BONUS episode: Taylor Wessing’s big US gamble

Hello and welcome to this bonus episode of The Lawyer Podcast. Yes, we thought we had wrapped up The Lawyer Podcast for the year. But Taylor Wessing and Winston and Strong had other ideas. The lawyer exclusively broke the story of the second transatlantic merger in under a month on Friday. So we couldn't resist before we head off into the fest of sunset and emergency podcast on the news. And here on the podcast as always are the lawyer's litigation editor Christian Smith and me editor-in-chief at the lawyer Catherine Griffiths, along with our deputy insight editor Nikhil Rajagoval, an international editor Charlie Johnston. And on this episode we have a very special guest, the founder of German Legal Magazine UVA, German Legal Market Expert, and quite conveniently the brother of our very own, Catherine Allard Griffiths. Welcome all. And look to start off with, because I think conscious that everyone listening might be very interested in transatlantic mergers, but may not be as knowledgeable about Winston and Strong and perhaps even Taylor Wessing. So you're probably the best person, just give us a brief vibe check on the two firms, what they are, what they're known for, what they do. Very briefly, Taylor Wessing, tend to be called Anglo-German, but we'll go into that in a minute. Taylor Wessing is an upper mid-market city firm, big strengths in venture capital private equity, tech, life sciences, IP, private wealth, bit of real estate as well. And they have what's called a varine. A varine is an association under a large umbrella where partnerships come together under this umbrella and use that platform and share the brand and so on share services, but they retain different profit pools completely. And that varine included the major part of it was the firm Vessing, or now which is actually creates the Wessing, part of Taylor Wessing's name. And they're essentially a European-based business with some Asian offices. I'm sure we'll get into that later in the podcast. Winston Strong, Chicago Headquartered, National Firm, again, sort of kind of upper mid-market-ish within the US, very strong litigation, decent corporate practice, also very interesting and very well regarded IP practice as well. They do have a very small London and Paris presence had always struggled to grow. So it was in that classic tier of US firms that couldn't quite get off the ground globally, or on a transatlantic level. Just to add to what Kat was saying, if you look at the data, the firm, Winston Strong generates the revenue of more than a billion dollars. Taylor Wessing, the firm as a whole, the varine, as a whole, generates the revenue of about half a billion pounds, but the UK part of it, which generates the lion's shirt at the revenue, which is going to the US merger, it is about 284 million pounds. And combined, the firm will be about 2,000 lawyers and will generate a revenue of about 1.6 billion dollars. Well, look, it would be easy to see this as the fourth major transatlantic merger in the past three years or so, or less than even, but there's a bit more to that in this case as well. I think actually before we come to the rationale behind it, it's probably worth explaining what's going on in Germany. This makes it a more complicated merger than perhaps we've talked about recently with Asherson Puganskoui and in particular, a more controversial one as well, Eld. Well, Taylor Wessing have been in a fine with each other for just under 25 years. The German practice is, as Kat said, is full service across five offices, I think. And the news that seemed to trickle into the German partnership in around September gave him a very hefty shock because they had reached the position where a lot of the German partners were saying that it's time for more integration with the rest of the fine. That was something that they had not been a huge proponent of over the last couple of decades. It was the only firm where the excuse was regularly wheeled out that there were tax reasons why they couldn't do a proper financial merger. But that seemed to have now passed and they were pressing for full integration. And as such, the announcement of the UK partnership that they were seeking a merger with the US firm was quite a shock. What's going to happen now is what's often happened to German law firms who either fail to get a merger or have been rejected by a different suitor is that already recruitment consultants are obviously phoning a lot of partners at Taylor Wessing. But what's possibly more interesting is that what's come out of the German a partnership over the last few weeks has been some really good reporting by Martin Schilder-Euber on this is that they set up a cooperation agreement with Taylor Wessing UK so that referral and client relationships can continue as before. But they've at least seemed to have made the internal announcement that they're going to stay independent. Now whether that is in the long term possible is the big question because Taylor Wessing I think most observers would say is a firm that has suffered from under management over the last 10 to 15 years. Their revenue per lawyer has stagnated over the last five which isn't a great metric. But they do have a new managing partner in Oliver Bertram and one of the most interesting things is that the degree to which the German partnership is now standing behind Bertram which is the first time in a long time that the very heterogeneous partnership which is Taylor Wessing has been strategically united to this extent. So that's a positive sign but I think most observers will say the firm is going to calm down a lot of pressure. It needs to undergo some equity management fairly quickly and there will be all sorts of other firms circling. The strengths of the