Ep: 11 Elliott Portnoy Offers Seasoned Law Firm Merger Combinations and Merger Advice
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“We intend to be the world’s leading law firm, not the world’s largest law firm.”
“Combinations like this are actually pretty rare in the legal profession. And while Dentons has done more than any law firm has ever done, the reality is that about 98 or 99 of 100 conversations never actually lead to fruition. These are complicated transactions.”
“But importantly, what maybe we’re most proud of, isn’t the number of deals or even the results, but that they don’t leak. We keep them very private. There are literally hundreds of law firms over the last five years with whom we’ve had conversations around the world.”
“… a law firm that isn’t innovating, that isn’t agile, that isn’t following its clients to where the clients need it to be, will be in real danger.”
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Hi listeners, this is Chris Batz, your host of the Law Firm Leadership podcast. I intentionally took a break from the podcast this summer to be with my family and welcome our now four-month-old son. But to kick off the next ten episodes, I have an exciting guest in store.
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As many of you know, we interview corporate defense law firm leaders, partners, general counsels and legal consultants. You’re listening to episode number eleven of the Law Firm Leadership podcast.
Chris: Welcome to the Law Firm Leadership podcast, I’m your host, Chris Batz with The Lion Group. Today I have the pleasure of speaking with Elliott Portnoy, global CEO of Dentons, which is the largest law firm in the world. As global CEO, Elliott is responsible for management of the firm, which includes over 8,000 lawyers and numerous support staff in 66 countries and 153 locations. Elliott was key to the formation of Dentons during March 2013 from the combination of SNR Denton, Canada’s Fraser Milner Casgrain, and Europe’s Salans and since then have been in the middle of several other combinations and growth, which we’ll get to.
Prior to Dentons, Elliott, you took the helm and was the youngest chairman of Sonnenschein Nath Rosenthal at 41 years old, since the firm’s founding in 1906. And during September 2010, Elliot helped lead the merger of Sonnenschein with UK’s Denton Wilde Sapte to create SNR Denton. Elliott you received your JD from Harvard, a PhD from Oxford being a Rhodes Scholar, and your undergrad from Syracuse. You’re active in community service, particularly on boards of non-profits and with KEEN.
Welcome, Elliott, to the Law Firm Leadership podcast. It’s a pleasure to have you on the show.
Elliott: Thanks very much Chris, very happy to join you.
Keeping a Focus on Family, Community and Team
Chris: So let’s just jump right in. I’ve really enjoyed and I know many people have just been watching the astronomic growth that has happened within Dentons and the progression of all the different combinations took place. And knowing that you were 41 when you took over as the youngest chairman at Sonnenschein, I’d love to just touch on some immediate advice. Knowing what you know now, what advice would you give yourself if you were to take on and kind of start that whole process over again with Sonnenschein at 41?
Elliott: Interesting question and one that I actually think about a lot is I feel very lucky that over these last ten years, I’ve been able to do something that many law firm leaders don’t get to do which is to be part of the transformation and really remaking of not just one firm but multiple firms. And it started with Sonnenschein, a firm with a rich history and wonderful people and tremendous values, but we’ve been able to continue to remake the firm.
But when I look back on the first set of combinations and really the starting point for our growth, I remember then some commitments that I made to myself that I still feel like I am maintaining around the importance of staying very focused on family. I have three young kids, and actually not so young anymore, but three kids, had to be very intensely focused on the community and perhaps, most importantly, to ensure that I could build a team that had the same passion for what we were doing because it’s the sort of endeavor that one can’t do singularly but that really has to be part of a team effort.
Chris: Yeah, so it sounds like you wouldn’t necessarily give yourself much advice or different advice. You just really stuck to your values for ten years.
Elliott: Well the world is dramatically different today for law firms than it was ten years ago, but we have the good fortune, some might say vision, but for these purposes we’ll just say the good fortune to look over the horizon and see a set of trends developing in the marketplace, to have a set of conversations with our clients, and to be a step ahead of what was happening in the profession. And the result is that ten years ago I feel like we embarked on exactly the right course to be able to create a better, stronger future, not just for all of my partners but, frankly, for the next generation of people who call Dentons home.
