Large US law firms are increasingly using mergers to grow, but a Bloomberg Law analysis shows that almost all firms trailed their rivals after doing big deals.
About two-thirds of the 18 largest mergers within the past 15 years saw the combined firms increase profits per partner and revenue per lawyer at a slower rate than competitors after their tie ups. All but three of those deals also trailed the average gross revenue growth across the country’s 100 largest firms.
The legal industry is in an era of consolidation, fueled by exponential gains at the country’s top firms and punctuated by a trio of large mergers finalized this month.
Some firm leaders feeling the pressure to scale up rush into deals with partners that seem to be financially and culturally compatible. They see mergers as a cure-all for problems that bring them to the table in the first place and don’t fully consider what the deals will yield in new business or the ability to charge higher rates. Many also fail to get buy-in from lawyers in key practice groups and locations.
“That’s a recipe for failure,” said Albert Bollard, a partner at McKinsey & Co. who co-leads its work in legal services. “Too often we see that the merger is seen as a strategy in and of itself.”
The mergers reviewed by Bloomberg Law juiced financials for many of the firms in the first year following their completion, thanks to combining revenue and favorable profit calculations. Many firms quickly fell behind in the ensuing years, often amid mass exits.
“Law firm mergers are the Super Bowl of talent retention,” Bollard said. Productive partners often find themselves inundated with headhunter calls the moment a deal is announced, he said, forcing their firms to make specific guarantees to retain top talent.
Three of the worst-performing mergers involved firms dealing with slews of lawyer defections in the lead up to and aftermath of those deals.
Missouri’s Bryan Cave Leighton Paisner is the product of three mergers since 2009, when it combined with Atlanta’s Powell Goldstein after the latter lost several lawyers from a key health care group. The firm outperformed average profits per equity partner and revenue per lawyer across the Am Law 100 in the two years after the deal. Bryan Cave began to lag after joining forces with Denver’s Holme Roberts & Owen, which was actively looking for a union after partner departures and layoffs.
BCLP saw about 29% of its 281 equity partners leave the firm since its third merger, a 2018 combination between Bryan Cave and the UK’s Berwin Leighton Paisner. Its gross revenue declined by nearly 7% during that time—even as other top 100 firms grew revenue by more than 41% on average—while its profits ticked up at about a quarter of the average rate.
“Our experience is that large-scale mergers take time to see growth and profitability improvement because no two firms are a perfect fit for each other and each merger must go through an integration process,” a Bryan Cave spokesperson said. “Our vision is to continue to build a leading, integrated international firm, unique in our culture and in our intelligent approach to clients.”
Texas-based Locke Lord’s gross revenue dipped nearly 17% in the years after its 2015 tie up with Edwards Wildman, a Boston-founded firm itself created via a 2011 merger. The combined firm also fell behind competitors in revenue per lawyer and partner profits growth. More than 30 former Edwards Wildman lawyers reportedly left the firm’s Boston office in the nine months following the merger amid declining revenue and compensation concerns. The combined firm’s total lawyer headcount fell by more than one-third, down to 556, in the eight years after the merger.
K&L Gates dropped the farthest behind on gross revenue growth of the combined firms analyzed by Bloomberg Law. The Pittsburgh-headquartered firm’s revenue rose at less than a quarter of the average rate following its 2009 tie up with Chicago’s Bell, Boyd & Lloyd. The deal was designed to give K&L Gates a foothold in the Windy City, but headcount in the new office was down by more than 40% a little more than three years later.
K&L Gates and Locke Lord, which officially combined with Troutman Pepper on Jan. 1, did not respond to requests for comment. BCLP is said to be weighing talks of another merger, potentially its fourth large combination in two decades. The firm’s spokesperson declined to comment on “market rumors,” but pointed to a smaller combination, an April 2024 tie up with 12-lawyer Seattle-based law firm Harrigan Leyh Farmer & Thomsen, as an example of its continued growth strategy.
Bloomberg Law reached out to all of the firms whose performance lagged after the deals. Most did not respond or declined to comment, while those that did touted the geographic and practice area reach achieved by their mergers.
Too many law firm leaders see mergers as “kind of a shortcut,” said Janet Stanton, a law firm consultant at Adam Smith, Esq.
“Managing partners seem to not be able to take the needle out of their arm,” she said. “They’re not really dealing necessarily with the real issues or thinking about how they should be doing things differently to grow.”
