Regional Law Firms Seize on Second-Tier Markets for Growth (1)

Regional law firms seeking growth through mergers prefer middle markets rather than top legal centers, data from combinations show.

About 60% of law firm mergers that went into effect in the first three quarters of 2024 involved regional firms expanding in secondary markets such as Denver, Las Vegas, and Seattle, a Bloomberg Law analysis of Fairfax Associates data shows. Three of four mergers announced in the third quarter for 2025 fit the trend, including Womble Bond Dickinson’s acquisition of Lewis Roca in Phoenix.

“We are looking for opportunities to grow, but we’re not going to take up multiple floors in a midtown Manhattan office,” Womble chief executive-elect Merrick Benn said in an interview. Markets such as Phoenix and Charlotte “provide opportunities for us.”

The moves support the view that it’s better to be one of the biggest law firms in an emerging market rather than try to fight for a middling presence in a top legal mecca such as New York, Chicago and Los Angeles. A focus on states such as Colorado, Arizona and Nevada lets firms expand their geographic reach, gain a competitive advantage and build practices that play to their strengths.

Middle markets offer a respite from competition with big rivals, said Bruce MacEwen, a law firm consultant with Adam Smith, Esq. Even the most aggressive growers among the top 50 law firms have largely steered clear of states such as Arizona and Colorado, he said.

Big firms such as Paul Weiss rely on markets with the greatest concentration of wealth and transactional activity, MacEwen said. “Paul Weiss and Latham have been on expansion tears lately, but they need capital markets, financial services businesses, and private equity,” he said. “Phoenix is a powerhouse in retail chain headquarters—they have nothing to say to that market.”

Market Moves

Spencer Fane, founded 145 years ago in Kansas City, Missouri, expanded in Utah and New Mexico earlier this year. Last week, it announced a combination with Holley Driggs in a bid to grow its presence in Las Vegas by two-thirds to 35 attorneys. Earlier this year, serial acquirer Fennemore Craig gained 80 Denver lawyers from dissolving firm Moye White, its fourth merger of 2024.

Mergers announced in the third quarter for next year included 941-attorney Womble’s tie-up with 221-lawyer Lewis Roca; 875-attorney Taft Stettinius & Hollister’s combination with Denver-based Sherman & Howard, which has 125 lawyers; and 574-attorney Ballard Spahr’s connection with Seattle-based Lane Powell, with 144 lawyers, the Fairfax data show.

While Womble opened an office in New York in 2022 through the acquisition of an IP boutique, Benn said he recognizes the limited growth opportunities in the Big Apple compared to the secondary markets.

“Are we going to be one of those white shoe firms in New York like Davis Polk and Cravath? No,” he said. Meanwhile, markets such as Phoenix and Charlotte “provide opportunities for us where we have the competitive advantage of a full-service firm for what clients need.”

Benn also said that given his firm’s roots in the US Southeast—the firm’s predecessor was founded in Winston-Salem, North Carolina—"our rates are much more aligned in the upper-middle market clients that we’re chasing.”

Operators that have thrived in Mountain West, where many regional firms are expanding, are largely those that can sustain middle-market billing rates, said Roxanne Jensen, a Denver-based consultant and former Morrison & Foerster partner.

“A lot of secondary markets are emerging with desirable industry development,” Jensen said. “There’s practice and rate compatibility that might not be available in primary markets.”

Lower Cost

MacEwen said the middle-market cities offer a big advantage—it’s less expensive to run a business there than in tier-one cities such as New York.

“If a firm is going to come in from outside, by definition, they’re coming in from second-tier market,” MacEwen said. “Their profits per equity partner and revenues per lawyer may not fit in with first-tier firms in the private equity and capital markets spaces.”

Practice areas at Taft, such as municipal bonds and finance, complement those of Sherman’s Phoenix and Denver-based practices, firm chair Robert Hicks said. The firm’s middle-market billing rates have so far prevented his firm from launching in New York and Florida, he said.

“There are a lot of major firms in New York that don’t have the same business model as us,” Hicks said. “Our model is to find a really good independent firm that does the high-end middle market work with rates that are similar to ours. We knew we’d need to have a lot of patience to get there.”

Ballard Spahr, in combining with Lane Powell, will gain three new offices in Seattle, Portland, Oregon, and Anchorage, Alaska. That will allow the firm to tap into the region’s tech clients.

“The rates tend to be lower and that matters for clients in these cities and it fits into our pricing structure,” said firm chair Peter Michaud, who joined the firm when it acquired his Minneapolis-based boutique in 2018. “My hope is not just to retain those three offices but to grow all three and add additional attorneys in all three offices.”

Patrick Whalen, chair and managing partner of Spencer Fane, said the pipeline of candidates interested in merging with his firm has increased over the past five years because it has become an acquirer of operations seeking a broader geographic reach. “You’ve got firms of all sizes and shapes increasingly open minded about combining,” he said.