We intend to be the World’s Leading Law Firm, not the World’s Largest Law Firm.
Chris: Just asking the probably not-so-simple question, why did the firm become the largest firm in the world? Was it something you just woke up and realized this is what needs to happen?
Elliott: We didn’t set out to become the world’s largest law firm. In 2010 when we did the first significant combination, which was the combination between Sonnenschein and Denton Wilde Sapte, we did so because we realized that our firm, full of some really outstanding lawyers, was largely indistinguishable from about three dozen other law firms in the U.S. legal market and our combination target, Denton Wilde Sapte, felt the same way about their position in their market. And we wanted to create a very different kind of law firm but principally a firm that could more effectively compete for clients and talent than others in the marketplace. That was the first step.
At the time we did not plan nor could we have imagined that we would become the world’s largest law firm. We were simply ensuring that we were taking the action steps to be responsive to our clients and a set of industry trends. The success of that first combination led to others and over time we became the world’s largest law firm, but it was never our objective or our goal.
We intend to be the world’s leading law firm, not the world’s largest law firm.
Chris: I had a conversation with a legal consultant last year and he had mentioned the combinations that Dentons have undergone and has noted other large global law firms eyeing this. Would you say, Elliott, that there’s a race to 10,000 lawyers?
Elliott: I don’t think so to the extent that it’s a race we’ll win, but we’re not in it to get to a particular number. There really is no magic number. It’s about ensuring you can meet the needs of your clients in all of the geographies, the practice areas, and industries that matter. And what we’ve learned over the course of the last several years of pretty material growth is that there is no limit, there’s no magic number, and rather, that we need to just be slavish in our response to what our clients need. And our clients have indicated that they want a very different kind of law firm, a firm that has a different strategy, a different philosophy, a different approach, but in particular, they want lawyers who are in and of the community and all of the markets that matter to them around the world. And today even as the world’s largest law firm, there are a number of markets where we either don’t have a presence or we don’t have a strong enough presence and we intend to continue growing.
A Review of The Firm’s Growth History
Chris: So let’s just do a little review for listeners to hear all that you and your team have been up to. So you mentioned the September 2010 merger that formed SNR Denton with the U.S. firm Sonnenschein and the UK firm Denton Wilde. And the next one that you guys have done was March 2013 which created Dentons and it was three firms: SNR Denton, Canada’s Fraser Milner, and then Europe’s Salans. And then after that it looked like January 2015, which I think was kind of the, I don’t know if the word is shock, but it really sent shockwaves, was the combination with China’s largest law firm. And is it Dacheng? Is that how you say it?
Elliott: Dacheng. That’s correct.
Chris: Dacheng. Okay. And then I know there was still ongoing conversations with McKenna Long Aldridge and that was wrapped up in June 2015, and then you had a combination with a Singapore firm in 2016, April, and then also in May 2016 you combined with a Columbia firm and a Mexico firm. And for sake of not butchering their names, I won’t say their names, but all that information will be in the podcast. What an incredible ride. I have to ask, Elliott, what were some of your takeaways through all of that combination activity?
Elliott: Well, I would first note that while trying not to be anything other than humble, in that same period we also grew in Italy, in Luxembourg, in Hungary, in South Africa, and since then in Brazil, and Amsterdam, and Peru, and Scotland.
We’re very fortunate that we got an extraordinary team. Combinations like this are actually pretty rare in the legal profession. And while Dentons has done more than any law firm has ever done, the reality is that about 98 or 99 of 100 conversations never actually lead to fruition. These are complicated transactions. You need to find a high level of strategic and cultural and economic fit, so most of the conversations we have actually don’t lead to a deal.
