Global powerhouse Dentons has touted its Project Golden Spike as an innovative expansion into regional American markets. Its name is meant to honor the celebratory railroad spike that completed the first transcontinental railroad in the United States in 1869. Dentons, as the firm would have it, is making its own attempt to connect this country’s many disparate locales.
But Golden Spike doesn’t seem to be to everyone’s taste, and a significant number of Dentons partners have chosen to take another train instead of going along for the ride.
According to data from ALM’s Legal Compass, 181 partners and associates have left the firm since the start of 2020, nearly offsetting the 259 who have joined, largely through the addition of new Golden Spike firms. Many of the partners who have left Dentons since the announcement of Golden Spike say the firm’s expansion plans were a main reason for their departure.
Much of the disquiet among these Dentons defectors arises from a belief that the firm is better served strengthening its ranks in major markets rather than expending resources in smaller regional markets.
Members of Dentons senior management say these claims are outlandish, arguing that the expansion received almost unanimous support.
Golden Spike, announced in October 2019, signaled a new effort to grow Dentons even further by moving into the types of markets most large firms overlook and, in the process, opening far more offices than any other firm. The project was pitched as a dual-partnership model that let combining firms maintain local decision-making power. Lawyers in Golden Spike firms remain partners of their old firm while also becoming partners in Dentons US—a member of a Swiss verein.
Dentons is not alone in using the verein model to structure its firm. DLA Piper, Norton Rose Fulbright, and Squire Patton Boggs are all vereins, among others. Yet Golden Spike seems to be giving the model a new test.
In January 2020, Dentons Bingham Greenebaum, headquartered in Indianapolis, brought six offices to the firm. That same month, Dentons Cohen & Grigsby, headquartered in Pittsburgh, Pennsylvania, brought three offices to the firm. In November 2020, Dentons Durham Jones Pinegar, headquartered in Salt Lake City, brought a further four offices.
By December 2020, Dentons had announced 20 new locations in the United States in less than 15 months. That growth gave it 44 offices in the country, more than any other global law firm.
Dentons has seen massive growth in the past few years. In 2015 the firm had a head count of 2,285 and revenue of around $1.2 billion. By 2020, head count had surpassed 11,000, with gross revenue of $2.9 billion. Much of the growth is owed to the firm’s expansion in China, where it has more lawyers than any other jurisdiction.
And the growth has continued in 2021. In March, Dentons Davis Brown, headquartered in Des Moines, Iowa, brought along three offices. Then in June, Birmingham, Alabama-based Dentons Sirote became the latest Golden Spike firm, adding five more offices.
Amid all that expansion, six former Dentons partners contacted for this article describe unease over Golden Spike as a contributing factor in why they left the firm. Many of the partners, all of whom requested anonymity for fear of reprisals, felt that moving into smaller markets came at the cost of improvements needed in major markets.
“I just didn’t see the point,” says one former partner whose practice was located in one of Dentons’ largest offices. “We needed more talent in our practice area and wanted to recruit more top-quality lawyers but were told it wasn’t going to happen.”
To this partner, there was a direct line between Golden Spike and the firm’s reluctance to add more lawyers in his practice area. And so he left.
“Golden Spike was controversial when it was proposed to the partnership,” says a second ex-Dentons partner, who worked from a different major market office and practice area from the first partner. “I was one of a group of equity partners who were pushing the firm to hire better people in our big market offices and expand them. But management was hell-bent on what they called significant growth—but it didn’t seem like quality growth, just for the sake of growth. When they came up with this idea of going into smaller markets, I didn’t agree.”
Yet Dentons senior management struggles to comprehend such sentiments, especially because they believe growth in smaller markets has not hampered the firm’s progress in major markets.
“We have grown in Manhattan—we’re much larger in New York than we were two years ago,” Dentons global chair Joe Andrew says. “There are naturally certain large markets we believe are unique and require a strong presence—like Manhattan and Washington, D.C. Golden Spike does not run contrary to that strategy.”
Dentons’ U.S. expansion strategy is aimed at building what it considers the first truly coast-to-coast national firm in America. Yet many former partners question the rationale of embarking on such a strategy in the first place.
“There’s a reason why big firms choose not to enter small markets,” says the second ex-partner. “They’re not as profitable, there are less clients to go around, and the talent pool isn’t as deep.”
Andrew disagrees, saying what some people might call small markets in America are still significant by global standards, with a rich vein of high-profile potential clients.
“Many regions in the U.S. have a larger legal spend than a lot of major global markets,” Andrew says. “Des Moines, Iowa—just the city—is nearly twice the size of important European markets, like Hungary and Turkey. Global firms are in both of those European markets, but we are the only global law firm in Iowa.”
Andrew also notes that the Big Four accounting firms do not limit their presence to a few major U.S. cities, but instead spread themselves out across the country into the very markets where Dentons is now moving.
“The accounting firms know that Russell 3000 and Fortune 500 companies—their potential clients— are spread across the country, so they go to these so-called ‘smaller’ markets to be near their clients and form close relationships with them,” Andrew says. “Legal services is a business defined by its relationships too, which is why we choose to be where the business is: all across the U.S.”
Recruiters and consultants say some regional firms are wary of opting-into the Golden Spike model, and that a number of firms have turned down Dentons’ advances because they did not want to join such a big firm or compete with other Dentons offices in their region.
Many recruiters and consultants say that while they give the global firm credit for its attempt to innovate the law firm business model, for many prospective merger partners the model still seems too unproven.
Andrew acknowledges that Golden Spike may not be for everyone, including the partners who have recently left or firms that don’t wish to join. But he says the proof of the strategy lies not just in the firm’s financial success since embarking on Golden Spike, but also in the quality and quantity of firms that have chosen to join the project.
“This is a big decision for each firm, and each one does due diligence on us. There’s always more than one firm in each market that wants to join us,” Andrew says, adding that in the markets where it plans expansion, Dentons targets only one or…