Published for Thomson Reuters Legal Executive Institute on February 4, 2016
ORLANDO, Fla. — We had a wonderful panel on law firm mergers at the 23rd Annual Law Firm Marketing Partner Forum, which provided unusually granular and human insights into why law firms merge and what makes a merger successful. I had a great time moderating the panel.
We began the panel by examining the market context for law firm mergers. According to Altman Weil, law firm merger activity reached an all-time high in 2015 and is likely to remain very active in 2016.
- Flat Demand for Big Law
The share of the overall market for legal service captured by large law firms in recent years has been flat, at best. At a time of unprecedented growth in overall demand, the market is increasingly choosing other providers (including “do it yourself” by increasing in-house legal departments) over the traditional large law firm solution. Both the Citi/Hildebrandt and Peer Monitor/Georgetown reports on the 2015 financial performance of large law firms document this market reality in great detail.
- Increasing the Footprint
One of Big Law’s responses to this flat demand is to try to increase their footprint by geography, practice area and industry sector.
To be sure, law firms need to address the underlying reasons that the market is turning away from them — as I have written on many occasions. Most fundamentally, the business model needs to be restructured to address clients’ needs and preferences and to take advantage of improvements that process design and technology make possible in the 21st century.
Meanwhile, firms will also focus on capturing an adequate share of the market. They will do that by all the traditional tactics of branding, marketing and client relationship management. In addition, they will seek to grow their headcount, hoping that the additional lawyers will help them capture market share. That is what is driving the increase in merger activity.
Merger Panel Insights
Obviously, each firm’s decision about whether to undertake a merger derives from its own specific, individual reality. Its objectives. Its strengths and weaknesses. Its hopes and fears.
Accordingly, we opened our merger discussion by asking each panelist to describe his firm’s history, make up and character.
The panel reflected law firms with three very different realities. One, Honigman Miller Schwartz & Cohn (represented by its Chairman & CEO David Foltyn), is a successful regional firm of 275 lawyers based in Michigan, which completed its first merger in Chicago in 2015. One, Squire Patton Boggs (represented by it Chairman Emeritus Jim Maiwurm), is an international firm built on the foundation of market leadership in Cleveland, Ohio, having accomplished several mergers over the years. And one, DLA Piper (represented by its Chairman Emeritus Lee Miller), is a global firm, assembled from modest beginnings in the north of England, which has undertaken an unprecedented number of mergers over the past 11 years. The stories of these three firms were fascinating.
We then engaged in a robust discussion of the details of the firms’ merger experiences. Why did they pursue mergers? What were the most important considerations in choosing a merger partner? How did they do due diligence? How did they integrate the firms once they had done a merger? How did they market the combined firm and work to maintain client confidence?
The discussion was detailed, candid and human. Each panelist talked about specific mergers they had undertaken and how they fared. The discussion included examples of mergers that were successful and those that were not. It also included discussion of the internal partnership issues that play out in assessing and deciding about a merger opportunity.
As would be expected, the stories of these very different firms were quite varied. That said, three themes emerged in common.
- Strategy Must Drive the Decision
Each merger the panelists discussed derived directly and specifically from the respective firm’s strategy. While each involved the potential benefit of scale and economies, none was done for those objectives alone. Instead, each stemmed from the core strategic objectives of the firm.
- Culture Is Paramount
As each panelist described what they looked for in a merger partner, and why they chose the particular merger partner they did, one issue was foremost in each case: culture. The potential personal fit of the firm is more important than any other issue.
- Success Requires Effective Integration
Agreeing to the merger is just the beginning. A successful merger requires effective execution once the agreement is reached.
Each panelist stressed that integration is the most important step in execution. Bringing the elements of the merging firms together and enabling the final merged firm to act as a single organization.
For me, the Marketing Partner Forum is one of the highlights of law firm leadership events each year. Thomson Reuters’ Nick Giannini and his Events team once again did a great job of hosting more than 240 registrants in Orlando. I was delighted to be a part of it.