Over the past three months, the number of United States law firm mergers and acquisitions decreased, according to surveys conducted by consulting firm Altman Weil Inc and Hildebrandt Institute, which is a division of Thomson Reuters. From April to June, law firms announced just 10 mergers, which was a decrease from 14 mergers in the first quarter, according to Altman Weil. On Wednesday, the Hildebrandt Institute said that the number of mergers to close during the second quarter fell from 20 to five. The surveys did not mention what the outlook would be for mergers in the third quarter.
There were a variety of factors that played into the drop of mergers. Some of those factors include law firms focusing on strengthening local markets and the bankruptcy case of Dewey & LeBoeuf, which was the result of a merger in 2007. The marketplace gained close to 300 partners from Dewey as it wound down its operations over the past six months, which could have reduced the need for firms to pursue new partnerships with other firms, according to Ward Bower. Bower is a consultant for Altman Weil.
In May, the law firm of Winston & Strawn added a group of 60 lawyers formerly from Dewey. The group was led by Dewey’s former global litigation chair Jeffrey Kessler. Another firm, Greenberg Traurig, considered a partnership with Dewey but nothing came to fruition. Instead, Greenberg added over 50 lawyers from the Warsaw office of Dewey. According to Kent Zimmermann, a consultant with Zeughauser Group, said that the legal industry was unnerved by the failure of Dewey because the firm’s failure highlighted how risky mergers can be today. Zimmermann said Dewey “made many firms cautious in evaluating growth strategy,” he said and the firm’s failure could have had a hand in the decrease in the number of mergers recently.
One of the mergers announced involved Frost Brown Todd and MGLAW from Nashville back in May. Frost Brown Todd is a multistate firm of 450 attorneys and the Nashville firm has seven attorneys. Also in May, the firm of Buchanan, Ingersoll & Rooney announced that it would acquire Manion McDonough & Luca. Both firms are in Pittsburg and Buchanan, Ingersoll & Rooney has 415 lawyers. Zimmermann also said that law firms are beginning to scrutinize possible merger partners a lot more now.
“There are a number of underperforming firms out there, and firms that are thinking of growing know that and want to evaluate opportunities with scrutiny,” he said. “Nobody wants to wind up with a lemon.”