Law firm mergers may quadruple by the end of the year after cratering in 2020 when offices struggled to cope with the coronavirus pandemic, an Altman Weil report released Tuesday found.
Law combinations began a rebound in the first quarter of 2021 with 26 transactions, putting deals on a pace to shatter the total of 65 in all of last year. Acquiring firms on average had 908 lawyers compared with 14 in those being acquired, according to Altman Weil.
“We wouldn’t be surprised to see law firm merger and acquisition totals back over 100 by year end,” said Thomas Clay, an Altman Weil principal, in a statement. “Law firm leaders are returning to a longer-term, strategic focus after a year of crisis management and tactical triage.”
The Altman Weil findings resemble those of legal consultancy Fairfax Associates, which found firms focusing on smaller combinations. Fairfax Associates recorded 18 completed mergers in the first quarter of 2021, a slight drop from the same time period in 2020, which saw 21 mergers.
While law firms regularly add individual lawyers laterally and small practice groups, there are few consolidations between major firms because they involve lengthy negotiations over compensation, leadership roles and client conflicts.
Only two of the 100 largest law firms made acquisitions this year. Crowell & Moring, with 560 lawyers, added 24-lawyer Kibbe & Orbe, a New York City financial services boutique. Winston & Strawn, with about 860 lawyers, expanded in Los Angeles by acquiring Scheper Kim & Harris, with 15 lawyers.
“Mergers of equals are few and far between,” Clay said in an interview, “because nobody wants to be seen as being acquired.”
So far in 2021, the biggest combination Altman Weil recorded was Dinsmore Shohl’s acquisition of 47-lawyer Wooden McLaughlin, which expanded the Midwestern firm into Indiana for the first time. Also, in the Midwest, Armstrong Teasdale, a 300-lawyer St. Louis-based firm, added 32-lawyer Kerman & Co. in London.
Global firm Dentons, which has been pursuing a broad strategy of bringing firms under its umbrella, announced two Latin American acquisitions, one in Ecuador and one in Bolivia.
Clay noted that “every firm in the Am Law 100 or 200 is actively looking for good lawyers with good clients.”
That dovetails with Fairfax Associates’ conclusions that “disruptive change within the legal industry creates ongoing pressure for firms to build greater depth and scale.”
Fairfax’s April 1 report noted that the pace of merger discussion had been hampered by limitations on in-person gatherings. It anticipated “an uptick in active discussions in the coming months and a return to higher levels of completed mergers by the end of 2021 or early 2022.”