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The midsized firm has remained on some experts’ endangered species lists for years, but is extinction really imminent or have rumors of its death been greatly exaggerated?

For this article, The Legal spoke to experts and firm leaders about the viability of the midsized firm in a profession that some believe will inevitably polarize into jack-of-all-trades mega-firms and hyper-specialized mini-firms/boutiques with nothing in-between.

Recognizing that “midsized” is a relative term, The Legal has chosen to define it for this story within the framework of the largest 100 law firms in the state, reaching out to the leaders of firms within the range of 50 to 120 attorneys to find out whether they believe the midsized firm is truly on its deathbed.

Perhaps not surprisingly given the poll demographic, the consensus was unanimous: Don’t plan the funeral just yet.

But that’s not merely blind faith talking; there is logic behind the optimism.

William A. Harvey, managing partner of Klehr Harrison Harvey Branzburg & Ellers in Philadelphia, said that when mega-firms snatch up smaller practices, it’s a blessing for the midsized firms that are left behind because it creates “tremendous opportunity” for hiring and business acquisitions by turning disillusioned attorneys and clients who resist the mergers into free agents.

“We love the fact that conventional wisdom says that midsized firms should join up with larger firms,” he said. “We hope they all do — we will not.”

Gary P. Hunt, managing partner of Tucker Arensberg in Pittsburgh, agreed that there is and will continue to be a wealth of opportunities for midsized firms in Pennsylvania as the state’s biggest firms continue to outgrow their regional practices and boutiques continue to narrow the scopes of their services.

“If anything, midsized firms are in a better position now than back when people started to make the predictions [of their demise],” he said. “As the large firms keep getting larger, they can offer certain types of things to certain types of clients that smaller firms can’t, but a price has to be paid for that growth.”

Hunt said he has noticed some attorneys leaving large firms for midsized firms because the ever-increasing rate pressure they’d been experiencing as their firms’ overhead continued to swell had started to drive away their clients.

While he acknowledged that big firms do sometimes “raid” smaller firms for their best lawyers and most profitable work, he said it’s often in the best interest of a partner at a midsized firm to move laterally than to attempt to step up to a large firm where they’ll “have to explain to their clients why their rates are going to jump.”

Not every client can afford mega-firm rates, he said.

“[Small and midsized] businesses need representation,” he said. “Individuals need representation. Many of them don’t want to or can’t afford to pay large firm rates.”

Hunt said there are even opportunities for midsized firms to attract business from Fortune 500 companies that are sensitive to skyrocketing rates.

Other attorneys had similar theories.

“I firmly believe midsized firms can compete by being able to offer the same quality of service as a large firm without being forced to increase our rates because we have lower overhead,” said Charles J. Ferry, executive committee chairman of Rhoads & Sinon in Harrisburg.

Stephen A. Madva, chairman of Montgomery McCracken Walker & Rhoads, said he believes that as long as there are midsized clients, “there will forever be a niche” for midsized firms, even ones that aren’t necessarily “niche firms.”

For Montgomery McCracken, the goal is to cover a broad range of practice areas without spreading itself too thin, he said.

“Can we be a full-service firm doing everything for everyone? Probably not,” he said. “Can we be something closer to that than a niche firm? That’s our plan.”

Harvey seconded Madva’s points saying there are “fortunes to be made in Philadelphia” working with mid-market clients, but that in order to attract these clients, midsized firms “should be able to project a broad enough platform.”

Madva and Harvey seemed to have a bit more faith in the midsized firm’s ability to be multifaceted than many of their peers.

Almost everyone interviewed for this story uttered a variation of the phrase “midsized firms cannot be all things to all clients” and most emphasized specialization and a narrow scope of expertise as keys to survival.

Ward Bower, a principal legal consultant at Altman Weil Inc., said the midsized firms that stay afloat tend to be the ones that are “tightly focused” on a select few practice groups or target industries.

He said firms that try to cover all the bases are in trouble, inevitably caught in “no man’s land” with too few attorneys to match the “breadth and depth” of a mega-firm and too much overhead to cater to clients in search of the lowest rates.

William Pietragallo II of Pietragallo Gordon Alfano Bosick & Raspanti in Pittsburgh said he considers his firm to be a “super-boutique,” largely due to the wide range of litigation it covers, from intellectual property litigation to qui tam litigation.

“Offering special services in unique practice areas allows us to differentiate ourselves,” he said. “It gives us a place in the legal landscape.”

Legal consultant Joel A. Rose of Joel A. Rose & Associates said midsized firms “should attempt to identify profitable practice areas.”

But too narrow a focus may actually be detrimental to a firm and a hot practice area today could quickly cool off if the economy shifts, which can be crippling for a midsized firm, said legal consultant Frank D’Amore of Attorney Career Catalysts.

It helps to have a few “bread and butter” practice areas, such as general litigation and corporate law, to supplement the more cyclical ones, like real estate and banking, he said.

If a midsized firm can maintain profitability and retain its employees, there’s no reason it can’t survive, he added.

“This belief that somehow the legal marketplace is going to have a hole with just mega-firms and boutiques — if you’re a student of business you know it’s not true,” he said.

D’Amore said deep parallels could be drawn between the structure of the legal industry and that of the accounting industry to demonstrate how smaller firms can coexist with large firms and continue to thrive.

“[In the accounting industry] below the big firms, there are a ton of smaller firms,” he said. “You can see it shakes out very much like that in the legal world right now.”

This relationship can be observed at the national level.

According to the Public Accounting Report‘s most recent list of the top 100 public accounting firms in the U.S. ranked by revenue (which actually included 101 firms because the last spot was a tie), in 2006 there were only four firms with over 10,000 professionals worldwide. The closest two after those had about 6,000 and 5,300 professionals respectively and then it dropped off considerably with only nine other firms above the 1,000 mark and none surpassing 2,000.

The smallest firm on the list had only 70 professionals.

Only six firms reported 2006 revenues of over $1 billion, with the next closest reporting $589 million. About seventy-six percent of the list was made up of firms that didn’t crack $100 million.

According to the most recent AmLaw 100, in 2006 there were only two firms in America with more than 3,000 lawyers worldwide, one with over 2,000 and 12 others with between 1,000 and 2,000. The smallest firm on the list had 193 lawyers. Only 11 firms broke the billion-dollar mark and exactly half of the list comprised firms that grossed under $500 million.

Warren L. Simpson Jr., managing partner of Philadelphia-based Weber Gallagher Simpson Stapleton Fires & Newby, also cited the hierarchy of accounting firms as an encouraging sign for law firms.

“They have certainly gone through more consolidation than law firms have and there is still evidence that well-run midsized accounting firms can succeed,” he said.

Still, many of those interviewed did admit that midsized law firms face a number of challenges.

Simpson mentioned the competition for talented lawyers and the growing necessity to keep abreast of technological advances as two struggles midsized firms continue to encounter.

And, of course, there’s always the looming threat of mega-firms sniffing around for merger and acquisition opportunities.

While everyone agreed that some smaller firms may simply have no choice but to merge with a mega-firm, they also agreed that there continues to be a lucrative midsized market that can prove very profitable for firms with leadership that recognizes golden opportunities.

According to Harvey, many of the midsized firms that have dissolved over the years were really just victims of mismanagement.

“Their clients never abandoned them; it was their partners who abandoned them,” he said. “Management always has to be able to articulate the continuing value proposition.”

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