To hear Craig Brown tell it, midsize law firms are midsize for a reason. Their clients are local and regional. Their billing rates are lower. And truth be told, an attorney count around 100 feels just right to most of them.
So when it comes to expanding, these firms are extremely cautious. Brown, who gives presentations to gatherings of about 80 managing partners for the New York State Bar Association every quarter, says certain circumstances have to exist for midsize firms to branch out beyond their regional footprint.
“The primary reason is for their clients,” says Brown, managing principal and CEO of Bridgeline Solutions. “As clients are moving beyond local and regional, law firms are following.”
Brown says there are rare exceptions in which law firms open out-of-town offices in the absence of client demand. He cites the example of Michelman & Robinson, which has New York City offices but started in Los Angeles. The firm opened a Chicago office because it was a growing market with exceptional attorneys willing to sign on. But there weren’t clients who were clamoring for it.
The 145-attorney firm also has offices in San Francisco and Orange County but the impetus for the California expansion was for the traditional reason of better serving clients, Brown said.
Meeting client needs was also what motivated Long Island firm Cullen and Dykman to more than double its attorney head count from 81 to 168 by merging with or acquiring eight firms since 2000.
“We don’t go blindly into new markets unless we have a well-defined target market, typically with established loyal clients of our own,” explains managing partner Christopher Palmer.
Cullen and Dykman, which launched its practice in Brooklyn 168 years ago, opened a Garden City office in 1966 as businesses migrated to the burbs, expanded to Washington, D.C., 12 years later as clients needed help navigating regulatory matters and merged with banking and real estate firm Bleakley Platt Remsen Millham & Curran in 2003 to open a Wall Street office.
When Dewey & LeBoeuf collapsed in 2012, Cullen and Dykman hired some of its energy and utility attorneys and took over its office space in Albany. The firm eventually expanded the Albany office to include a banking and litigation practice to meet the demand for legal services in the capital and upstate.
“Many of our clients are state-specific and regional clients. They’ve kind of asked us to grow with them and we’ll always say yes to that,” Palmer says.
Cullen and Dykman asks itself two simple questions when it considers a merger or acquisition. Will the whole be greater than the sum of the parts? Will it be a win-win for both parties? The answer to both questions must be an unequivocal yes for the firm to grow, Palmer says.
Jon Lindsey, managing partner for global recruiting firm Major, Lindsey & Africa, also suggests that midsize firms look within before expanding.
“For midsize firms, the question is do you need to be bigger,” he says. “If so, do you need to be swallowed up by one of the whales, do you need to link hands with a firm roughly the same size or can you wait long enough to do it organically?”
But he cautions: “If you have 50 lawyers spread over a dozen practice areas, it’s hard to persuade clients you have the bench strength to become a powerhouse.”
Eric Seeger, a principal at Altman Weil, thinks most midsize firms are reluctant to expand.
“Midsize firms are being very careful about expansion because they have been burned so many times on lateral hires and because they are under intense pressure to meet annual profitability goals,” he says.
Murphy & McGonigle name attorney Thomas McGonigle says geographic expansion doesn’t make sense unless a firm knows that opening offices will dramatically increase its client base.
The firm has offices in New York and Washington, D.C., which are necessary because its work involves the SEC. Perhaps, McGonigle says, it makes sense to open an office in Chicago because of its large financial exchanges.
But he seems to talk himself out of the idea almost as soon as he mentions it. The partners would have to be willing to put up their own money to finance expansion because the firm has decided not to take on debt. Another impediment is that it takes 120 days after hiring attorneys to bring in revenue. But perhaps more important, the partners, who have practiced together since the 1980s, like the 52-lawyer firm just the way it is.
“I can see us getting to 75 at some point,” McGonigle says. “I don’t think we’ll ever get to 76. We like the feel of a small place where we all know each other and can all fit in the same space.”
The same sentiment was echoed by other firms.
“What we have found is that our clients have the confidence to know that we can get the deal closed or win the case anywhere in the country,” says Richard Haddad, chair of the litigation practice at Otterbourg. “What we have found is that we don’t need additional real estate. Our assets are people.”
Ronald Shechtman, managing partner at Pryor Cashman, agrees.
“Geographic expansion I think is a great challenge for midsize firms,” Shechtman says. “In the legal profession, it seems that the law of economy of scale are turned upside down. The bigger you get and the more offices you have the more expensive your operations become and the less economical they will be.”