It’s been an active several years for law firm mergers, and the rate of consolidation is still increasing, according to a new report.
The consultancy firm Altman Weil recorded 48 law firm combinations in the first half of 2015, marking the highest mid-year number in the nine years it has been tracking such activity.
Nineteen combinations took place in the second quarter, with the legal behemoth Dentons leading the way and in merger talks to combine with even more firms.
In January, Dentons announced plans to merge with China’s Dacheng Law Offices to create a firm with 6,000 lawyers; and by July 1, it had finalized its merger with Atlanta-based McKenna Long & Aldridge.
Eric Seeger, a principal at Altman Weil, said that the figures set the stage for a busy 2015, noting that law firm mergers are usually announced in the second half.
“A lot of times the discussions will begin in earnest after compensation season concludes at the beginning of the year, and then it takes some time to put the deal together.”
Kent Zimmermann, a consultant with Zeughauser Group, said he believes the Dentons Dacheng deal, in particular, has created an atmosphere in which other law firm chairs “feel pressure to grow.”
Zimmermann added, “We heard from some the day the deal was announced.”
He said the “prevailing thinking” among executive committees is that expanding through lateral hires takes too long and carries too much margin for error.
The mid-year report identified Chicago and Houston as particularly desirable markets for law firm expansion. It pointed to Cozen O’Connor’s acquisition of the 60-lawyer Chicago-based firm Meckler Bulger Tilson, and Blank Rome’s acquisition of the 24-lawyer IP boutique Wong Cabello in Houston.
Seeger noted most of the combinations stem from small firms being acquired by large firms, often times because the smaller firms have succession planning issues. Dentons is an outlier in that it is “all-in on massive growth,” he said, noting this strategy cuts both ways.
“The pro is that you’re everywhere, all the time, and you take your place among the world’s elite by having legitimate capability in all jurisdictions,” Seeger said.
“The risk, of course, is that you grow too rapidly to successfully manage all the pieces.”