German partnership are not dissimilar to those of the UK's are very good IP and one of the leading IT practices and they're excellent eventually capital practice as well and they are attracted for many firms as well. And can I ask why have they split as a result of this or preceding this? Why can't they all do? I mean A&O Sherman for example has German offices and they all merge together. Why can't Taylor Wessing keep its German offices? I'm sure Kat could say something to this. I think from the and just looking at the figures as well, the German offices aren't as profitable. I think there would have been a drag on the profitability of the firm as a whole. But I think more to the point the German like many German firms they their transatlantic business is not so much related to private capital. It's more related to industrial clients and IT clients and they have referral relationships to a whole bunch of US firms and I think the feeling of the German side is that the way I understood it is what they're they're scepticism about what the UK firms doing is that the the merge firm won't be big enough in Europe to and Winston Straun isn't big enough in the US to make up for those the loss of those referral relationships. There are some major technology corporations who use Taylor Wessing in Germany and I think there's a real fear that any tie up with Winston Straun we're threatened that but I don't think there's really any interest at all in a US tie up. Yeah I mean Taylor Wessing UK I mean they their partners are acutely aware that they are precisely in the sort of fields that US firms will come a calling. You know we've seen what's been happening with Travis Smith over the over the last few years Taylor Wessing at the moment has a relatively sticky kind of partnership in London but you know the fact is that the US firms are still paying big money for really good teams and Taylor Wessing would have come into that would have come into that category. I mean Taylor Wessing has understood the importance of a US arm to its practice four years you know it's got a California operation it doesn't practice local law but it has six partners out there actually two of them are from the UK partnership and the rest are actually from other parts of the Orion but it's been a really important plank of their practice and I think that you can't be in tech and in life sciences and venture capital emerging you know growth company markets in London without actually having a proper US strategy so I don't I think for the UK partners the logic is obvious I think Al is absolutely right for Joan partners it's a much more distant prospect and I don't think the it's much less existential but of course by not accepting that premise it means they now have existential issues for themselves. Well we'll come back to Europe as well in a moment but just kept sucking with you and Nikhil as well I think I mean just talk us through you you started on it there cat the rationale behind this merger why does Taylor Wessing want to and also why does Winston and Straun want it? Well I think if you look at all the mergers that have happened in the past two three years Christian you're very clear why the firms want these mergers the mid-tier firms are seeing the problems or the limitations of their model UK firms clearly want US presence US mid-tier firms want a global platform that the UK firms tend to provide them but by that logic it's very clear as to why they wanted a merger and in that respect I think it serves that purpose and I think for firms outside New York I mean there are plenty of really good firms that have got you know Chicago or Boston or you know sort of a lot of the Midwest I think a lot of UK lawyers don't really understand actually how important the Midwest economy is and actually I suspect the Germans don't either on that basis as well because there are a lot of industrials and there are a lot of potential strategic buyers not just financial buyers and quite often those those firms that have got you know a big business and actually huge in disputes as well you know they are quite attractive culturally to a UK firm because they don't make quite the same level of of profit per equity partner you know there isn't quite the same expectation to be clear there will be a higher expectation for Taylor Westing UK to come up to scratch in terms of those metrics but but they do present a sort of a rounded alternative that is more perhaps culturally less ferocious should we say culturally than quite a lot of the big New York firms and speaking of this sort of litigation focus as well care let me ask you a pop quiz who was the fastest growing litigation practice in the UK last year why I don't know Christian who was the fastest growing litigation practice in the UK last year all right you know how I feel about Pantos it was Taylor Westing they were the fastest well actually well that's that's not entirely true they were the second fastest by half a percent or something like that but only because what in part because you know Sherman was the fastest growing practice but that was their first year post merger and they would have had a little bit of merger growth out of that so the fastest organic growing litigation practice and Taylor Westing has been you know focusing on that quite a lot recently both in the UK and more globally very much in the life science and technology areas as well but more commercially too and also like Ashes who is merging with the litigation heavy Perkins Kui Ashes has also been putting its foot down in litigation in recent years so there's a bit of a bit of a a link theory I suppose yeah I think this reminds us doesn't it that you know life isn't all about the top private equity private capital deals you know there is plenty of other work to