Is Big Law finally about to enter a long-heralded period of sustained trans-Atlantic consolidation?
Fifty-two combinations involving U.S.-based firms were announced in the first six months of 2017, according to management consultancy Altman Weil, topping the previous midyear peak of 48, which was set in 2015 and matched in 2016.
Altman Weil principal Eric Seeger said that falling demand for legal services was causing firms to merge in an attempt to gain market share. “Law firms of all sizes are vying to acquire new clients, expand into new markets, and upgrade their brands through quality combinations,” he said. “We don’t expect that to change any time soon.”
While there have been a smattering of domestic deals in the United States—Boies Schiller Flexner recently acquired Los Angeles litigation boutique Caldwell Leslie & Proctor, and Fox Rothschild entered the Pacific northwest by absorbing Seattle firm Riddell Williams—much of the activity has been international.
In fact, just over half of all law firm mergers in the second quarter were cross-border, according to professional services consultancy Fairfax Associates, with 12 such deals having been announced so far this year.
After a few relatively quiet years following the spate of deals that formed Dentons, Hogan Lovells and Squire Patton Boggs, among others, trans-Atlantic tie-ups, in particular, appear to once again be growing in popularity.
The year started with a massive U.S.-U.K. deal, with Eversheds Sutherland launching in January to create a 2,300-lawyer giant, while Norton Rose Fulbright (NRF) added Chadbourne & Parke to its fast-growing verein in June. Among the other trans-Atlantic combinations, 975-lawyer U.K. insurance firm Kennedys acquired New Jersey-based Carroll McNulty & Kull; U.S. labor and employment specialist Littler Mendelson continued its European expansion by absorbing U.K. boutique GQ Employment Law; and Womble Carlyle Sandridge & Rice is set to complete its combination with 580-lawyer U.K. firm Bond Dickinson in October.
Fairfax principal Lisa Smith, who heads the consulting firm’s Washington, D.C., office, said that the increase in cross-border merger activity is being driven in particular by the limited international capability of many U.S. law firms.
“A lot of U.S. firms that haven’t gone international already are now deciding that they need to do something,” she said. “We’ve heard from some large domestic [U.S.] firms that the work they’re being considered for is being pushed down the value chain because they’re not seen by clients as having the same scope and capability as international firms. They’re concerned that they’re losing work to firms with a global platform—even if the work doesn’t require it.”
Looking ahead, there is no sign that things will slow down in the second half of 2017, with two large-scale combinations already confirmed and a third in the works. In addition to the Womble Bond Dickinson deal, Norton Rose Fulbright has announced a deal for 179-lawyer Australian firm Henry Davis York, while Chicago’s Arnstein & Lehr and Philadelphia-based Saul Ewing are currently in merger discussions.
“It looks like the rest of the year is going to continue to be busy,” Smith said.