‘We need to use this mix to forge a brand new world 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 affords ‘a profitable trifecta: world disputes and world transactions on day one, a high-quality US regulation agency, and alignment over ambitions for progress.’
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 Might 2024, D’Agostino is obvious that the merger represents a right away leap ahead for each corporations, with extra formidable progress to observe.
‘We’ve discovered a agency whose make-up and energy are similar 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 special 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 corporations 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 enlargement
HSF has lengthy been vocal about its want to increase within the US, which fashioned a central plank of its HSF Ambition technique, launched in 2022.
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’ll additionally acquire a presence in Washington DC and Silicon Valley. ‘This deal offers us three of these [priority cities] instantly, however the true prize is what we’re going to construct over the subsequent 5 years,’ he explains.
Each corporations 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 the 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 vitality follow within the US.
‘Our vitality sector follow is a jewel in our crown, I assume we are able to declare to be one of many world’s main regulation corporations in that area. Kramer doesn’t have that, however we’ve agreed that we’re going to construct it collectively, which is able to contain us Texas,’ he continues.
Extra progress priorities embody strengthening its non-public fairness follow 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, notably in Silicon Valley.
As soon as mixed, the agency shall be one of many largest non-US headquartered corporations within the US by accomplice numbers, in keeping with D’Agostino, who notes that ‘this can be a main step for us and offers us a major benefit’.
‘On 1 Might, 25% of the agency’s world income will come from our three mixed US places of work. There’s a sensible path to get that nearer to 30%, or perhaps a third, over the subsequent five-year window,’ he predicts.
Hypothesis out there steered that the merger would possibly have an effect on HSF’s referral relationships with different US corporations, however D’Agostino downplays these considerations, emphasizing the agency’s traditionally broad relationships within the US.
‘We’ve at all times had broad relationships within the US, and we’d hope these relationships will proceed, as these corporations will nonetheless need to instruct our agency in jurisdictions the place we now have main groups. What’s thrilling now could be we’ll be capable to retain extra of the US work we herald,’ he explains.
Discovering the precise agency
Talking to D’Agostino, it’s clear the agency took a really deliberate method to its US merger technique that has enabled it to maneuver rapidly, working carefully with consultants to assist it zone in on appropriate companions.
‘We determined we had been on the lookout for a agency within the $300m-$400m income vary,’ he says. ‘Usually when folks take into consideration US mergers, they think about corporations of comparable sizes getting collectively, however that’s very, very tough to do. We didn’t search for a world agency; we centered on discovering a powerful US agency with restricted or no overlap, and the agency that got here out on prime was Kramer,’ he explains.
Information of the discussions was tightly managed, with D’Agostino main the talks alongside chair and senior accomplice Rebecca Maslen-Stannage in Sydney, government 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 below wraps, jokingly including: ‘someone messaged me saying they’ll by no means invite me to play poker.’
Validation of Kramer because the group’s chosen suitor got here from HSF New York managing accomplice Scott Balber.
‘Once we ran the shortlist via with Scott, and he pointed at Kramer and mentioned, “That might be an unbelievable mixture” – that was our second of validation,’ remembers D’Agostino.
From there, ‘it turned clear very early on that either side felt we’d discovered the precise 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 world remuneration construction.
‘This ensures that companions are finest incentivised to collaborate throughout borders and to proceed the collegiality that each corporations presently take pleasure in,’ D’Agostino notes.
To assist 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 concerning the agency’s potential to retain expertise. ‘Companions in each corporations are dedicated to pursuing a imaginative and prescient to be one of many world’s main worldwide regulation corporations,’ he says.
‘Since we introduced this, the suggestions from shoppers, commentators, and companions has been enormously optimistic’, D’Agostino stresses. With many companions in New York set to search out out extra concerning the deal this week, companions will subsequent obtain detailed details about the union in January 2025, forward of the February vote.
It’s honest to say D’Agostino is assured concerning 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 technology and generations to come back,’ he says. ‘Our companions can’t wait to get began.’