Lower Manhattan in New York City. Credit: Shutterstock

The New York legal market throws up two big obstacles for midsize law firms: great expense and intense competition.

But several midsize firms based in the mid-Atlantic region have boldly expanded their reach in New York in recent months, generally with an eye on expanding key practices or client relationships.

“If they’re further expanding into an industry segment or a practice area where they already have some success, they may have success in New York by bringing in some laterals,” said Silvia Coulter, a founding partner of LawVision Group.

But, Coulter cautioned: “I think if firms are just willy-nilly opening offices because they think it’s a good idea to have a presence in New York, they’re going to run into the same issues firms in the past have.”

Earlier this month, Philadelphia-based defense firm Weber Gallagher Simpson Stapleton Fires & Newby hired six lawyers in New York who have a retail-focused defense practice.

Offit Kurman, which was founded in Maryland and has a growing Philadelphia presence, continued its creep northward this year, hiring 20 lawyers in Manhattan. The firm announced an affiliation in April with 12-lawyer Menaker & Herrmann, and earlier in the year, it had brought on a group of eight from now-closed firm Eaton & Van Winkle.

Regional firm Archer, based in New Jersey, acquired a bankruptcy boutique in February, allowing it to add its first full-time office in New York. The small firm’s rate structure was in line with Archer’s, firm leadership said, and was expected to add $2 million in revenue in the short term.

Dilworth Paxson also recently added to its New York office, and to a greater extent in the Princeton, New Jersey, area, when it acquired Smith, Stratton, Wise, Heher & Brennan early this year. The move was largely motivated by the needs of pharmaceutical clients, CEO Ajay Raju said.

Finding a Niche

For evidence of the challenges presented by New York’s pricey, crowded market, look no further than the number of small firms that have dissolved or been acquired this year and last. Earlier this year, New York law firm management consultant Michael Blanchard told the New York Law Journal that roughly three-quarters of the firms he was working with were considering whether they should merge with a similar-sized firm or be acquired.

For midsize and larger firms, that creates opportunities. But expanding too quickly can be dangerous, too.

For example, when Blue Bell-based Nelson Brown & Co. shuttered in 2015, sources pointed to fast expansion in New York and Washington, D.C., as a factor in the firm’s downfall.

Coulter said group laterals and small acquisitions are more likely to stick. It’s better yet if the group fills a specific niche or client need.

“If it’s an established entity, and it becomes the branch, so to speak, of a larger firm … chances are that’s going to have a higher probability of being successful,” Coulter said. “The lowest level of success is, ‘We’re going to open in New York because we think we should.’ Hope is not a strategy.”

Focusing on specific practice needs and established groups helped Philadelphia-based Montgomery McCracken Walker & Rhoads identify a couple of small New York firms to acquire in recent years. Those moves have proven successful so far, vice chairman Richard Simins said.

Two years ago, the firm added nine lawyers to its New York office from real estate boutique Schechter & Brucker. That group focused on cooperative corporations and condominium law, as did several lawyers already at Montgomery McCracken at the time, making for a total of 12 in that niche practice.

Last year, the firm bolted on real estate firm Mishaan Dayon & Lieblich, which worked on high-dollar commercial leasing and development transaction.

The Schechter & Brucker combination brought Montgomery McCracken’s New York office to 30 lawyers, and the Mishaan Dayon lawyers numbered five, plus staff. Seven of the nine Schechter & Brucker attorneys remain at Montgomery McCracken, and all five from Mishaan Dayon. The firm’s New York office is now 34 lawyers.

Growing that niche real estate practice, as well as investing in the firm’s maritime and transportation group, has been key to Montgomery McCracken’s New York strategy, Simins said. The growth has also opened the door to further expansion and cross-selling, he added.

“We plan to extend the two practices we have there for sure,” Simins said. “We have the best of both worlds. We have a couple of really robust practices in New York … that gives us an opportunity now to move beyond, to having a wider presence.”