be had on on a transatlantic level can we bring in Charlie Charlie you've been looking at what this deal might mean for other parts of the sort of the Taylor Westing sphere if you like and I think you've been following actually what was going on with their Spanish link up yep absolutely so I think what we're seeing with Taylor Westing's strategy for international expansion and we've been seeing this for a little while now is that there's a growing kind of sense and recognition of this as a further example of a pattern of yes international expansion entire ups but through methods that are outside of that for our model that we mentioned we saw that in Italy just earlier this year through a strategic alliance with domestic Italian firm Orzinger or two and we saw that a couple years ago as well with a similar agreement with iberian vermiceeha so this merger is another geographic expansion that continues that trend and diverts away from that varian structure and at the same time it also signals somewhat of a move away from Asia which is super interesting to consider especially in the context of the asher's US merger announced just last month as well I think it really shows the kind of different pathways that they're embarking upon Taylor Westing itself has been actively reducing or perhaps they might say reorganising their Asian presence in October it's split from its Hong Kong arm HM Chen and co so that ended in association that has been going for about 10 years now and alongside that it's been refocusing should we say it's China strategy around Shanghai so when you take that in the context of asher's who at the same time are pursuing the US merger but are continuing to prioritise their Asia Pacific presence you know they've got offices across Hong Kong Singapore Tokyo Shanghai Beijing etc and so I think that's really interesting to consider and coming back to Europe for a second we know that this merger will have structural consequences in particular you know not only Germany is set to split but also so will Eastern Europe and what that means in practice is that whilst the firm is expanding into the US they're creating space elsewhere for firms who may want to enter those markets and you know leaving behind very well established pools of talent for them I think that's such a good point and I think it is going to present so many opportunities for firms that want to expand further into into the content I mean how you've already talked about you know the fact that recruiters are already calling in Germany and we haven't talked much about France but you know that will happen as well and Eastern Europe has been increasingly interesting I mean when we say Eastern Europe we really mean Poland here that has become increasingly interesting to an awful lot of firms we know we saw Adolf Shaw's take the link later's Warsaw office there are persistent questions raised over what A&O are going to A&O Sherman are going to do with their Warsaw offices although obviously the firm itself says that they are committed to Warsaw at all times but you know there is a sort of wholesale restructure and I think that will happen across across the continent because of these moves you know to to your point Charlie you know the Winston Taylor which is what we're going to have to learn to call them and by the way I can't remember which way that name works I keep calling it Taylor Winston so if I at some point in this podcast I say Taylor Winston apologies but anyway Winston Taylor is the firm anyway not all transatlantic mergers can be grouped together I mean we are currently grouping ashes together with Winston Taylor because they happen within a month of each other but as Charlie points out it is a completely different fish you know Winston Taylor is not interested in Asia they've said that really clear obviously they are they're going to have to want to fulfill certain amounts and mandates for their clients but that is not a priority area of growth whereas ashes it is and obviously the other thing is that the sectors very notable to see how Middle East is very important to Winston Taylor strategy in a way that you didn't really hear so much from the ashes management when they did the deal and the reason the Middle East is important is because Taylor Westing as was has a really really strong private wealth practice and that is going to power quite a lot of the move into private capital private equity and investment work into the US as well. And Charlie can we just clarify so so Poland and Germany are separating but then Spain and the Netherlands and other parts of the European practice are staying with the London office. So yes so Spain they're alliance with a see how will remain in place that's been confirmed. The likes of the Netherlands, Belgium, Ireland they will also remain with Winston Taylor it's just France Germany and Eastern Europe that went. And I suppose I mean in some ways linked to what Alad was saying before about the less the lower profitability in Germany I mean that's nickel you that's also going to be an issue with the current Taylor Westing in Winston and strong in the sense that they own a lot less in London on the hold don't they? Yes I mean in my eyes I see this as an acquisition I mean if we were if we were calling A N or Sherman an acquisition of Sherman and Sterling then this is exactly that this is an acquisition because Taylor Westing is the Taylor bit of it is clearly the tiniest part and there's going to be an increased set of expectations from that bit as Kat mentioned earlier that if you talked to any lawyer today at Taylor Westing they've you know they've got a great work life balance they've got a 1600 hour target they rarely work weekends but that's not the case for Winston and strong the set of expectations for Taylor for