I’m not writing this for the sake of writing. First of all, writing more is not my primary goal. That’s just not how I measure success.
If this unprompted defense is stirring doubt in any readers, then please excuse a journalist for listening with a critical ear as managing partner after managing partner tells a similar—and similarly unprovoked—tale about their most recent merger or lateral partner hire.
“We don’t have a strategy that’s built on growing for growth’s sake.” “We’re not in the business of growing just for the sake of growing.” “Our goal is really not to be any particular size or to grow for growth’s sake.”
Those are real quotes from three real managing partners at Am Law 200 firms, whose names I won’t mention here. Everybody seems to agree, even if they haven’t been asked: Growing for growth’s sake is not good.
But how did this all-too-common defense of Big Law mergers and lateral additions come to be? When was the growth’s-sake scar marked on the collective psyche of managing partners? And is wanting to get bigger ever a reasonable defense of a merger or lateral hire?
Managing partners’ insistence against growth for growth’s sake has at least two implications. One is that it’s at least a strategy they’re aware of, either from themselves or their peers. The other is that it’s not one they believe in or think they are pursuing.
So, when was growth—pure, unadulterated growth—actually pursued? It would have happened recently. Large-scale and rapid growth is a relatively new phenomenon for large law firms, with the first transatlantic merger occurring in 1998 when Dentons predecessor Salans Hertzfeld & Heilbronn acquired New York’s Christy & Viener, a move followed the next year by Clifford Chance and its cross-border combination with New York’s Rogers & Wells.
Thomas Clay, a principal at legal consultancy Altman Weil Inc., remembers a not-too-long-ago time when a 100-person law firm was a big enough outfit to counsel the country’s largest companies. As regional banks and companies grew into international behemoths, some firms grew alongside their clients. But it led other firms who may not have had those large companies as clients to conclude that they also needed to be bigger.
“It was probably a fair number of years before the recession where a lot of people would say we do have to grow much more quickly to survive or compete better,” Clay said. “Even though there was never really much evidence of that to be true.”
It should be noted that Clay, too, has heard the for-growth’s-sake “disclaimer” often in his practice.
The pace of law firm mergers only accelerated after 2000. In 2007, they had grown so frequent that Altman Weil launched its MergerLine website to track them, with 60 combinations in the survey’s inaugural year. Last year marked the fourth consecutive year of 80 or more combinations.
It is in this timeframe that “growth for growth’s sake” entered the law firm lexicon. Perhaps the most official example rebuke of the strategy was a 2014 report by the Center for the Study of the Legal Profession at Georgetown University, which focused on the question: “Is bigger always better?”
The report said the urge to grow was the “most prominent driver of law firm strategies over the past decade or so,” and stated that law firm leaders were “fixated” on “building a bigger boat.” The report concluded, in essence, that enough was enough.
The report debunked a slew of notions around the benefits of growth. There are no economies of scale for large firms; being bigger doesn’t necessarily lead to more opportunities for younger lawyers; broadening your practice offerings isn’t by itself a brand differentiator; and a bigger footprint doesn’t always lead to better client service, the report concluded.
“Growth for growth’s sake is not a viable strategy in today’s legal market,” the report said.
A Harvard Business School professor issued another report in 2014 and ALM Intelligence conducted a similar analysis earlier this year. Law firm managing partners, like most lawyers, are good readers. That’s what James Jones, a senior fellow at the Center for the Study of the Legal Profession, has concluded.
“It’s gotten through to managing partners that they realize they can’t be giving that as a reason,” Jones said. “So they’re always careful to say that, ‘This isn’t growth for growth’s sake.’ You can probably believe that in about a third of the cases, maybe.”
Jones said he doesn’t believe most of the law firm merger activity is done for well-thought out strategic reasons, like adding strength to a firm’s best practice area or expanding a firm’s well-known practices into a geographic region where a group of clients has demand for it.
So, a word of practical advice for managing partners. When describing your next merger, focus on the strategy you are actually pursuing. Tell the story of a real-life client who needs your services in your new market. Talk about how your acquired firm has a practice you’re already well-known for. Tell us about the new rainmakers you’ve brought in and their actual client base.
If you can’t do some of those things, then be prepared to answer if your firm is growing for growth’s sake.
CLARIFICATION: 6/21/17, 11:02 a.m. EDT: The seventh paragraph of this column has been revised to note the first, true transatlantic law firm union.