The pace of law firm mergers in California is not likely to slow soon, industry watchers say.
2018 was a record year for law firm combinations, with 106 mergers announced industrywide, according to Altman Weil MergerLine, which tracks law firm combinations. According to MergerLine, 11 of those combinations involved at least one California-based firm.
Four out-of-town firms acquired California boutiques in 2018, three California-based midsize firms announced acquisitions of smaller shops in California, and two California boutiques acquired smaller firms on the East Coast. Los Angeles-based Littler Mendelson also made two acquisitions outside the U.S.
In 2017, there were 13 law firm tie-ups involving at least one California firm, according to Altman Weil, including five acquisitions of California firms with 20 or more lawyers.
Consultants expect the momentum to continue into 2019, and that firms’ interest in expanding in California will only grow.
“California never fades as an attractive place for large law firms to be. There are always East Coast firms looking to plant the flag in California and become bicoastal,” said Eric Seeger, a principal at Willow Grove, Pennsylvania-based Altman Weil.
To that end, two East Coast-based Am Law 200 firms have already announced in 2019 that they bolstered their Golden State presences by acquiring local boutiques.
Washington, D.C.-based Arent Fox absorbed a group of seven attorneys from San Francisco law firm Kay & Merkle, which specializes in the real estate and automotive industries. And Philadelphia-based Blank Rome added five more family law attorneys from Los Angeles-based Buter, Buzard, Fishbein & Royce.
“Most law firm mergers we see nationally are small firms combining with other small firms,” Seeger said. “California is a bit different in that we see more large firms acquiring small firms as a means of getting into the West Coast market.”
Also this year, Dallas-based Munck Wilson Mandala announced its combination with intellectual property and entertainment boutique The Hecker Law Group, allowing the firm to launch a new Los Angeles office with four attorneys, led by Gary Hecker.
“Another thing that is different these days is more smaller firms are open to mergers than we’ve ever experienced,” Seeger added, “that’s driven by both opportunity and need on the part of the smaller firms.”
However, not all law firm marriages ended up to be the perfect match. A bit more than a year after folding his Palo Alto, California-based intellectual property boutique into Squire Patton Boggs, partner Ronald Fernando reconstituted his old shop last August with several current and former colleagues, claiming that “the business relationship didn’t work.” But Squire Patton Boggs continued to show its interest in the region in 2018, when it absorbed another Silicon Valley firm, Singularity, to build up its IP practice.
“The Bay Area has been an attractive market for law firms for years,” said law firm merger consultant Kent Zimmermann of the Zeughauser Group, noting that since the tech boom, there have been more law firms interested in expanding in Northern California.
While most of the acquisitions have been for the small firms, Zimmermann said he expects there to be “more and larger combinations” in the Golden State going forward.