Legal Market Consolidation: Recent Trends
The legal industry is no stranger to the adage "bigger is better," as demonstrated by the growing trend of law firm mergers. Data from legal consultancy Fairfax Associates reveals that the first quarter of 2023 has seen as many large law firm mergers as all of 2022 combined. This surge in mergers can be attributed to the desire for firms to expand their services, gain a competitive edge, and adapt to the evolving needs of clients.
Specialisation has become a highly valued trait in the legal market, with clients seeking out firms with expertise in specific practices, sectors, and geographies. As a result, firms must demonstrate "bench strength" and quality on par with or better than their peers to secure lucrative assignments.
Significant merger activity occurred during 2022, including the mergers of BLM and Clyde & Co, as well as Weightmans and RadcliffesLeBrasseur. Scale can be a key factor in achieving this goal, as larger firms with high-quality practices and sector teams can leverage their extensive resources and expertise to gain a strategic advantage. Furthermore, growth is essential for law firms looking to maintain or improve profitability and create opportunities for young lawyers to ascend to partner status.
According to data from legal consultancy Fairfax Associates, the number of completed mergers between large law firms (with a minimum of 100 lawyers each) in the first quarter of 2023 is at least equivalent to the total number of such mergers completed in the entire year of 2022.
In 2023, a couple of large law firm mergers took place, including the merger between 1,400-lawyer Holland & Knight and 257-lawyer Waller Lansden Dortch & Davis in March, and the combination of 1,050 lawyers from Orrick, Herrington & Sutcliffe with 100-lawyer Buckley in February. Freeborn & Peters, a 110-lawyer firm, has recently merged with Smith, Gambrell & Russell, which has 285 lawyers.
Ultimately, the decision to pursue a law firm merger is complex and can transform every aspect of a firm's operations, from its culture and practice emphasis to its geographic focus and business structure. However, for those firms that navigate the challenges and seize the opportunities presented by a merger, the potential rewards can be significant.
In this article, we will dive into the latest trends and insights on law firm mergers and what they mean for the industry as a whole.
Moving beyond Profits
Merging law firms can unlock a wealth of benefits, including the potential for improved services in specialty areas of law. By bringing together legal experts from both firms, a merger can result in a deeper and more nuanced understanding of the law, similar to mixing two colours of paint to create a new, unique shade. This was demonstrated by the merger of Corbett & Co., an international construction law boutique, with London law firm Howard Kennedy.
By combining the skills and experience of attorneys from each firm, a merger can result in a deeper and more nuanced understanding of the law. Each attorney brings a distinct perspective to the table. The CEO and Managing Shareholder of Maynard Cooper & Gale, Jeff Grantham on the merger of its firm said, “This merger represents the union of two firms that have experienced growth and momentum over the past several years.”
As law firms consider mergers in 2023, they should remember that the benefits go beyond expanding their reach or increasing profits. Instead, mergers can unlock the potential for greater specialisation and expertise in the law.
Law Firm Mergers – Benefits
Mergers and acquisitions (M&A) are becoming increasingly popular among law firms, as they offer many benefits, such as quick access to established infrastructure and client base. By acquiring or merging with pre-established teams in new geographic regions or with expertise in new practice areas, law firms can avoid the teething process and expand their services more efficiently. According to a study conducted by M&A advisors Acquira Professional Services, the desire to merge with another law firm is not limited to larger firms alone. The study surveyed 100 law firms of various sizes, and nearly half of them (47%) expressed interest in merging with another firm. One of the most common reasons for firms considering a merger was ‘geographic expansion’. This was exemplified in the recent merger between Weightmans and RadcliffesLeBrasseur.
Moreover, many big law firms including those that are part of ‘Magic Circle’ are seen tying hands with law firms in developing countries to take advantage of “lower wages, and reduce their overall expenses” as seen between Allen and Overy and Trilegal. Alex Pease, a partner at Allen and Overy says, “We believe this will be this, in the interest of our worldwide client base.” It has been revealed that the firm has been experiencing a surge in business from India. To better serve its clients in the region, the firm has partnered with Trilegal and provides training programs for partners and associates. This suggests that law firms of all sizes are looking for ways to expand their reach and better serve clients in different regions.
Furthermore, the “diversification of resources” is another compelling benefit of service consolidation. By acquiring a law firm with a strong digital or tech function, for example, the EU's General Data Protection Regulation has brought data privacy to the forefront, making businesses, including law firms, more aware of the need for cross-border protection. Law firms with a global presence are better equipped to tackle international issues, giving them an edge over traditional law firms in addressing GDPR and similar regulations. For these reasons, we can expect to see many more law firm mergers in the coming years.
Potential consolidation
In an article published in March 2023 titled “Bar Council of India to Liberate Indian Legal Market”, we discussed the opportunity for foreign law firms to enter the Indian market. This is expected to contribute to the global trend of law firm mergers, with potential consolidation for firms that handle cross-border M&A. According to Vinayak Burman, Founder & Managing Partner, of Vertices Partners, “Opening up of law practice in India to foreign lawyers will create opportunities for tie-ups and partnerships. It is likely to pave the way for potential consolidation, especially for firms dealing in the cross-border M&A practice in particular.”
While mergers and acquisitions are often viewed as a way to boost business growth, a new study by the Solicitors Regulation Authority reveals that the process can also have downsides. Losing the firm's culture can negatively impact the bottom line and make retaining and attracting talent harder. Merging processes and infrastructure can also be time-consuming and burdensome, particularly when dealing with legacy systems. Smaller firms, in particular, are aware of the importance of preserving their culture and identity during mergers and acquisitions. To ensure that the benefits of growth through M&A outweigh the costs, law firms must be cautious during the process and take steps to preserve their culture.Subscribe to the Legal Practice Intelligence fortnightly eBulletin. Follow the links to access more articles related to the business of law and legal technology.
Disclaimer: The views and opinions expressed in this article do not necessarily reflect the official policy or position of Novum Learning or Legal Practice Intelligence (LPI). While every attempt has been made to ensure that the information in this article has been obtained from reliable sources, neither Novum Learning or LPI nor the author is responsible for any errors or omissions, or for the results obtained from the use of this information, as the content published here is for information purposes only. The article does not constitute a comprehensive or complete statement of the matters discussed or the law relating thereto and does not constitute professional and/or financial advice.