But we’re very fortunate that the combinations you’ve identified, the large ones and some of the more modest in size, all had similar features which was a high level of strategic alignment and that were infused by our clients identifying a market, a practice, a sector, that they believed were critically important to them. But perhaps most importantly, all of the combinations have been very good to our fundamental economics. In every part of the firm, this growth has led to our ability to serve clients we couldn’t serve previously, to retain clients that we may have been in jeopardy of losing, and to attract and retain talent that we might not have been able to attract and retain but for the growth. So for us it’s really been not just an extraordinary journey, but it’s been the fulfillment of our clients’ desires and it’s allowed us, in a period of exceptional competition and turbulence, to create a far brighter economic future for all of our people.
The Deal Team and What They Are Proud Of
Chris: Elliott, I can’t help but wonder if most conversations never come to fruition, what kind of deal team are you using or are you working with internally or externally to manage those numerous conversations? How do you guys handle the volume?
Elliott: Well, it’s an internal deal team. It is a dynamic, exceptionally diverse and talented team based in a number of markets around the world and that team really deserves all the credit for what we’ve been able to accomplish. While my colleague Joe Andrew and I often get the credit, the real praise goes to our team, our team of what we call our global chiefs, individuals who are responsible for some of our key functions, our core deal team, and our regional CEOs, who work very closely with us to be able to advance these opportunities. And having done as many transactions as we’ve done, we’ve gotten pretty good at it and we’re able to make early decisions about when we think the cultural or strategic fit may not be present and we’ll withdraw from a conversation.
But importantly, what maybe we’re most proud of, Chris isn’t the number of deals or even the results, but that they don’t leak. We keep them very private. There are literally hundreds of law firms over the last five years with whom we’ve had conversations around the world.
Chris: That’s amazing.
Elliott: And in some instances, those conversations have been quite advanced, even gotten nearly to the point of a vote, where we or they have decided, or maybe mutually decided, not to proceed and there’s not been a leak. That’s critical. We need to be able to maintain with complete confidence and discretion these opportunities. And unlike so many transactions that fail because word gets out to the media, our deals don’t and that’s made a really material difference to our ability to be able to advance those combinations which we’ve approved to closure.
Chris: That’s huge. Yeah, it’s definitely commendable because in today’s age that tends to happen quite a bit.
Elliott: There are a number of firms, I’m sure you know them, that are on their seventh or eighth publically reported merger conversation and the sad truth for some of those firms is that they may never be able to complete a deal because the market simply won’t have confidence, firms won’t have confidence having a conversation with the leadership team because they don’t believe it can be done confidentially and with real discretion and that’s vitally important to actually getting a deal done when it involves lawyers.
His Friendship with Joe Andrew and “the Power of Two” Leading at the Top
Chris: Yeah, I get that. You mentioned Joe Andrew. I’d love for you to just tell me, tell us a little about your relationship and friendship with Joe over the years.
Elliott: Sure. Joe and I were friends before we became partners. I was able to successfully recruit Joe to join me at the old Sonnenschein firm. And he and I as friends and colleagues in leadership developed the approach and the strategy and then executed on it over these last seven years since the combination with Sonnenschein and Denton Wilde Sapte.
It’s unusual because most law firms have a singular leader and that leader very often has to look over his or her shoulder and worry about who might be moving up behind them or in front of them.
And it’s often very difficult in the law firm context to be able to build a team and be able to execute on an aggressive strategy as a single person. And Joe and I formed a team. We like to talk about it as the power of two and we are able to together advance the opportunities. It used to be we do everything together. It’s a little harder these days with 66 countries to cover, so we divide and conquer perhaps a little more than we otherwise used to. But having two people with complementary skills who come at issues and problems a little differently, frankly, allows us to make better decisions and we are a unified team, which is very different than most law firms that just have one person typically, one chairman or one CEO and that’s it. We’ve done it differently and we think actually it’s a best practice and one that really has helped us achieve our objectives.
Top 3 Anecdotes (Advice) for Law Firm Mergers
Chris: Elliott, let me have you step into the shoes of others. If you were a managing partner of a firm, say 1,000 or less even down to 100 attorneys, what advice would you give a managing partner exploring a merger or combination? What’s your top two or three anecdote advice for them?
