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Delayed merger fuels talk of federation failure

Delayed merger fuels talk of federation failure

The speculation around the delayed merger of Dentons and Gadens suggests that the transition has fractured the national firm’s federated model for good.

Almost one year since the news broke that national firm Gadens was moving to vote on a merger with international giant Dentons, it is almost certain that the firm’s Melbourne office will not come along for the ride. Dentons is expected to have a presence in Australia by the end of the year.

In a report published yesterday, Dentons global chairman Joe Andrew gave the strongest indication yet that Gadens Melbourne will not be part of the final merger deal.

“The firm has a federated system. One office we identified that would not join in the same way was Melbourne,” Mr Andrew told Legal Business.

A Dentons spokesperson subsequently clarified Mr Andrew’s remarks in a formal statement. The firm reiterated that Gadens’ federated model spelled a unique merger arrangement for its joint venture with the global powerhouse from the outset.

Branding was singled out as one of the primary reasons that a different approach would be adopted for the Gadens-Dentons merger.

“It has previously been reported that because of the federated nature of Gadens, different offices in the joint venture would have different relationships with Dentons Australia at launch.

“In keeping with Dentons’ polycentric nature, both Gadens and Dentons recognise that these offices require distinct branding in response to client and market dynamics in those centres,” the statement said.

Gadens has underscored the federated nature of its business structure in all official communications.

Under the national federated structure the firm is subject to governance by a national board, with management teams operating each Gadens office independently.

Gadens’ Sydney, Port Moresby and Perth offices operate as one group, and each of the offices in Brisbane, Adelaide and Melbourne are separate. No profits or clients are shared between the independent groups and each office has its own managing partner and CEO.

Practically, the federated model means that each independent office can implement its own policies and go about its day-to-day business as it sees fit. The Melbourne office, in particular, stands out as one of the most independent.

For example, it recently implemented a generous new parental leave policy. While the firm’s Melbourne lawyers may be entitled to as much as six months’ parental leave, their colleagues in other groups are not.

The nature of the federated model also implies that separate groups can compete with one another for clients.

The Dentons statement released this week went on to suggest that because the local markets in each of Australia’s states and territories are so unique, the best way forward will become apparent once the global giant lands here.

“As the world’s only truly polycentric law firm, Dentons recognises that each market is different and that local offices are best positioned to determine the approach that is best for them and their clients.

“Those approaches, and their benefits to clients, will be clear when Dentons Australia launches in the 4th Quarter of this year,” the statement said.

In November last year Lawyers Weekly reported that Gadens was Dentons’ pick as the vehicle for the global giant to break into Australia’s legal market. Later that month, the firms released a statement that a three-way merger between Dentons, Gadens and Singaporean firm Rodyk & Davidson would proceed – and that, in the case of Gadens, it would go to a vote.

It is believed the firms communicated for 18 months in the lead-up to the announcement of the merger.

Since the announcement of the vote last November, Gadens has remained tight-lipped about any further developments.

Dentons finalised its merger with the 200-strong Singaporean team at Rodyk & Davidson in April this year.

While the very concept of running a business under a federated model is to ensure operational independence under one brand name, indications suggest that the Dentons merger has fractured the Gadens federation for good.

All reports suggest Gadens Melbourne will split from its sister groups when they finally merge with Dentons before the end of 2016. It remains unclear whether the Melbourne office will be able to retain the Gadens name.

Both Gadens’ independent offices in Melbourne and Sydney were approached for comment. No response was received from the Melbourne office at the time of publication. The Sydney group declined to comment.

“We do not have anything to add to Dentons’ statement at this time,” a spokesperson from the Sydney office said.  

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