Seeking Sustainability
The country’s largest and most profitable firms have been on a growth tear over the last 15 years.
Kirkland & Ellis and Latham & Watkins—the two biggest US-founded firms—saw global revenue soar by 415% and 196%, respectively, since 2008. They far eclipsed the 108% average revenue growth among the largest 100 firms during the same time. The firms’ revenue per lawyer and profits per equity partner gains also dwarfed the Am Law 100 average.
The market is rewarding top firms for increasing depth in a narrower set of practice areas, Bollard said.
“These economic returns have concentrated fast in these destination practices—much, much faster than they have for scale as a whole,” he said.
For some struggling firms, however, mergers are more about staying alive than trying to keep pace.
“Perhaps they didn’t really have a path forward and that’s true in a lot of mergers,” said Kristin Stark, a principal at Fairfax Associates, which advises law firms on combinations and other strategies. “Maybe it didn’t create huge economic growth, but it created enough economic growth and it created sustainability.”
Chicago’s Bell Boyd lost three practice group leaders amid other exits the year before its merger with K&L Gates. The midsize firm, among many hard hit by the 2008 recession, had become ripe for poaching by larger market entrants in Chicago. Its leaders reportedly discussed tie ups with larger firms, like Alston & Bird and Hunton & Williams, before striking a deal with K&L Gates.
The departures continued after it came under the K&L Gates umbrella. Several corporate partners who joined rival firms balked at increased capital contribution requirements after the merger, according to a 2012 Crain’s Chicago report. Others said the firm’s national ambitions of K&L Gates drove up billing rates and posed conflicts that jeopardized client relationships.
‘Thinking Integration’
Merging firms often overlook the importance of planning how to integrate separate entities and communicate strategic goals with partners, according to observers.
“It is the classic version of a managing partner not able to bring his or her partners along because it’s too much change,” Bollard said. “The partners push back and they’re not actually able to enact the second horizon, which is actually the whole point of doing the deal in the first place.”
Kansas City-founded Husch Blackwell is one of two combinations that beat the average gross revenue gains at the country’s 100 biggest firms after a large merger. The other: South Carolina-founded Nelson Mullins after a 2018 tie up with Florida’s Broad and Cassels.
Husch Blackwell’s gross revenue grew by nearly 75% in the seven years after it combined with Milwaukee-based Whyte Hirschboeck. That’s compared to more than 61% in revenue gains on average across the Am Law 100 over that same time period.
Angela Quinn, the firm’s chief client officer, helped usher it through the tie up. She credited integration planning that she said began before the letter of intent to merge was signed.
“We’re already thinking integration, and we’re already bringing groups together, we’re already putting together the plan,” Quinn said.
The firms early on brought groups of 20 to 25 partners on each side to meetings discussing the deal. Quinn and her team pulled together a detailed business case for the merger, including financial and integration plans that went to all of its partners.
Six firms surpassed their peers in profit growth after mergers: Bryan Cave, after tying up with Powell Goldstein but before its deal with Holme Roberts; McGuireWoods after merging with North Carolina’s Helms Mulliss Wicker; and the combined firms Hogan Lovells, Kilpatrick Townsend & Stockton, Hunton Andrews Kurth, and Nelson Mullins.
Farifax’s Stark said the Am Law 100 is a poor benchmark because specific firms on the list change over the years and the dramatic surge among a small group at the top skews the average.
“There is a harsh reality that the Am Law 50 has outpaced everybody on growth and that it largely has been driven not through merger,” Stark said. “Those firms had a very different strategy and they accomplished a lot without merger that it would be nearly impossible for other firms to have replicated without some of the resources that those firms had at their disposal.”
Still, other law firms situated in the lower half of the top 100 have exceeded average growth without a merger. Kansas City-founded Polsinelli’s gross revenue skyrocketed by more than 654% over the last 15 years. The firm grew quickly through individual and group hires, including adding nearly 50 Holland & Knight lawyers last year. It’s focused largely on three core practices: health care, real estate, and middle-market corporate transactions. It also boosted pay for rainmakers and lawyers in top geographic markets.
Little changes when the gross revenue of combined firms are compared to those in the back half of the country’s 100 largest. All except three—Husch Blackwell, McGuireWoods, and Nelson Mullins—lagged behind the Am Law 51-100 average. Husch Blackwell, McGuireWoods, Nelson Mullins, and Fox Rothschild (after a merger with North Carolina’s Smith Moore Leatherwood) were the only firms that beat the Am Law 51-100 profits per equity partner average.
