While major law firms provide valued counsel to clients during this current wave of corporate mega-mergers, some of these firms face the same issues, as the legal industry is itself experiencing merger mania.
According to Altman Weil, Philadelphia-based legal consultants, 2018 is on record pace for M&A among law firms. Through 2Q2018 there have been 52 announced combinations. The largest during the most recent quarter was Clark Hill, a 450-lawyer firm, gobbling up Dallas-based Strasburger & Price and their nearly 200-attorney team. In June, Atlanta’s Nelson Mullins added the 160-lawyer Orlando firm Broad and Cassel, further bolstering its presence in the Southeast.
“Intensifying market competition is making sizable law firms with hundreds of lawyers receptive to merger offers that they would never have considered a few years ago,” Thomas Clay of Altman Weil told Bloomberg Law.
These mergers have been on the climb pretty much since 2013. During this time period, there have been an average of nearly 90 mergers or acquisitions per year, with the majority of them being among mid-sized firms. What’s surprising, perhaps, are the motivations for these companies to join forces.
Barry Genkin, an M&A attorney at Blank Rome, told American Lawyer that these firms are actually looking to keep their best lawyers around. With these purchases, they can go from being a regional or niche player to one that has a much larger geographic footprint and one with more robust practice areas.
Mark Hinderks, Managing Partner at Stinson Leonard, echoed this sentiment.
“Doing a merger is an opportunity to make more than incremental progress at one time to get mutual access to expanded client bases and to … extend into new practices that are already integrated pretty well together without you having to weave them together yourself,” Hinderks said in an interview with American Lawyer.
The mergers aren’t limited to U.S.-based firms either. In fact, many of them are transcontinental. One company in particular, the U.K.-based Dentons, made seven purchases in 1Q2018 alone. The biggest cross-border deal this year was between the St. Louis-based Bryan Cave and Berwin Leighton Paisner of the U.K. The combined entity houses more than 1,500 attorneys.
Going forward, industry watchers like Kent Zimmerman of Zeughauser Group, expect this consolidation to continue. Not only do these deals help the firms expand their presence and keep key staff in house, but they can also help boost margins by reducing redundancies and improving economies of scale.
It’s a time of transition for the legal industry. With growth slowing and additional players (including the Big 4 accounting firms) joining the fray, it’s easy to understand why the market is shifting into consolidation and turf protection mode. As for the long-term implications, time will be the ultimate judge.