ArentFox Schiff, one year into a merger that created the firm, has tripled the volume of work leaders predicted would result from the combination, chair Anthony Lupo said.
The firm now has bigger practice presences across tech, intellectual property and corporate. Intellectual property and patent practices have been hot, in addition to areas including consumer products and litigation, Lupo said.
“There are so many more areas that are needed now,” Lupo, 57, said in an interview. “We needed to get bigger. It’s just a much more complex legal paradigm than in the past.”
Rivals are validating the decision of Washington DC’s Arent Fox and Chicago’s Schiff Hardin to combine a year ago by taking that leap themselves. There have been at least three mergers of firms that each have at least 100 lawyers so far this year, compared with just two in all of 2022, according to Fairfax Associates.
The activity comes as the industry faces economic uncertainty triggered in part by rising interest rates and a slowdown in corporate deals work. Firms also face pressure from the most profitable shops that continue to fork over huge pay packages for the most sought-after attorneys, said Kent Zimmermann, a law firm management consultant at the Zeughauser Group.
ArentFox Schiff revenue grew last year compared to what the firms would have reported separately, Lupo said. He declined to give details, saying the firm is still putting together year-end financial figures.
Arent Fox and Schiff Hardin reported $345 million and $177 million in revenue, respectively, in 2021, according to the American Lawyer. Those two figures together would have ranked the combined firm among the 100 largest in the US.
“There’s a recognition that the mid-size firms are either going to blow up and go to boutiques where they can compete, or they’re going to get larger,” Lupo said. “It’s economically challenging for a mid-sized firm in major commercial cities.”
‘Work on the Table’
Founded in DC in 1942, Arent Fox had a reputation for decades as a top firm in the nation’s capital.
The firm experienced “growing pains” in the 1990s and early 2000s, Lupo said. It opened and closed offices outside the US and engaged in merger talks that went nowhere.
When Lupo in 2021 became the fourth chair in Arent Fox’s history, he said he came in with a mandate—get bigger.
The firm’s merger with 210-attorney Schiff Hardin that closed March 1, 2022 created a 600-plus lawyer law firm with large offices in Washington, Chicago, New York, Boston and California. Patents were the only area where the two legacy firms competed for the same work, Lupo said. Most practice groups complemented each other, he said.
“We didn’t do this because other firms were getting bigger,” said Lupo, a longtime tech, entertainment and fashion lawyer. “We did this because we felt like we were leaving work on the table.”
Schiff Hardin, with its Chicago roots dating back to the time of the Civil War, doubled its corporate practice and New York presence with the merger, said Zimmermann, who advised Schiff Hardin on the deal.
Schiff Hardin managing partner Joseph Krasovec is now a co-managing partner of the new firm alongside Cristina Carvalho.
Firms that have pulled off big mergers so far this year include Big Law’s Orrick acquiring Washington-based financial services boutique Buckley, and Atlanta’s Smith Gambrell & Russell merging with Chicago’s Freeborn & Peters.
Florida-based Holland & Knight in January acquired Waller Lansden Dortch & Davis, a 270-lawyer firm headquartered in Nashville.
Zeughauser’s law firm merger practice is the busiest it has ever been, with a large group of small and big firms also considering tie-ups, Zimmermann said.
Firms involved in talks include ones with heavy transactions focuses that are looking to balance their practice mix. They also include firms that recognize lateral hiring alone isn’t enough to compete.
“Firms are increasingly exposed to poaching,” said Zimmermann. “And if they don’t have a deep enough bench in their areas of focus, they sometimes face a single point of failure.”
As larger firms “are pulling away,” smaller shops realize the way “to move the needle is to look at mergers,” he said.
Hogan Lovells and Shearman & Sterling were among law firms recently engaged in talks. However, the two called off those negotiations last week, with Shearman noting that “a combination at this time is not in the best interest of either firm.”
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