Mergers are back, but is it the best decision for your firm?
Is a merger the best decision for your law firm? Photo illustration by Sara Wadford/Shutterstock
Ready to join forces with another law firm? You’re just in time.
Law firm mergers are back after a pandemic lull, according to a January report from Fairfax Associates. In 2023, there was a mix of mergers of firms of all sizes, including those that were looking for geographic expansion as well as those seeking niche expansion, deeper client relations and new markets.
According to the report, eight domestic mergers were announced for completion during the first quarter.
“The pace is picking up because as there is continued economic uncertainty, there is a need to be able to meet client needs head-on,” explains Roxanne Jensen, the founder of EvolveLaw, a law firm consultancy. “There’s no excuse for not having the right talent at the right place at the right time to be able to compete effectively.”
But that doesn’t mean all firms should be looking for merger opportunities immediately. First, they need to decide why they want to merge. The No. 1 reason firms report wanting to merge is to grow in size and profitability, says Kent Zimmermann, the strategic adviser for Zeughauser Group. They have limited options for doing this: They can grow with associates, laterals, groups of laterals—or they can grow with merging. If you choose any of the former options, Zimmermann says, it can be a slow, expensive and error-prone way to grow, as people retire or leave the firm.
“The net growth is underwhelming,” he says.
But consultants like him or others can help by suggesting merger partners and facilitating talks between firms.
The second-most common reason for a firm to merge, Zimmermann says, is fear of other firms poaching its lawyers. Small firms are increasingly exposed to poaching, and even a minimal amount can be destabilizing. A merger would mitigate this risk.
When to merge
Even if the reasons are good for a merger, the timing may not be.
It’s very important to consider merging only when your firm is doing well, Zimmermann says. Then you can walk away if the deal doesn’t make sense.
Greensfelder, Hemker & Gale in St. Louis and Ulmer & Berne in Cincinnati merged in February, and the timing was perfect due to the strength of both firms, says Kevin McLaughlin, former president and CEO of Greensfelder and co-managing partner of the new firm, UB Greensfelder.
Kent Zimmerman. Photo by Keith Berr.“Both firms maintained strong financial positions through the pandemic and are poised to take on this type of transformative growth,” he says. “Our combination is a strategic and opportunistic move, not a move of necessity.”
The merger between U.S.-based Hogan & Hartson and London-based Lovells to become the 2,600-lawyer transatlantic firm Hogan Lovells back in 2010 was successful because both firms were in a position of strength, firm CEO Miguel Zaldivar says.
“They needed to scale here, and we needed to scale there—and we had the ability to increase profits,” he says. Both firms also had a common vision, a similar culture and complementary practices and regions with very little overlap.
To help create a successful merger, Zaldivar says, it was key for everyone to believe in it and to view it as a merger of equals.
“If you’re going to go into a merger, go into the merger to build a much stronger organization,” he says. “We felt like we created a new firm. We treasure our history, but our history was restarted in 2010.”
Leighton Lord, the Columbia, South Carolina-based president and chief strategy officer at Maynard Nexsen, which has 24 offices, says law firms should also consider their clients’ needs when merging. Lord, who led Nexsen Pruet before it merged with Maynard Cooper & Gale in April 2023, says firms need to merge when their clients outgrow them—and when hiring and retaining talent becomes a challenge. He says his firm decided to merge when some of their key clients needed expertise that they didn’t have and were doing business in states where they didn’t practice.
“The main pro is that you have the opportunity to create a better law firm,” Lord says. “The challenge is that it is hard work, and for some, change can be difficult.”
To make the adjustments as easy as possible, it’s important to look for a firm with a similar culture fit, strategic compatibility and alignment, says Jeff Grantham, the CEO and managing shareholder of Maynard Nexsen, who led Maynard Cooper & Gale prior to the merger.
“Over the past few years, we have been expanding and growing, and this merger was the next strategic step to our growth. And the cultural and strategic compatibility really aligned in the way each firm approached serving its clients and how its lawyers worked together on teams,” Grantham says.
Roxanne Jensen. Photo courtesy of Roxanne Jensen.Choose wisely
Ulmer and Greensfelder got on each other’s radar after a publication recognized both firms as “punching above their weight,” explained Scott Kadish, who was managing partner at Ulmer & Berne and is now co-managing partner at UB Greensfelder. That prompted both firms to take a closer look at each other, and they discovered complimentary practices and firm objectives that made combination discussions a natural next step, Kadish says.
It’s not usually that easy, however.
“Every year, there are literally hundreds of merger discussions taking place—all to result in maybe 40-ish mergers where the smaller firm has at least five lawyers,” says Bill Johnston, the president of W. Johnston Associates, a law firm advisory in Old Saybrook, Connecticut. “The odds are against a merger ever happening, so focus first on implementing your strategy.”
It’s totally normal for it to take a very long time to find a merger partner, and you may be rejected frequently during your merger inquiries, Johnston says.
This story was originally published in the April-May 2024 issue of the ABA Journal under the headline: “Let’s Team Up? The return of the merger: But is it the best decision for your firm?”
