Merging Law Firms Face Challenge of Creating New Identity

Law operations that rely on mergers to grow—with some combining multiple times over short periods—must wrestle with setting a new identity for the firm.

While merger partners in advance vet questions such as financial compatibility and hourly rates, they often put decisions about other issues central to the new firm’s culture off until later, said Laura Saklad, former chief operating officer at Orrick Herrington & Sutcliffe. These include how much control partners have, ways lawyers develop business and factors that dictate pay, she said.

“It’s in the post-decision, pre-close phase where you have to deal with these things,” said Saklad, now a consultant at tech firm Intapp. “It’s like lateral partner integration on steroids.”

The issue is relevant now because so many law firms are in the process of connecting their separate operations into a single unit with a new identity. By January, Troutman Pepper Hamilton Sanders aims to complete its second merger in five years, and Taft Stettinius & Hollister expects to complete its third.

Those two firms aren’t alone. Consultants at Fairfax Associates tracked 29 mergers in the first half of the year, up from 28 in the same period last year and 25 in 2022. Fairfax’s report was released before mergers between Ballard Spahr and Lane Powell, Taft Stettinius & Hollister and Sherman & Howard, and Womble Bond & Dickinson and Lewis Roca were announced.

The loss—or even the threatened loss—of a prized culture runs against the grain of something firm leaders repeatedly say they are trying to protect. Sherman chief executive Stefan Stein said last week his firm wanted to merge with Taft in part because of “the alignment of our client-focused, people-first cultures.”

A week earlier, Sidley Austin announced that it elected a new chair in partner Brian Fahrney, who said protecting the firm’s culture is important. The same day Pryor Cashman said David Rose would be the new managing partner, and he said he shares his predecessor’s commitment to “preserving the firm’s culture.”

Yet, at firms that are merging, partners must familiarize themselves with hundreds of new colleagues, including many who have different approaches to work, said New York-based legal recruiter Jon Truster. “The firm loses its culture a little bit when these rapid mergers are going on,” he said.

Defined by Mergers

Troutman Pepper is the product of the 2020 merger of Troutman Sanders and Pepper Hamilton that resulted in a 1,110-lawyer firm with $918 million in revenue. Now it’s set add another at least another 500 lawyers by combining with Locke Lord.

Three former Troutman Pepper partners, requesting anonymity to discuss the firm without professional repercussions, said the firm’s race to scale has come with a change in its culture. The firm has developed a more business-focused approach, placing a premium on the most lucrative practices at the expense of those charging lower rates, they said.

Lawyers who don’t meet the strict standards don’t last at the firm, one of the people said. A spokesperson for Troutman Pepper declined to comment.

A&O Shearman formed this year as a nearly 4,000-lawyer firm with about $3.5 billion in revenue following the combination of Allen & Overy and Shearman & Sterling. The newly-merged firm said last month it was cutting its global partner count by 10%, closing its Johannesburg office, and shutting down its consulting business.

A&O managing partner Herve Ekue said the cuts are designed to “unlock the growth opportunities” envisioned by the merger.

“As one would expect from a newly merged business, we are actively engaged in post-merger integration,” Ekue said. “We already see the benefit of synergies and additional opportunities to assist our clients on high-profile international matters, which underpinned the rationale for the merger.” Ekué added that “we never take decisions like this lightly, particularly when they affect our people.”

The move shows the difficult business choices firms face post-merger, Truster said. “A&O and Shearman had strong cultures, but I think they will come out better on the other end,” he said.

Robert Hicks

At Taft, which is merging with 125-lawyer firm Sherman & Howard, business metrics also have played a growing role in the firm’s growth strategy, according to interviews with leaders of the firms. Robert Hicks, Taft’s chairman and managing partner, said the firms had similar billing rates and formulas for compensating partners.

“Culture can be an amorphous concept but ended up being concrete for us,” Hicks said. “They made a huge effort to get to know us as people.”

Womble Bond Dickinson and Lewis Roca found the firms had similar compensation and rate structures, which will make integration by January an easier process, said Kenneth Van Winkle, Lewis Roca’s managing partner. “If it wasn’t, that would have been a hurdle that would have been difficult to overcome,” he said. “But it’s definitely a hand-in-glove situation when it comes to building the two partnerships.”

However, it remains to be seen how Ballard Spahr and Lane Powell, which also announced the formation of a 750-lawyer firm effective in January, will integrate the firms’ partnership tiers.

Ballard Spahr has a single tier of equity partners, while Lane Powell has two tiers of equity and non-equity partners. Ballard Spahr chair Peter Michaud said a board committee appointed earlier this year is looking at whether the firm should implement a two-tiered system.

“It’s actually something that we’ll probably tackle as a combined firm,” Michaud said. “In the meantime, what we just need to do is really focus on helping every attorney who joins us from Lane Powell understand that they’re important to us and that we are excited to help them develop as attorneys and to grow their practices, regardless of what their title is.”

Preserving Culture

Some firms assert the trauma of culture clash is not worth any potential benefits of a merger.

Partners and firms often use “culture” as an excuse to avoid giving up independence, even if being acquired by a larger firm would put them in a more competitive position, said Fairfax Associates principal Lisa Smith, who advises on law firm mergers.

Firms “can’t tolerate underperformance in a way they have in the past,” Smith said. “Particularly powerful partners feel like they have a strong voice in firm decisions, and they worry that will be diluted in a larger platform. That could be a piece of what people are concerned about.”

Ronald Shechtman

In order to avoid becoming subsumed by a larger firm’s culture, several midsize firms have chosen to stay out of the merger game.

“Mergers come with enormous risk” of changing economic models and values, said Ronald Shechtman, managing partner of New York-based Pryor Cashman. “We hear about positive announcements” about mergers, though “we hear less about the failures and problems.”

Michael Ferachi, managing member of New Orleans-founded McGlinchey Stafford, said staying small comes with the cost of limitations in client representation and lack of Big Law’s geographic reach or practice area mix. While he’ll never turn down an inquiry from an interested acquirer, Ferachi said he’s more interested in growing through lateral hiring and group acquisition.

“We like what we’ve built in the 50 years we’ve been in existence,” Ferachi said. “I don’t want to lose that by being acquired. The opportunity may come along, but we’d rather take what we have in the last 50 years and grow it in a different manner than being acquired.”