The American Lawyer reports that 2019 was a record-breaking year for law firm merger announcements and represented a “solid year of growth” for completed mergers, according to recent data collected by two legal industry consultancy firms tracking law firm tie-ups. Altman Weil, which tracks law firm merger announcements, announced that last year’s 115 combinations broke the record set by the U.S. legal industry in 2018, which saw 106 announcements. Additionally, another report by legal consultancy firm Fairfax Associates, which counts combinations once they are completed, announced that firms completed 59 mergers in 2019. While this is lower than the 71 mergers counted in 2018, it is still higher than the historical average of 54 mergers per year recorded between 2009 and 2018, Fairfax notes.
Two of the largest merger announcements from 2019 took effect the first day of the new year: Taft—the result of Cincinnati-based Taft Stettinius & Hollister merging with Minneapolis-based Briggs & Morgan—and Lathrop GPM, the offspring of Kansas City, Missouri-based Lathrop Gage and Minneapolis-based Gray Plant Mooty. Aside from Taft and Lathrop GPM, ten more law firm mergers are scheduled to close in the first quarter of 2020, Fairfax reports. This includes Dentons’ combinations with Indianapolis-based Bingham Greenebaum Doll and Pittsburgh-based Cohen & Grigsby as well as the pending marriage of Minneapolis-based Faegre Baker Daniels and Philadelphia-based Drinker Biddle & Reath, (as quoted in The American Lawyer).
The majority of mergers in 2019 continued to be small combinations, with eighty-five percent of the mergers involved firms between five and 20 lawyers, Fairfax reports. “We are continuing to see firms anywhere from 100 lawyers to 600 to 700 lawyers feel like they need more scale in order to compete effectively,” notes Lisa Smith, a principal at Fairfax Associates. “I think we’ll continue to see consolidation in the form of laterals and groups or small acquisitions or mergers of equal size. Consolidation is going to continue to be big in 2020,” she adds. Additionally, Zeughauser Group consultant Kent Zimmermann notes law firms are competing hard for talent. Deciding to scale up and merge can give a law firm a deeper bench and greater revenue, which can mitigate and ward off the poaching of top talent by other firms, (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
Contact Bill Sugarman for more information.
The American Lawyer reports on several key trends from this year and what we can expect for the legal industry in 2018. According to the article, key trends that we can expect to continue into 2018 include increases in law firm mergers, lateral moves within groups, and enhancements in legal technology innovation and the business operations of firms.
2017 is set to be a record year for U.S. mergers. So far this year, there have been 85 mergers and acquisitions involving U.S. law firms in 2017, according to Altman Weil data—just six shy of the all-time record, set in 2015. But while several large-scale tie-ups hit the headlines, the overwhelming majority of deals in 2017 were extremely small: Over 90 percent involved at least one firm of under 100 lawyers, while more than two-thirds were acquisitions of firms with 10 lawyers or fewer (as quoted in The American Lawyer).
Last year also saw a large number of lateral moves that involved practice groups within targeted geographic markets. “I think there’s more and more pressure to grow breadth and depth, and laterals and groups are a big part of that for many or most firms,” notes Kent Zimmermann, a consultant at The Zeughauser Group.
In 2017, law firms continued adopting legal project management techniques to get a better grip on what matters actually cost. Am Law’s article reports more firms will adopt better pricing tools; legal operations staff will gain power inside legal departments; and the traditional competition for Big Law work will be upended. That won’t happen everywhere all at once next year. But better technology will make the change begin to gather speed. “The entire industry is stuck on the billable hour because it doesn’t understand its unit costs,” says Keith Lipman, President of the legal tech company Prosperoware. “If we get to the point of managing unit cost, law firms can actually get away from the billable hour. So, the faster you collect data to understand that is critical” (as quoted in The American Lawyer).
See highlights from the full article on The American Lawyer.
Please contact Bill Sugarman for more information.
Law firm mergers and acquisitions are on track to reach an all-time high in 2017, according to the latest report released by legal consulting firm Altman Weil. So far this year, there have been 52 combinations announced, including 24 in the second quarter, topping the prior mid-year peak of 48 in 2016.
Altman Weil’s MergerLine report revealed acquisitions of firms with twenty or fewer lawyers accounted for 86% of all deals in the first quarter and 71% in the second quarter of 2017. For these deals, acquirers’ primary focus was the Midwest, including firms in Ohio, Indiana, Missouri and Michigan, and the Southern US, including firms in Florida and Texas.
“The chief driver of combinations is the battle for market share that’s being waged in response to flat or decreasing demand for law firm services, and we don’t expect that to change any time soon,” said Altman Weil principal, Eric Seegar. “Law firms of all sizes are vying to acquire new clients, expand into new markets, and upgrade their brands through quality combinations. Many of the largest U.S. firms are now routinely looking outside the domestic market for those opportunities.”
See the full report and article on The American Lawyer.
Contact Bill Sugarman for more information.
Big law firms have always been pathologically conservative in updating their policies, but has this mentality begun to affect their overall profitability? The American Lawyer recently released an article investigating whether large firms’ aging partners, who often control a majority of the client base, habitually put their self-interests above the firm’s longevity—to the point that the partners’ “short-term gains could become the institution’s long-run catastrophe.”
The New York Times released a statistic in their Dealbook stating that nearly half (46 percent) of all managing partners are between 60 and 70 years old, with only 3 percent under age 50. And, according to The American Lawyer, these partners are hoarding their clients with an “eat what they kill” mentality–which, AmLaw argues, makes the eventual succession of new partners that much more difficult.
Interestingly enough, this problem does not go unnoticed at the big law firms. A 2011 survey by Altman Weil found that 47 percent of firm leaders identified the “retirement and succession of baby boom lawyers in their firms” as their greatest concern. Yet, in Altman Weil’s 2013 survey, “only 27 percent of managing partners reported that they had a formal succession planning process.”
The American Lawyer concludes that aging partners should work to “encourage long-term institutional stability,” through prioritizing client service, encouraging partner cooperation, helping partners prepare for their “second acts,” and encouraging them to sacrifice some self-interest for the long-term betterment of the firm.
However, while Big Law partners should certainly concerned be about the futures of both their firms and themselves, many big law firms are already feeling the heat from their stagnated approach. In 2013, a study of over $10 billion in client fee invoices by LexisNexis/Counsel Link found that mid-sized firms (termed “large enough” firms, of 201-500 lawyers) are quickly grabbing the market share from biggest firms (those with 750+ attorneys). In fact, the study found, while big law firms saw a drop in their market share from 2010 to 2013, ‘large enough’ firms successfully grew theirs from 18 to 22 percent.
So, while the biggest firms continue to turn a blind eye to future strategy, it’s safe to conclude that their mid-sized competitors are eagerly seizing the opportunity to thrive.