There’s no such thing as the summer doldrums this year for law firm mergers, as small and midsize firms continue to attract Big Law suitors.
The past two weeks alone brought news of at least six mergers involving an Am Law 200 or Global 100 firm, according to ALM reports and Altman Weil’s MergerLine. A MergerLine report from earlier this summer showed that the legal industry was already on pace for another record-setting year for law firm mergers, with 51 combinations taking place in the first half.
Altman Weil consultant Eric Seeger said if inquiries by law firms are any indication, many more combinations are likely in the works.
“The firms that have seen consistently positive results are feeling bullish about growth, and have the willingness to make those investments,” Seeger said. “I can’t remember a time when so many firms were calling us to find a firm to acquire, or to discuss a merger opportunity.”
On Tuesday, Washington, D.C.-based Venable announced a combination with IP firm Fitzpatrick, Cella, Harper & Scinto, in the biggest deal of the month so far. Fitzpatrick Cella adds 104 lawyers to Venable, which will have roughly 800 attorneys once the merger becomes official in November.
And last week, Kansas City-based Stinson Leonard Street announced plans to bulk up its presence in St. Louis in its second acquisition since the spring, with 24-lawyer intellectual property firm Senniger Powers.
For Am Law 200 firms, small and midsize combination partners usually offer one of three things, said Barry Genkin, an M&A lawyer at Blank Rome: a geographic foothold, deep strength in a new practice area or added capabilities in an existing, key practice area. Often the smaller of two merging firms is looking for a way to keep its most successful partners, who may be looking to take their practices to a larger platform, he said.
“They’re certainly not desperate, but they know the clock is ticking, and the longer they wait the harder it’s going to be to find a [merger] partner that’s compatible,” Genkin said. “You don’t want to do something like that when you’re under the gun.”
As for the smaller mergers of 10 lawyers or fewer, those are often akin to a group lateral partner hire in investment and impact on firm head count, but with a greater chance of success, said Frank D’Amore of Attorney Career Catalysts in Philadelphia.
“If you can bring a group, it’s a bit stronger sign that the clients are going to come,” he said. “If you’re able to get a firm, and you’re able to lock in the key partners, it takes the client flight risk almost away, because you’re getting the whole firm.”
Simply watching other combinations take place has been enough to make some firms take the plunge, D’Amore said. “Earlier in my recruiting career I had to do much more of an educational process” with firms that should consider a merger, he said. But now, firm leaders are more aware of the possibilities, because so many of their peers are making those moves.
Seeger echoed that sentiment, and said Altman Weil gets inquiries from firms that see their market being “stirred up.” As they watch neighbors merge, they’re open to exploring opportunities for themselves, he said.
Meanwhile, pressures on certain niche practices can also drive movement. For instance, a number of this year’s mergers have involved IP boutiques, including three of the most recently acquired firms—Fitzpatrick Cella, Senniger Powers and Singularity.
“I’ve heard from other IP firms that patent prosecution has been undergoing commoditization for years,” Seeger said. That places pressures on IP boutique profit margins, he said. But some large firms are willing to take on that less profitable group for the cross-selling opportunities.
That may be the case for other practice areas as well, Seeger said, such as employment law. However, he noted, there are plenty of highly profitable boutiques that merge with larger firms as well.
“Sophisticated niche expertise is valuable to large firms,” he said, “and to clients.”