Led by a strong wave of cross-border combinations, law firm merger activity in the first quarter of 2017 continued to accelerate as legal services shops gained growth and market share through acquisitions, according to reports by legal consultancies Altman Weil Inc. and Fairfax Associates.
The first three months of 2017 saw 28 combinations, two of them between Am Law 100 firms, five of the cross-border variety and other acquisitions of smaller U.S. firms, said Altman Weil’s report.
“It’s really a continuation and acceleration of what we’ve been seeing for the past couple of years,” said Altman Weil principal Thomas Clay. “Firms [recognize] that if they’re going to continue to grow and gain market share, it’s not going to be organic, it’s going to be by acquisition.”
So far, 2017 has seen its fair share of big names combining with others to corner markets and expand their reach. Altman Weil, which counts deals when they are announced rather than completed, noted that Norton Rose Fulbright’s proposed absorption of Chadbourne & Parke into its Swiss verein structure would be the largest tie-up of the first quarter. The union will create a combined firm of about 4,000 lawyers, about 1,000 of whom will be based in the U.S., with more than 300 in New York and 130 in Washington, D.C.
In another deal announced in November and finalized on Jan. 1, Arnold & Porter officially merged with Kaye Scholer to create Arnold & Porter Kaye Scholer, a move by the former to crack into New York’s highly profitable corporate market. The ever-expanding Dentons bolted on firms in Mexico, Costa Rica and The Netherlands, while rival global legal giant DLA Piper absorbed firms in Denmark and Portugal into its own international network.
The American Lawyer, which last month reported on an analysis of 15 years of law firm mergers by ALM Intelligence, looked this week at the peculiar alchemy of the Arnold & Porter Kaye Scholer and Norton Rose Fulbright combinations.
Another survey conducted by Washington, D.C.-based Fairfax Associates also noted the continued uptick in cross-border combinations. For the last three years, international mergers have been on the rise—2016 alone saw 13 such deals—but Fairfax Associates principal Lisa Smith noted that for the first time the U.S. firms are doing the bulk of those transactions.
“We’re starting to see a resurgence [in] global expansion,” Smith said.
In the first quarter, 1,900-lawyer British firm Eversheds absorbed 400-lawyer Sutherland Asbill & Brennan to form Eversheds Sutherland, while Norton Rose Fulbright completed its acquisition of Vancouver-based Bull, Housser & Tupper. Holman Fenwick Willan, another U.K. firm, also finalized its union with Houston’s Legge, Farrow, Kimmitt, McGrath & Brown. (Fairfax Associates, unlike Altman Weil, counts combinations upon the date of their completion.)
Regional mergers—such as 652-lawyer Baker, Donelson, Bearman, Caldwell & Berkowitz bringing on about 110 lawyers from Baltimore-based Ober Kaler—continued to remain prevalent. In March, four firms with roots in Chicago and New York announced a pair of different mergers.
But, as in years and quarters past, the majority of combinations were larger U.S. firms picking up smaller shops with 20 or fewer lawyers. Those deals accounted for upwards of 75 percent of all combinations during the first three months of 2016, said both Altman Weil and Fairfax Associates.
“Firms continue to look at competitive market and recognize that it’s not only about size, it is about depth and experience in core practices and looking at ways to achieve that,” said Fairfax’s Smith.
Looking ahead to the rest of 2017, she and Altman Weil’s Clay agree that merger activity will continue to remain high as firms are constantly looking to stay competitive by acquiring market share. But Clay cautions that there are real risks for failure if mergers are entered into haphazardly.
“You really, really got to make sure that you do it right or a lot of bad things happen,” Clay said.