Report: Law Firm Mergers Continue Record Pace
The latest quarterly report from legal consultancy Altman Weil shows 19 law firm mergers announced in the U.S. during this year's third quarter, bringing the total number of tie-ups during the first nine months of 2013 to 58—a 41 percent jump over the same period last year.
When Altman Weil released its second-quarter report in July, the legal industry was on its way to surpassing the record 70 mergers reached in 2008 amid the onset of the global financial crisis. Heading into this year's fourth quarter, the industry is still poised to break that record.
"What's driving [the increase] is larger firms are seeing opportunities to either buy clients or buy expertise [and] in a slow-growth, no-growth market, that's not a bad way to go," says Thomas Clay, an Altman Weil principal who advises firms on mergers and acquisitions.
The third quarter included this year's largest combination so far: Kansas City–based Stinson Morrison Hecker's announcement last month that it will join forces with Minneapolis firm Leonard, Street and Deinard to form a 525-lawyer operation with 14 offices across the U.S. Clay notes that the merger is just the latest involving Missouri firms looking to expand by combining with similar-sized rivals, following the 2009 union of Polsinelli Shalton Welte Seulthaus and Shughart Thomson & Kilroy to form the Kansas City–based firm now known simply as Polsinelli, and the 2008 combination of Husch & Eppenberger and Blackwell Sanders to create St. Louis–based Husch Blackwell.
Clay says many of the Midwestern firms that have entered into "merger[s] of equals" in recent years have done so to strengthen their foundations while also looking to expand beyond their local markets. For such firms, Clay adds, the goal is often to grow to the point that they can ultimately land an office "in the capital of the midwest: Chicago."
Says Clay: "I think some of them see this as a way to look more credible to potential lawyers, or smaller firms, in Chicago."
The third quarter's other large combination—announced in July and official as of the start of September—saw Phoenix-based Lewis and Roca merge with 75-lawyer Denver firm Rothgerber Johnson & Lyons in a deal to create a firm with more than 250 attorneys in nine offices.
The balance of the third-quarter tie-ups mostly involved large firms swallowing smaller shops, including Ballard Spahr's acquisition of 14-lawyer white-collar and securities litigation boutique Stillman & Friedman in New York; Schiff Hardin's addition of 11-attorney Mazur Carp & Rubin in New York in July; and Blank Rome's acquisition of Houston-based maritime boutique Bell, Ryniker & Letourneau in August.
Clay says snapping up a small firm is a low-risk option for large firms that want to add business at a time when client demand is largely stagnant: "Everybody is looking for groups that they can acquire or gobble up, and that's why you're seeing so many of those smaller deals coming about."
While the Stinson Leonard Street deal is the largest combination so far this year, it could soon be eclipsed given this week's confirmation by global behemoth Dentons and fellow Am Law 100 firm McKenna Long & Aldridge that they are in talks about a potential tie-up that would create a firm with 3,100 lawyers around the world. (That merger might not be tallied in 2013, though, given The Am Law Daily's report that a source at one of the firms pegged January 1, 2014, as the target date for any agreement between the two firms to take effect.)