Update, 1/7/2013, 6:15 p.m. EST: Comments from recent Schiff Hardin lateral Carmen Gentile have been added to the fifth and eighth paragraphs below.
Schiff Hardin is the latest Am Law 200 firm to use a merger to expand in a niche practice, announcing Monday that it has joined forces with 10-lawyer Washington, D.C., energy boutique Bruder, Gentile & Marcoux.
The combination, effective at the start of the year, doubles Chicago-based Schiff’s current energy group and expands its D.C. office to 30 attorneys.
Since its founding in 1976, Bruder Gentile has focused exclusively on regulatory issues affecting the electric energy and natural gas industries, often in matters before the Federal Energy Regulatory Commission and North American Electric Reliability Corporation. Five attorneys come to Schiff as partners—Carmen Gentile, Thomas Blackburn, Michel Marcoux, Peter Matt, and Joel deJesus—along with five associates.
For Schiff, the tie-up is an effort to capitalize on what the firm sees as a coming boom in energy work following increased regulation on greenhouse gasses, the rise in renewable energy, and other developments, says Sherry Quirk, head of Schiff’s D.C. operation and leader of its energy and public utilities group. Schiff opened an energy-focused D.C. office in 1977.
Quirk and Gentile say Schiff approached Bruder Gentile a few months ago without the use of a recruiter or consultant, and the talks quickly became serious. “For us it’s a big move and indicates how heavily invested we are in the energy area and our D.C. practice,” Quirk says.
From Bruder Gentile’s perspective, the decision to join forces with a larger firm after more than three decades of independence comes as the majority of the firm’s partners reach their mid-60s and early 70s (deJesus is the lone exception at 47).
Quirk says that Schiff has no mandatory retirement age, and while several of the new attorneys are at an age when many wind down their practices, “their decision on retirement we leave to them.”
Gentile, 72, says he has no plans to stop working, and that while the age of his partners was a factor, “it was not by any means a determining factor.” Gentile says his former firm had received overtures a few times a year since its founding from larger firms wanting to merge, but “we had always decided to stay independent.” In Schiff, cultural compatibility and “the kind of skill set and diversified practice we were looking for” helped the deal fall into place, Gentile says. He adds that they expect to bring over all of their clients, including Pepco Holdings Inc., which provides energy to the mid-Atlantic region; Chicago-based Integrys Energy Group; Dominion, which operates in the Midwest, mid-Atlantic, and Northeast; and Indiana-based Vectren.
The additions put a physical strain on a new D.C. office that Schiff just moved into last August. Quirk says they are already planning to take on more space in their building at 901 K Street NW. “We weren’t quite planning on this large of an expansion,” Quirk says. Schiff now counts nearly 400 attorneys in nine U.S. offices. In 2011 the firm had $227 million in revenue and $870,000 in profits per partner, according to the most recent financial information available from The American Lawyer. Since then, Schiff has opened an office in Ann Arbor, Michigan, and expanded in Charlotte with the creation of a business advisory affiliate based there.
Los Angeles–based legal consultant Ed Reeser says that the acquisition by Schiff appears to be a solid one, since boutiques often outperform diversified national firms in locking down good clients, in part by offering more reasonable rates. Strong client loyalties, he adds, should help the boutique’s lawyers retain the work in a larger setting, even if it means enacting a modest rate increase. “I expect to see more of this [strategy] pursued aggressively by large firms seeking revenue growth because buying proven practices is clearly easier than growing them internally,” Reeser said in an email.
Since the new year began, a number of firms have announced combinations, including Detroit-based Dickinson Wright merging with 60-lawyer Phoenix shop Mariscal, Weeks, McIntyre & Friedlander; Novak Druce Connolly Bove + Quigg, itself the product of a recent merger, expanding into Boston with the addition of seven-lawyer firm Rissman Hendricks & Oliverio; and Wilson Elser Moskowitz Edelman & Dicker absorbing eight-lawyer Houston firm Powers & Frost.
Monday also brought an analysis from legal consultancy Altman Weil on law firm merger activity in 2012. All told, the group tracked 60 announced mergers and acquisitions, the same number as in 2011. The vast majority of the deals involved the acquisition of firms with 20 or fewer lawyers. Another seven saw the acquisition of firms with between 21 and 100 lawyers, and six involved larger firms.
As The Am Law Daily has previously reported, those in the latter category include the cross-border combinations of Texas-based Fulbright & Jaworksi with the U.K.’s Norton Rose; SNR Denton executing a three-way merger with European firm Salans and Canada’s Fraser Milner Casgrain; and K&L Gates’s tie-up with Australian law firm Middletons.
Altman Weil principal Ward Bower said Monday that he expects the global combinations to continue, and for law firms looking to expand into new domestic locations to do so through mass hires. “Really the safest and surest way to establish a practice in a new location is by acquiring,” says Bower.