Global law firm Dentons is poised to combine with China’s largest law firm Dacheng to form the world’s biggest law firm by attorney head count, with more than 6,500 lawyers in 50 countries.
The deal has been approved by partners at both firms and must still receive approval by Chinese regulators, which could come as soon as Monday. If approved, it would be the first time a domestic law firm in China has combined with a global law firm with a presence in the United States. The closest the legal industry has come to such a deal was in 2012, when Australian law firm Mallesons Stephen Jaques and Hong Kong-based King & Wood combined to form a 2,700-attorney firm. But in that case, Mallesons had offices in Australia, not the United States, Europe, the Middle East and Africa, as Dentons does.
The combined firm will go by Dentons outside of China, and by Dacheng within China.
The legal industry has been moving toward consolidation for several years — the number of law firm mergers and acquisitions more than doubled from 39 in 2010 to 82 in 2014 — but Dentons has grown faster and more dramatically through mergers than most. Just five years ago, the firm was known as Sonnenschein Nath & Rosenthal, a Chicago-based law firm with 800 attorneys across several U.S. offices. In 2010, Sonnenschein merged with UK-based Denton Wilde Sapte, forming SNR Denton and boosting its attorney head count to 1,200. And in 2013, SNR Denton entered a three-way combination with Canadian law firm Fraser Milner Casgrain and European firm Salans, forming its current iteration, Dentons, with about 2,500 attorneys worldwide.
In 2014, Dentons earned $1.25 billion in revenue. Dacheng earned about $400 million in revenue. Dacheng is based in Beijing and has about 4,000 lawyers, primarily in China. The firm has 42 offices in mainland China, three in the United States, two in Europe and one each in Taiwan, Hong Kong and Singapore.
Dentons has about 140 attorneys in Washington, where the firm’s chief executive Elliott Portnoy and chairman Joe Andrew are based. Portnoy and Andrew will remain in their respective leadership positions. Peng Xuefeng, Dacheng’s director and founding partner, will be chairman of the global board.
Dentons is structured as a verein, meaning that Dentons and Dacheng will maintain separate finances but share clients. The upside for combinations structured this way is that it allows firms to avoid some logistical challenges that mergers of traditional law firm partnerships face, such as aligning different partner pay structures. But the downside is that it can be more difficult to integrate the respective firms.
“It’s probably a good deal,” said Steve Nelson, managing principal for the law and government affairs group at the Arlington executive search firm McCormick Group. “You’re talking about a real presence in China. It’s a big splash and gets you a long way in terms of your China strategy.”
Portnoy said he expects that the Chinese companies that Dacheng represents will seek Dentons attorneys for advice in the United States, Europe and elsewhere Dentons has attorneys, and that Dentons’s clients will seek Dacheng attorneys for advice on projects and initiatives in China.
“There is a tremendous focus on part of the Chinese legal sector and economic sector on growth outside of China,” Portnoy said. “And our conversations with our clients suggest that they believe navigating the legal and economic landscape in China is, in many instances, their most significant business priority.”
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