What is a Swiss Verein?
Once upon a time, if law firms merged it meant merging everything, including financial systems. Now, many choose instead to adopt vereins.
Vereins are a very flexible form of limited liability partnerships (LLP). They allow firms to take advantage of their brand power without merging their finances. Essentially, if the good old days of full mergers could be compared to a “what’s mine is yours” romance, firms are now only saying, “I do” on the understanding that they keep separate bank accounts.
It may be more helpful to view vereins as a branding association with a shared strategy. Firms will usually also share functions such as IT, to help the business function as one.
Indeed, it’s debatable that entering into a verein is really a true merger at all, although many firms would attest that it is.
Why is it Swiss? And what does verein mean?
It’s Swiss because it’s a Swiss legal structure. And verein is a German word roughtly meaning association.
Who’s done it?
International firms rather than your high street tiddlers. Two huge firms operating in different parts of the world are more likely to need to adopt a structure that accommodates their differences than two broadly similar British practices.
Some of the world’s largest law firms are vereins: Baker & McKenzie was the first to elect the structure back in 2004, although, so far uniquely, it didn’t do it to facilitate a merger but for operational reasons. Others that have followed in its wake include DLA Piper, Hogan Lovells, King & Wood Mallesons (SJ Berwin), Norton Rose Fulbright, Squire Patton Boggs and the latest taker: Dentons (itself already a verein) and Dacheng.
What are the advantages?
Vereins have various benefits: individual offices are only bound by regulations in the country they’re based; global accountability is limited; profit pools are not shared and so partner profits are not shared, which means that the most profitable element of a verein is insulated from any chill financial winds from the weaker partners.
What are the disadvantages?
For one thing, you’ll probably have to put up with lawyers at other firms making comments that you’re not really one firm at all. The type of lawyer who values the traditional values of partnership can get quite sniffy about vereins.
More tangibly, not sharing profits can be seen as a disadvantage if it fails to encourage the constituent parts of a verein to share clients. However, firms usually get round this by sharing the costs incurred by clients, and so indirectly sharing profits.
Why should I care?
Well, firstly, it’s always handy to know how law firms operate.
Secondly, if you’re researching a firm that has recently merged, it’s always good to dig out the firm’s own original press release (you’ll find it somewhere on their website) to see what word they themselves use. For example, when Dentons has gone though its various tie-ups, it has always employed the word ‘combination’ rather than ’merger’.
Now, using the word merger instead of combination isn’t a terrible faux pas which will scupper your chances of getting a training contract, but being able to trot out the firm’s own preferred phrases is a subtle signal that you can be ‘on-message’.
- More features about how law firms work
31 Oct 2013: King & Wood Mallesons and SJ Berwin merger goes live
15 Dec 2009: Hogan & Hartson’s merger with Lovells gets go-ahead