Taylor Westing lawyers in the UK is going to either grow or they're going to follow a multi-tier system when it comes to expectations and compensation eventually. I suspect that the UK Taylor Westing partners will bulk Nikhil at your characterization of them not working at weekends but they might they might but they will not see that when they talk about culture. Also true I think what this also shows is the inability of the sort of the upper mid if you like the national US firms is that they are now absolutely accepting that they can't get a transatlantic platform at all on their own they can't build it themselves they have to do the deal and Nikhil I know this is a point that you've made repeatedly as well and and and it is therefore the issue what is going to happen next because if I was running a national firm such as let's say Pillsbury or Austin and Bird or those are two random names by the way or Shepherd Mullin or one of those kind of firms that have you know quite often been thrown into the mix as potentially interested in in coming to Europe you've got a decreasing pool of candidates that can actually deliver what you want for the clients. No absolutely and and even if you look at Winston-in-Stron they they paddled with a few important lateral hires last year in London they hired a partner seagull from Deckert they made a decent enough round of promotions in London as well but again none of that was enough to give them the kind of scale that they wanted out of London and despite the fact that Germany is leaving the that the is decoupling from the from the Orion Winston-in-Stron saw value in the deal and they decided to stick with it simply because of how far up the priority list London is for them and just to put that into context what what this acquisition does for them is that when they were they were barely in the US 50 with the revenue of 44 million dollars earlier this year this will overnight take them into the top 10 and there'll be a 320 million dollar firm in London which puts them right next to middle bank. That is quite something could can we come back to Germany here and also I'd like now to advance and trademark my term twex it so Ahmed you've talked about the the likelihood of the vessing part of Taylor Westing becoming under attack from headhunters and from opportunistic firms what are the dual practices what if you were if you were looking to expand what would you do number one and secondly talk us through the mood within the vessing part of the firm at the moment and the mandate that Oliver Butler actually must have. Yeah the strong practices are health care IP, IT and venture capital and they really are top flight practices Bertrand was was he's someone with with some management experience about the firm it's not a couple of other management jobs and the fact that he was voted in about a year and a half ago shows that the Taylor vessing partnership were ready for a different approach. Now you can say it's a few years too late but what he does have in he and his management team and to by all reports the atmosphere in the in the if we call it the vessing partnership although they insist they're keeping the name I think is is fairly bullish and they think that they are there will be in in in a position to restructure the firm and there is some possibly significantly structured that would from outside this point of you would have to take place but the big question is what happens in a year or two if the problem with the fine structure has been a lack of integration and not getting a fair share of cross border work then being an independent firm and having started to be a completely independent firm in 2025 is not really going to solve that and so that's why a lot of people were already speculating about the German partnership looking for another merger partner in in the UK although I imagine now that the the fine philosophy is coming under a lot of pressure I mean we've seen the example of it at Taylor vessing and and the financial results of CMS and Osborne Clark to name two others are not haven't been exactly stellar over the past five years I think there's a lot of justified speculation well if they were going to have to restructure and then look for a merger partner in the UK why didn't they do that before yeah do it and do it with Taylor vessing UK you know within if you are an independent firm in Germany right now you've got obviously at the top you have hangeler you have glyce you have nir you know another independent firm like Luther to your point I mean correct me if I'm wrong but Luther went into sort of a slightly odd alliance with a couple a couple of other European firms and has slightly lost ground is my is my feeling you know to be an independent firm in Germany has its own massive risks doesn't it yes and no I think one thing that looks very different from Germany is if you're if you're sitting on the biggest economy in europe then if you affirm that has up to 300 400 lawyers then the existential need for an international alliance it's possibly not as obvious as in some other countries and Luther actually is a good example they have indeed had a whole a whole load of different alliance partners over the years but they actually one of the good performers according to the financial data over the last five years and that they've done that mostly from a domestic practice so I think just in the same way there'll be some US firms who would never dream of doing an international tie up in Germany the economy is big enough for a medium sized firm to get along actually very well without it it's a question however of what is it the partners want and are they happy being in a purely domestic firm and firms like hangeler and lies and nerdy mention cat are highly international they do tons of cross