Freshfields, along with Clifford Chance, Linklaters and Allen & Overy, is one of a so-called Global Quartet of UK law firms. Clifford Chance merged in 2000 with New York firm Rogers & Wells -- a merger that was beset by difficulties and is only now settling down after a series of departures. Allen & Overy and Linklaters have both decided to build their New York offices by hiring lawyers from U.S. firms, despite the fact that they can rarely offer them more money than they are earning elsewhere -- a hard sell at best.

To date, the transatlantic mergers of law firms have usually involved at least one second-tier law firm, with the deal by DLA being the first true merger of equals, albeit outside the Magic Circle and Wall Street domain. Chicago firm Mayer Brown & Platt took over City corporate boutique Rowe & Maw in 2002, and in 2003 Cleveland's Jones Day took over another small City firm, Gouldens.

While there is still no shortage of American law firms looking to break into the European market by acquiring an existing, established practice, most firms prefer to take over smaller ones and impose their own corporate culture. The top U.S. law firms are both much more profitable, and much smaller, than the top English firms. Skadden Arps is the largest, with 1,600 lawyers, compared to 3,300 lawyers at the UK's largest firm Clifford Chance. The average Skadden partner earns $1.7m, while at Clifford Chance the average is $1.2m.

If Freshfields succeeds in convincing a top-tier New York firm that it wants to be taken over by a larger, less profitable, European suitor, it will undoubtedly lead to a raft of similar deals, as clients reconsider their options.

Consolidation, transformation

For now, the most likely law firm mergers are likely to be domestic or pan-European. These are easier to achieve, and there are many firms outside the Magic Circle who feel they simply need more resources to compete with their larger rivals.

If that isn't enough to make the London legal market a darn interesting place to be for the next few years, consider that the government is planning some pretty serious reforms of the rules governing law firms. Parliament asked Sir David Clementi, a former chairman of the Prudential, to review the market for legal services last year, and he made some serious recommendations which look set to totally transform the way law is practiced in the UK.

Chief amongst Clementi's suggestions: a change to the current law which allows only lawyers to be partners and owners of law firms. That means that big businesses, including retailers like Tesco, might buy a law firm so that they could offer their customers legal services, in addition to the host of insurance and financial services products they currently sell. It also means accounting firms might team up with legal firms to offer a one-stop shop advisory service to clients., or law firms could make their finance directors partners. The permutations are limitless. Even more fundamental, is the prospect that law firms might one day float on the Stock Exchange, and thus raise cash from external shareholders to make investments. The government is still deciding precisely what form the new rules will take, but there's no doubt that big changes are on the way.