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Global Affairs

Swiss Verein: Challenging Norms in the Legal Industry

 3 min read / 

The way in which lawyers operating under a single brand (or a “one-firm culture”) work together deserves attention.

Globalisation has paved the way for mergers between large law firms. A growing number of “mergers” are being conducted by way of two or more law firms coming together under a Swiss verein. A Swiss verein is a voluntary association of different member firms or member offices and it does not practise law in its own name. It falls short of a fully integrated merger between the participant firms with a single, global profit pool.

In a Swiss verein, each member firm or member office is responsible for its legal, regulatory, accounting and tax liabilities. Each member firm or member office represents a separate profit pool and a separate operating entity, though there is cross-office sharing of branding, marketing, business development, and/or administrative costs. It is an effective alliance of different law firms or offices operating under a common brand.

In this structure, marketing efforts are centralised. The different member firms or member offices present a united front to secure mandates from large cap, multinational clients. For the purposes of industry rankings and public relations, Swiss vereins report their financial results on a consolidated basis. This has caused some controversy within the industry because, strictly speaking, member firms or member offices operate as separate businesses and consolidated reporting obfuscates that reality at the expense of other fully integrated firms.

A “normal” merger of two or more law firms on a fully integrated basis is hard won. It requires two or more firms of similar or equivalent market standing with complementary strengths in their practice areas, geographic spread, and client/sector coverage, as well as a strong cultural fit between their respective teams of lawyers. In contrast, a Swiss verein structure allows “mergers” to be done in an expeditious and low-risk manner, insulating member firms or member offices from joint liability (though courts or regulators may choose to “see through” the verein structure in legal or regulatory proceedings), and preserving the autonomy and culture of constituent member firms or member offices.

A merger implies sharing of knowledge and expertise, clients, and legal work between participant firms to enhance both revenue and profitability of the enlarged entity. Swiss vereins are flexible structures where legal and financial commitments made to other participants in the system are minimised and, as a consequence, there is a potential misalignment of cultural identity, strategic direction and incentives among participants. This is not to say Swiss vereins are unworkable. In fact, the Big Four in the accounting/auditing profession have adopted them in the past, or are continuing to use them. What it does mean is that the business structure heavily depends on mutual trust and good faith among participants since there are fewer built-in safeguards.

Swiss vereins are challenging norms in the legal industry. Their success depends on individual legal practices being able and willing to pursue a common vision within a more liberalised institutional framework. As is the case for their fully integrated counterparts, people will be their most valuable asset.

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