomplice numbers, based on D’Agostino, who notes that ‘it is a main step for us and provides us a major benefit’.
‘On 1 Could, 25% of the agency’s international earnings will come from our three mixed US places of work. There’s a practical path to get that nearer to 30%, or perhaps a third, over the subsequent five-year window,’ he predicts.
Hypothesis out there advised that the merger would possibly have an effect on HSF’s referral relationships with different US companies, however D’Agostino downplays these issues, emphasizing the agency’s traditionally broad relationships within the US.
‘We’ve all the time had broad relationships within the US, and we’d hope these relationships will proceed, as these companies will nonetheless wish to instruct our agency in jurisdictions the place we have now main groups. What’s thrilling now could be we’ll be capable of retain extra of the US work we herald,’ he explains.
Discovering the appropriate agency
Chatting with D’Agostino, it’s clear the agency took a really deliberate strategy to its US merger technique that has enabled it to maneuver shortly, working carefully with consultants to assist it zone in on appropriate companions.
‘We determined we have been searching for a agency within the $300m-$400m income vary,’ he says. ‘Typically when folks take into consideration US mergers, they think about companies of comparable sizes getting collectively, however that’s very, very tough to do. We didn’t search for a global agency; we targeted on discovering a powerful US agency with restricted or no overlap, and the agency that got here out on high was Kramer,’ he explains.
Data of the discussions was tightly managed, with D’Agostino main the talks alongside chair and senior accomplice Rebecca Maslen-Stannage in Sydney, govt accomplice Alison Brown, and senior M&A accomplice Gavin Davies in London. Reflecting on the secrecy surrounding the deal, D’Agostino admits it wasn’t straightforward to maintain underneath wraps, jokingly including: ‘somebody messaged me saying they’ll by no means invite me to play poker.’
Validation of Kramer because the workforce’s chosen suitor got here from HSF New York managing accomplice Scott Balber.
‘Once we ran the shortlist by way of with Scott, and he pointed at Kramer and mentioned, “That will be an unimaginable mixture” – that was our second of validation,’ remembers D’Agostino.
From there, ‘it grew to become clear very early on that each side felt we’d discovered the appropriate accomplice. The cultural alignment was apparent, and the joint imaginative and prescient was clear from the get-go, which helped us transfer at tempo.’
Strategic integration
Herbert Smith Freehills Kramer – working as HSF Kramer within the US – is predicted to be financially built-in from day one, working with a single revenue pool and a unified international remuneration construction.
‘This ensures that companions are finest incentivised to collaborate throughout borders and to proceed the collegiality that each companies at present get pleasure from,’ D’Agostino notes.
To help the merger’s success and guarantee accomplice stability, HSF has launched lock-in measures designed to incentivise retention and collaboration.
Whereas the main points of those measures are nonetheless being finalised, D’Agostino is assured in regards to the agency’s means to retain expertise. ‘Companions in each companies are dedicated to pursuing a imaginative and prescient to be one of many world’s main worldwide regulation companies,’ he says.
‘Since we introduced this, the suggestions from purchasers, commentators, and companions has been enormously constructive’, D’Agostino stresses. With many companions in New York set to seek out out extra in regards to the deal this week, companions will subsequent obtain detailed details about the union in January 2025, forward of the February vote.
It’s truthful to say D’Agostino is assured in regards to the end result. ‘This technique was not plucked from skinny air. We’ve been looking for the very best agency to affix forces with, and now we’ve discovered it.’
‘That is thrilling – it’s setting the agency up for the subsequent era and generations to come back,’ he says. ‘Our companions can’t wait to get began.’
anna.huntley@legalease.co.uk