border work on their own but also with allied UK and US firms and it leaves UK firms many of whom have been certainly inquiring about mergers across the other side of the Atlantic with one fewer merger partner but to potentially merge with basically I mean cat do you think that the pressure in 2026 now will certainly be on these firms to to get a move on I'm really looking forward to hearing from firms such as Simmons and Simmons and Stemson Howard and Phil Fisher and Adelshaws these are firms that have very much set out their store as becoming very much European focus that don't want to go down that US merger route that don't want to disrupt disrupt their supply lines of referrals at the moment I think the Taylor Westing deal will make them think again I mean not necessarily change their direction but will probably make them reexamine their strategy and see how long that is going to be viable for you know there is so much of running law firms is about luck and about timing and I think to a large extent what looks like a great strategy now can suddenly turn very very sour I mean let's not let's not forget you know Taylor Westing has been a prisoner of this varying structure for years and years and years and I have to say that most of us thought that they were stuck with it you know much as in the way the Osborne Clarks kind of stuck with it or CMS or Norton Rose or what have you so I think this you know Taylor Westing cutting the Gordian knot should probably embolden quite a number of managing partners to say well actually you you know you can control your own destiny or not necessarily stuck with with what's been bequeathed but equally you know you still have to find the right US partner for it for it to really work so I think I think they're in a kind of sort of holding pattern at the moment all right then we'll look it's we do this for the air shows Perkins Kui podcast and let's do the same here I want to hear if it's a good merger or a bad merger it's a good acquisition for Winston-Straw and for televesting Germany it is possibly the beginning of an exciting new time where it gives them the chance to reshape the firm the way they some people have wanted to do so that from the last five years could it also be the beginning of the end for Taylor Westing Germany theoretically yes but they do have the fate is in their hands it's up to them whether they want to follow the line or the better it is pushing I'm going to double down on what Alette said which is that it is a great acquisition for Winston-Straw having said that I feel like this will pose more explicit challenges as far as integration is concerned than some of the other ones than some of the other recent mergers have yeah I think you know it might be difficult to speak to an entire paniopean perspective on whether this will be good for them but I do think one area in which it will be good is specifically for ASEHA and for those referral relationships and I say that because of specifically because of Winston-Straw bringing the Miami office to this acquisition and the referrals that could come from that yeah I think it's I I'm not sure yet I'm sorry I'm going to sit on the fence I don't know I want to find out more and I think cutting off the most successful or one of the most successful parts of the firm being Germany and maybe not in terms of money but in terms of actual reputation and performance and quality is an interesting one particularly at a time when Taylor Westing is doing so well in areas like IP and the UPC it's a bold decision yeah my take is yeah definitely bold and I think bold can often be a euphemism for insane but I don't think it's insane I think it's imaginative I think it's it frees up the thinking for a lot of management in in this particular in this particular sector of the market because what they've done is kind of the unthinkable and now we're already used to it that the verine is being split up and so on it it presents a solution potentially for those UK firms such as Travis Smith to follow suit that you can be potentially absorbed into a greater whole of the US and for it not to scare the horses necessarily well we'll see with a partnership vote right but I suspect the partners will will go along with this and it creates opportunities as a pure transatlantic play Taylor Westing could have carried on like this forever and never found any kind of US merger partner whatsoever but you know if you're not integrated with the German firm you know presumably you're still getting the benefits if you've got a cooperation or a referral agreement you're still going to get that client service you're still going to preserve the personal relationships that may have built up over the years so you know I think it's almost it was an unimaginable act and now it's truly imaginable and allows other managing partners to also imagine things big I do think that they're a huge risk so I agree absolutely with with all of you at saying that but I think that this simply underlines the importance of the transatlantic corridor and you know that is a logic that is not going away well less of an unequivocal vote of support for this merger then the Escher's Perkins Cooey one and I'm really I really hope that we don't have to do another emergency progress before the end of the year so if please law firms out there stop merging that would be rather helpful so we can get some holiday you know more merging I think till the third week of January would be good that would be very very good um twexit who knows what will follow from twexit many perhaps unintended consequences we'll leave this episode there uh thank you very much for tuning up you can find out more about this and other news on the lawyer.com and until the new year it really is we think goodbye from us goodbye goodbye