With about 2 million people and a fairly steady economy that leans heavily on agriculture and manufacturing, the Kansas City, Mo., metropolitan area hardly rivals New York, Chicago or Los Angeles when it comes to demand for legal services. Yet the city is home to quite a few sizable law firms — four of the 250 largest U.S. law firms are based there, with an additional three firms headquartered elsewhere but maintaining a significant presence.
A spate of mergers during the past decade has produced a local legal landscape dominated by firms with 300 or more attorneys and smaller boutiques.
“When I started working in Kansas City in 1982, there were 10 or 12 firms with 100 attorneys or more, and that’s now down to six or seven,” said Mark Hinderks, managing partner of 300-attorney Stinson Morrison Hecker. “We don’t have as many of what you would consider midsize firms here. Certainly, the number of firms between 40 and 100 attorneys is much smaller than it was.”
Stinson Morrison itself is the byproduct of a 2002 merger between Stinson, Mag & Fizzell and Morrison & Hecker, both Kansas City firms. In 2008, Kansas City firm Blackwell Sanders merged with St. Louis-based Husch & Eppenberger under the banner of Husch Blackwell Sanders, now the second-largest firm in Missouri with about 600 attorneys. That merger was followed closely by the 2009 consolidation of Kansas City firms Polsinelli Shalton Flanigan Suelthaus and Shughart Thomson & Kilroy to become 481-attorney Polsinelli Shughart.
“The merger provided us with some opportunities that we would not otherwise had if we had been either one of our predecessor firms, as far as size and depth,” said Polsinelli Shughart Chairman Russ Welsh. “It’s Darwinism. Animals that live on islands become extinct.”
The merger strategy has been popular in Kansas City in part because the legal market has a limited client base and is largely saturated with firms. (No Fortune 500 companies are based in the city proper, but suburban Overland Park, Kan., is home to three such companies, including Sprint Nextel Corp.)
“I do think there are more lawyers here than work to go around,” said John Snyder, managing partner of the 50-attorney Kansas City office of Sonnenschein Nath & Rosenthal.
With the exception of several large labor law firms, national firms have not been elbowing into the market. Instead, local firms have been combining with an eye to becoming bigger players on the national scene. Although a 100-attorney Kansas City firm might be a hard sell to large clients based outside the region, a 300- to 600-attorney firm might well get a second look, according to leaders of several of the city’s larger firms.
Improvements in technology have also made clients less concerned about where their lawyers are located.
“We did not then, nor do we now, think that being 300 lawyers is a particularly viable option for securing large clients, particularly as we look to the future,” said David Fenley, co-chairman of Husch Blackwell Sanders.
LOW BILLING RATES
The key to the larger firms’ strategy is billing rates significantly lower than those charged by firms on the East and West coasts. Local rates generally run between 25% and 40% less — a byproduct of lower overhead and salaries in the Midwest.
“In this economy, it’s a real advantage,” said Joel Voran, chief executive officer of Kansas City-based Lathrop & Gage, which has about 300 attorneys and last year opened offices in Chicago and Los Angeles. “We can provide the legal talent at a more competitive rate. Our growth strategy is to be in some larger markets but keep prices down.”
Location has been a benefit to litigation powerhouse Shook, Hardy & Bacon, the second largest among firms with historic roots in Kansas City. Although most of the firm’s clients are outside the region, maintaining back-office functions such as document review and information technology in Kansas City has been a cost saver, said Chairman John Murphy.
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