BigLaw Could Learn Lessons from the Unsuccessful Corporate Conglomerate Business Model


Republished/posted with permission of Daily Journal Corp (2009)

Going back to the days of Jim Ling of LTV and Charlie

Bluhdorn of Gulf & Western, we saw the rise of the “conglomerate,” the building of massive, far flung business empires of widely disparate business lines, pyramiding off the cash flows and leverage of recent

acquisitions to fund further acquisitions. There is a very definite issue with respect to how long one may pursue a strategy to acquire, use the increased revenue of an acquisition to apply to another acquisition, and keep going through a repetition of the process. Eventually, the

process comes to a resounding, and inglorious end. Not uncommonly, brilliant buys at the beginning become diluted and overwhelmed by terrible buys later in the process, because the strategy mandates that you buy something... and later that you buy almost anything, just to keep the momentum, because if you stop, the model collapses.

Those conglomerate building strategies ultimately turned out to be famously unsuccessful for a long list of reasons, but among the more resounding was the inability to assemble a workable management in a superior, coordinated fashion. Bad motives or character either had nothing to do with

the ultimate failure, or were irrelevant in any event.

Consider the strong parallels from that business experience of the 1960s and 1970s to the last decade of expansion in BigLaw to the “global one stop shop.” The reality is that for most partners, if the firm has a headquarters in New York, that an office in Los Angeles is really not that

important, and one in Prague even less so. Adding an entertainment law practice to your corporate finance group is unlikely to have much, if any, crossover benefit in marketing or service for either group. An intellectual

property shop in Palo Alto, a rocket docket team in Delaware, an estate planning practice in Minneapolis, an alternative energy team in Bucharest, and a group of lawyers in Shanghai..........

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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