Elliott: I think if the firm is already considering a merger combination, then perhaps the most important advice is already been followed. I think for those firms that are not looking at opportunities to grow and follow their clients in the markets that may matter to them, they may be at a disadvantage. But for those managing partners who are already doing so, I think the most important priorities would be first to find a firm that you can have discussions with, who will treat everything as entirely confidential so there can be no leaks. Nothing can be more damaging, as we talked about, than those premature leaks to the media that really can tear apart a partnership.
The second would be to look for a potential combination or merger partner that’s got some experience getting deals done. As noted in earlier in our conversation, these are complicated deals. Partnerships are not the same as corporate M&A transactions, so having a combination partner who knows how to integrate, how to get a deal done, how to get the necessary votes can be really important.
Then the third thing I think would be not to double down on your existing challenges. We see a lot of merger activity, a lot of combinations between firms that seem to have the same attributes and the same challenges and that’s perhaps a short-term way to avoid the challenge, but in the long term, we think or I think what’s probably most effective is to find a firm that brings you something you do not already have, whether it’s geographic reach, particular talent, or different industry expertise. The doubling down on your existing complement of attributes usually is not the strategy for long-term success.
Who are Dentons’ Competitors?
Chris: That’s great advice and I appreciate your sharing that Elliott. Let’s shift to your competition. Now, when you’re the biggest out there, you may discover you have competitors you didn’t realize that were there. I’d love to just ask you in this competitive environment now with a firm like yours, who are your competitors?
Elliott: In truth, our competitors are both law firms and non-law firms.
In the law firm world, we’ve got a set of global law firm competitors, those larger firms that are able to offer integrated client service across multiple countries and geographies. That’s always been part of our competition. We also compete with the elite law firms, sometimes smaller firms, in every marketplace. But often what we’re competing against will be legal networks which are themselves not integrated. It’s multiple firms coming together under the banner of a network to try to vie for work. But increasingly in markets outside the U.S., our competition is the big four. Whereas you probably know, there are no restrictions on the ability of the big four to practice law in most jurisdictions around the world, so we’ll compete for litigation or M&A work from the PWC, or KPMG, or E&Y in a number of geographies.
And in the last few years, we found even more competition from technology companies, companies that are increasingly bringing artificial intelligence and other innovation to the practice of law such that the competitive marketplace looks a whole lot different today certainly than it did in 2010 when Sonnenschein and Denton Wilde Sapte first came together to create a SNR Denton.
50,000 Feet View – Changes Coming to the Legal Industry
Chris: I had a feeling that there would be more than simply law firms out there. To hear the public accounting firms competing and then the technology firms. Elliott, you gave us a high-level perspective on competition, let’s go a little higher. Let’s talk about the entire legal industry as a whole, so 50,000 feet. What changes do you see coming to the legal industry? Give us like a 5 to 20 year time span. What should we be expecting?
Elliott: First I think I’d note one of the hallmarks of the legal profession and industry is that there can be different firms in the same marketplace, whether in Washington DC, where I’m sitting today, or Kansas City, or London, or Toronto following very different strategies and they all will have some measure of success. The particular strategy we’ve employed has been very successful for us, but we don’t suggest it’s the right one for everyone. But it’s against the backdrop of a set of trends in the industry that are inexorable and moving faster and faster.
There is in the profession, not just in the U.S., but around the world, stagnant demand and if it’s not stagnant, then it’s declining. Clients simply don’t need lawyers the way they used to. Clients are not as loyal to a law firm as perhaps they used to be.
They’re using formal procurement processes, panel reviews, and the like, which results in clients consolidating and using fewer law firms than they ever have. Legal project management is very much a trend that will reshape the way business is done. All at the same time you’ve got these new law firm competitors that I mentioned earlier, like the big four, cloud based law firms.
You’ve got artificial intelligence that is reshaping the profession such that there are estimates that as much as 33 or even a higher percentage of work done by associates today won’t be done by associates in ten years, but will be done by machines or computers.
Chris: That’s amazing.
Elliott: And when you put all of those pieces together at the same time, it’s a serious threat to the way in which many law firms futures may kind of unveil themselves such that for us, the action steps we’ve taken position us for growth and success going forward, but those law firms that are standing still, that are hoping that the market will return to the way it once was, I think are going to be in very shaky shape and may well not make it because all of those trends are moving faster and faster and those are just the trends we know about.
