Law firm mergers are on the rise. In 2019, there were 115 mergers. This is a slight increase from 2018 with 106 and 2017 with 102(1). Large law firms like Faegre Baker & Daniels and Drinker Biddle & Reath are combining for 1,300 attorneys. So, what creates a market for law firm mergers?
- Interest in new practice areas or compliment an existing one?
- Expand into a new region or consolidate?
- Increase profitability?
- Compete with larger firms?
Other firms that have merged(1):
– Troutman Sanders and Pepper Hamilton 1,100 attorneys
– Taft Stettinius & Hollister and Briggs & Morgan 600 attorneys
– Lathrop Gage and Gray Plant Moody 400 attorneys
There are many strategies to merge with another firm. How do expenses play a part in this?
- What expenses do you absorb from the other firm?
- Are you responsible for existing contracts or can you cancel upon the merger?
- Can you renegotiate existing contracts?
- Is a firm experiencing financial problems?
- Would the firm continue to produce the same revenue?
Ideally, mergers would benefit both parties, however, an acquired firm that is struggling would not be in the best negotiating position. Keeping a close eye on expenses is critical to survive as a business whether you are merging or not. There is much to learn about a business by comparing year-to-year Profit & Loss statements. For instance, has there been a layoff recently to make the bottom line more enticing?
How healthy is your P&L? What would you look for in a firm to acquire? Spending quality time on due diligence could confirm a promising merger or give you enough information to “pass”.
Before you finalize that next merger, let Legal Counsel Consulting help you with the legal research services and contracts. If you would like to schedule a brief conversation, please feel free to contact me.