Big Merger Year Sets All Eyes on 2014
Data released by legal consultancy Altman Weil on Wednesday shows that U.S. law firm combinations rose 47 percent in 2013. Small firm tie-ups were partially responsible for the frenzied merger activity, which saw 88 firms join forces—the largest number in a single year since Altman Weil began tracking mergers in 2006.
The results weren’t a surprise—The Am Law Daily reported late last year on 2013’s record-setting merger pace—but Altman Weil does note some of the reasons driving the merger mania. For instance, most of the merger deals involved a smaller firm being absorbed by an acquirer at least five times its size.
Ward Bower, a principal at Newtown Square, Pa.–based Altman Weil and veteran merger enthusiast, tells The Am Law Daily that larger firms of the Am Law 200 variety have been keen on picking up smaller shops to bolster certain practice areas or move into new geographic locales.
Despite 2013’s high volume of combinations, mergers between Am Law 200 firms were nonexistent, something Bower attributes to the complexity in orchestrating larger deals that call for the formation of a “third entity” with a unified compensation and management structure that must be negotiated between both merger partners.
Dentons and McKenna Long & Aldridge saw their tie-up talks flounder in November because of disagreements about the structure of a combined firm. Conflicts, which helped scrap discussions that same month between Pillsbury Winthrop Shaw Pittman and Orrick, Herrington & Sutcliffe, as well as in December between Locke Lord and Patton Boggs, are also a complicating factor in completing big firm mergers.
Altman Weil’s report comes on the heels of research released by London-based alliance partner Jomati Consultants, which notes that mergers among U.K. firms also hit record levels in 2013.
Bower says that most merger activity in the U.K. last year was domestic. With the country just beginning to emerge from a double-dip recession, and the fiscal year for most British firms ending on April 30, Bower says he foresees the potential return of transatlantic merger activity in 2014.
“The U.K. firms are in their final stretch right now, so we’ll know their [2013–14] financial performance soon,” Bower says. “I think you’ll see U.S. firms, at least those that are rethinking what they want to do in London, take a look at some of them.”
Cross-border mergers represented only 6 percent of law firm tie-ups in 2013, according to Altman Weil. The largest deal involved Hogan Lovells’ acquisition of 120-lawyer South African firm Routledge Modise, a tie-up The Am Law Daily reported on in November.
And if the early results from 2014 are any indication, more mergers could be on the way this year.