As is always the case, there will be some unexpected twists and turns, but the result is that a law firm that isn’t innovating, that isn’t agile, that isn’t following its clients to where the clients need it to be, will be in real danger.
What Isn’t Changing for the Legal Industry in the Next 10 Years
Chris: Yeah, thank you for that. I know there’s been lots of changes and consolidation coming to the legal industry. Let me flip it. Let me invert it. I want to invoke Charlie Munger in this question and to quote Jeff Bezos, what’s not going to change in the next 10 – 20 years for the legal industry?
Elliott: I believe that the fundamental quality and reliance on lawyers for a particular set of services won’t change.
Ten years from now, twenty years from now that focus on quality will remain unchanged. There will still be a set of elite law firms in every marketplace that will continue to be successful so that whether it’s the New York elite firms, or the Magic Circle in the U.K., or the proverbial Seven Sisters firms in Canada, those firms will still be in existence. They will still be successful. That will be I think a feature of the marketplace. There will still be small boutique firms in jurisdictions all around the world. And there will still be large, global players like Dentons that continue to have the ability to handle that high value, complex work that requires a multi-jurisdictional focus. It’s everything in between those that I think is very much at risk and in jeopardy in this evolving landscape.
What is NextLaw Labs?
Chris: Let’s pivot to another thing Dentons has launched in May 2015 NextLaw Labs and is that a legal tech accelerator, business accelerator?
Elliott: It is. We were the first law firm to build and develop our own accelerator. We would refer to it as a collaboration platform. It is wholly owned by Dentons. And we do a number of things with NextLaw Labs.
First and most importantly, we collaborate with our clients, so our lawyers and our clients collaborate to develop our own technology solutions to problems that clients have in various industry and practice areas. That’s the most important thing we do, trying to bring innovation to help solve clients’ problems.
But we also make investments in various technology companies. As you know, there’s been a virtual explosion in the legal tech sector and there are a number of solutions out there that rather than building it ourselves, we’ve invested in some of the leading companies. There are about a dozen companies last year that we made investments in which give us preferential access to the technology, the software so that we can then test it and use it with our clients. And increasingly clients want a law firm that is innovative, that can actually not just do what has always been done, whether in litigation or in transactional or regulatory work.
And NextLaw Labs gives us the ability to bring something very new and different to our ongoing client relationships.
Chris: Yeah, that’s truly exciting and I continue to see some firms fearful and steer away from the technology that’s changing the industry and some of them I see embracing them. And I think it seems to be very important to be embracing it.
Elliott: Our clients are very focused on innovation. Our clients partner with us, with NextLaw Labs, and that’s what makes it a great success. We’re able to use this collaboration platform to add real value to clients. It’s often said clients want everything better, faster, cheaper; that’s not necessarily the case. They do want better service. They’d like to have greater value, but they’re really looking for a law firm that wants to partner with them, invest in them, and bring best practices and innovation to the relationship and NextLaw Labs allows us to do just that.
What’s life like being a global CEO of the largest law firm in the world?
Chris: What’s life like being a global CEO of the largest law firm in the world?
Elliott: I’m very fortunate I have what I believe is one of the best jobs available in the legal profession, the legal sector. I’m able to help put together a new firm, a firm that doesn’t always follow all the traditional rules, that pushes the boundaries, that really tries to be a little bit of a challenger brand and to do so in collaboration with clients. I’m very lucky.
The travel is extensive as you might imagine. With 153 offices in 66 countries, I’m on the road virtually all the time and that can certainly be draining at times, but it also is exhilarating when we’re able to meet client needs in ways and places we never could. We’re able to attract fabulous talent that might never have considered joining the old Sonnenschein or the old Fraser Milner Casgrain or Denton Wilde Sapte and that makes the long plane flights pale in comparison to the upside.
Chris: What’s the most interesting place you’ve been to thus far?