The Case for Consolidation
Law firms’ desire to merge mirrors the common approach among the business clients they serve.
Combinations continue to be a central part of corporate growth strategy, despite high-profile disasters like the $100 billion AT&T and Time Warner deal. Companies have improved their ability to make mergers work, according to research by Bain & Co. Frequent acquirers outperformed others over a recent 10-year period, Bain found in a report last year. But massive deals remain the most risky.
Hogan & Hartson was a top Washington law firm with powerful regulatory, government, and litigation practices and when it officially combined with leading UK law firm Lovells in 2010. The firms dubbed the combination Big Law’s “first trans-Atlantic merger of equals.”
The combination was “transformative for us—Hogan Lovells simply became a different firm,” said CEO Miguel Zaldivar. The merger catapulted the firm among the five most profitable US firms, before its position later slipped to the 11th spot.
The firm’s 115% gain in partner profits since the deal exceeded the industry average. That’s despite a 61% revenue growth rate that was well below that 107% average.
Zaldivar said more than half of the firm’s revenue is generated in offices outside of the US. Its revenue growth would be as much as 30% higher after adjusting for currency devaluation, bringing it closer to the average.
“We’ve grown to become a global law firm with a much higher profile in the market, enabling us to attract the types of major, multijurisdictional engagements that either legacy firm would have not been able to bring in,” he said.
Philadelphia’s Ballard Spahr has done two large combinations in the past six years, including a Jan. 1 merger with Pacific Northwest firm Lane Powell.
“We’ve been very careful in our growth,” said Peter Michaud, Ballard Spahr’s chair. The Lane Powell deal “makes sense,” but it “isn’t because it’s going to make us bigger,” he said. “It’s because we’re going to be adding capabilities and we’re going to be adding practices that will benefit our clients.”
The firm’s 2018 merger with Lindquist & Vennum brought similar strategic benefits, according to Michaud, who was a Lindquist partner at the time of the deal.
Ballard Spahr had strong practices in litigation, finance, and real estate, but needed a larger national team for M&A, a key area for Big Law firms. Lindquist was a successful regional firm with a large M&A practice in its hometown of Minneapolis, but was seeking greater depth and wider geographic reach, said Michaud.
If Lindquist approached a private equity fund in a place like California before the merger, Michaud said they would respond along the lines of: “We love using you guys, but it’s kind of hard for us to explain to our limited partners, our investors, why we’re using this small Minneapolis firm that doesn’t even have an LA office.”
The combined firm saw revenue from its M&A group rise by 65% to nearly $49 million in the six years since the merger, according to Ballard Spahr.
Michaud touts another metric for judging the firm’s performance: revenue per lawyer. Ballard Spahr’s RPL has climbed by more than 22% since the Lindquist merger, just behind the 24% average gain among the 100 largest firms. The number surpasses the nearly 19% growth among Am Law 51-100 firms during that time.
Womble Bond Dickinson on Jan. 1 finalized its merger with Phoenix-founded Lewis Roca. Womble Bond is the product of a November 2017 merger between US firm Womble Carlyle Sandridge & Rice and UK-based Bond Dickinson.
The firm has grown its total gross revenue by 21% since 2018, about half the industry average rate. Its revenue per lawyer grew 21% over the last five years, nearing the 24% average gain.
“The merger itself just created a different perception of our firm,” said Womble Bond former chair Betty Temple, who led the firm through the earlier tie up.
“All of a sudden, people realized we had real international capabilities, and we were different and so the type of talent and the work that we could do for even for our existing clients just really did increase dramatically,” she said.
How We Did It
Bloomberg Law analyzed the 18 mergers completed since 2008 in which a firm in the Am Law 100—the country’s 100 largest by gross revenue—tied up with a firm with more than 100 lawyers.
The firms’ revenue and profits, based on data compiled by The American Lawyer, were compared to averages across the Am Law 100. For firms that completed multiple large mergers, performance was compared to averages for the time period before the completion of additional mergers.
The data set includes only those mergers completed by 2019 in order to track at least five years of performance by the combined firms. Law firms structured as Swiss vereins, which do not share profit pools, and those with the majority of their lawyers located outside of the US were excluded.
—With assistance from Justin Henry in Washington
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