Anglo-Australian firm Herbert Smith Freehills (HSF) and New York-based Kramer Levin Naftalis & Frankel have agreed to merge, in a landmark deal that will create a top 20 global firm by revenue. 

The two firms’ partnerships voted “overwhelmingly” in favour of the merger, HSF said today (4 April), adding that the deal was the “first truly transatlantic and transpacific law firm combination”.

The merged firm will have a single profit pool from the start and revenue of more than $2bn, moving legacy HSF into the global top 20 from its current place in the AmLaw ranking of 34. It will have 2,700 lawyers including around 630 partners based across 26 offices. 

Rebecca Maslen-Stannage, HSF chair and senior partner, commented: “This combination is a historic and long-term commitment from both firms to pursue our future together as one combined firm, and this is just the beginning. We are excited about our shared vision and will build on our strong foundations around the globe.”

The combined firm will launch 1 June as Herbert Smith Freehills Kramer globally and HSF Kramer in the US. 

The two firms are complementary in terms of their international coverage. HSF has to date operated a small New York office and has particular strength in the UK and Australia as well as across the wider European and Asia Pacific region.

Kramer Levin – much the smaller of the two firms – ranks just outside the AmLaw 100 and has offices in New York, Washington DC and Silicon Valley. The firm had a sizeable Paris office that was not included in the merger and was spun out to Morgan Lewis last December. 

Paul Schoeman and Howard Spilko, co-managing partners of Kramer Levin, said that joining forces with HSF was “a unique opportunity that enables us to achieve our shared vision and potential for strategic growth in the US”, adding: “This is a significant achievement for our combined firm.”

The deal delivers HSF around 120 US partners in complementary practice areas, notably disputes, and sectors including energy, financial services, infrastructure, mining and technology.

For HSF, the combination represents a logical follow-on from the deal that created the firm 12 years ago, when London’s Herbert Smith merged with Australia’s Freehills.

After a difficult period in the immediate aftermath of that merger, when a large number of London-based partners left the firm, the deal has come to be regarded as a success, with the firm building up its European network in recent years.  

HSF reported record revenue, profit and profit per equity partner (PEP) for the year ended 30 April 2024, with turnover rising 10.1% to hit £1.3bn ($1.6bn) and PEP up 12% to £1.3m ($1.6m).

Meantime, while Kramer Levin’s revenue for the 2023 calendar year of $435.2m, as reported by Law.com, is less than a third of HSF’s turnover, its PEP of $2.4m is significantly higher than its merger partner’s. 

The disparity in PEP between the two sides is unsurprising, given that Kramer Levin is anchored in the lucrative US market, and is indeed welcome for what it says about the New York firm’s market position. The merged firm will, however, require a partnership remuneration system that accounts for this disparity, a challenge the UK’s Magic Circle firms have moved to address in recent years by changing their payment models. 

Commenting on the deal, HSF’s global CEO, Justin D’Agostino, said: “Today is an exciting day – a major milestone for our firms. HSF Kramer’s combined offering, global reach and scale means we will be able to deliver more effectively for our clients, whose needs are evolving rapidly in a complex environment.”

The combination’s rationale has key parallels with last year’s merger between Magic Circle UK firm Allen & Overy and Shearman & Sterling to create A&O Shearman, given its promise of handing HSF a credible presence in the key US market and the relative size of its prospective US partner.