Elliott: It would be difficult to point to a single place. I’ve got some favorites of places that I spend a lot of time all around the world. But I’m lucky; I can in a week be in Sao Paulo, in Edinburgh, and then head off to Sydney, and end up in Almaty, Kazakhstan and each of the markets culturally is very, very different.
But what I’ve very lucky to experience is that in each of those markets we’re often either the only global law firm in the marketplace or sometimes the oldest and most rooted. So I get the opportunity to see a place like Singapore, where we are literally the oldest law firm in Singapore, through the eyes of a group of colleagues who have been there for generations, who are deeply rooted. The founders of our firm in Singapore have streets named after them. And that’s a very different experience in a place like Singapore, in China, where we have over 40 offices, or in Canada where we have six offices, or here in the U.S. where we have nearly two dozen. Each market’s a little bit different, but in all of them we’ve got really exceptional lawyers and professionals. And I get the pleasure of traveling to meet with clients and meet with colleagues and try to help knit everything together.
What is KEEN? And Why Start it in the US?
Chris: So I know that community service has been an important value for you. Talk to me about KEEN. Why KEEN? Why bring it from England to the U.S.?
Elliott: KEEN is very important to me. It’s a sports program for children with disabilities that I founded at Oxford when I couldn’t find a program like it here in the U.S. We built it here in the greater Washington area.
But it’s actually less about me and maybe it says more about my firm in that in 2006 when Sonnenschein was preparing to celebrate its centennial, rather than spending a lot of money on a movie or a coffee table book, the firm came to me and gave me the seed funding to be able to establish KEEN affiliates in New York, in Chicago, and Los Angeles, and St. Louis, and a number of markets around the U.S. And Dentons continues to be one of the most active and generous supporters of KEEN because while I happen to place a really high premium on community service and community engagement, Dentons does as well. And that’s been a wonderful ability to marry my interest in community service with what I do for my day job. And Dentons has a long and rich history of pro bono and community service engagement. And KEEN is just one example of how the firm really invests in the communities in which its lawyers live and work.
Chris: We talked earlier and you had mentioned that, and I can understand you may not have a lot of time to read, but here’s another inversion question I’d like to ask, what books should be written, Elliott, that aren’t written yet. Do you have any book titles that you think should be written?
Elliott: Well, of course I hope someone will write about the wonderful journey that we’ve had at Dentons and the ability to knit together these extraordinary law firms.
I can’t say that I can identify a book that needs to be written. Candidly, in my case, I need to find more time to be able to read. I just had a little bit of time off and was able to begin to make a dent in the pile of books that not only is on my bedside table but fills up the drawers of that table. But I just made my way through Hillbilly Elegy, which had been at the top of the list of books that I wanted to read in part because I grew up in West Virginia, but in part because I had heard so much critical acclaim, all of which I think was warranted. It was a wonderful read, particularly at a time people in the U.S. are wondering why certain voting patterns developed the way they did in this most recent election.
Chris: I know our time is kind of coming to a close, so let me ask you this question being that it’s our last question. What’s the kindest thing anyone has ever done for you, Elliott?
Elliott: I think maybe the most important and I suppose it was kind, it certainly felt that way to me, was the decision of the Rhodes scholarship selection committee to give me the opportunity to spend three years studying and doing my PhD at Oxford. For me, it firmly established my outlook as a globalist, as someone who believes that we are better when we are inclusive, when we don’t have borders. And for me it was very much a life-changing opportunity. It happens to be also where I had the opportunity to establish KEEN. So so many of my current passions and interests come together and but for the kindness of that group that saw fit to give me the opportunity to have a scholarship to study at Oxford, I might be on a very different path right now, Chris.
Chris: It’s certainly an honor and it’s tremendous that you were given that opportunity and I can see why that would be such a kind thing. Well, Elliott, it’s been a pleasure. Thank you for your time. I was thrilled to know that you would be willing to do this. I know you have an extremely busy schedule and just appreciate all the story you were able to share with us. And it’s exciting to watch what Dentons is doing.
Elliott: Well, I enjoyed it, Chris and hope to continue the conversation in the coming months.
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