The trend of big law firms merging to expand is accelerating, with recent announcements of three more mergers. These mergers aim to scale operations, add practice areas, and increase revenue, among other objectives (source). While consolidating legal services might look attractive for in-house legal teams, the complexities and costs associated with mega-firms can outweigh the supposed benefits, writes former general counsel and legal consultant Rob Chesnut (source).
One of the driving forces behind these mergers is the increasing desire of in-house teams to streamline their legal work by working with fewer firms. However, Chesnut argues that legal services aren’t as interchangeable as commodities and highlights the importance of quality relationships with outside counsel. He underscores the practical, thoughtful advice that skilled lawyers provide—benefits that aren’t easily replaced by another attorney from a large, preferred provider.
Working with large firms can also introduce several inefficiencies. Increased bureaucracy can complicate matter management, with retainers that resemble merger agreements and billing processes mired in layers of administrative oversight. Conflicts checks in mega-firms can be cumbersome, practically necessitating advanced technology to navigate the complexities involved. This can negate any envisioned efficiencies of consolidating legal work.
Furthermore, the higher overhead costs associated with large firms—spanning from lavish office spaces to extensive marketing efforts—are often passed down to clients. These costs, combined with potentially inflated billing pressures due to internal bureaucratic demands, can result in higher legal expenses, despite any negotiated discounts.
In contrast, smaller or medium-sized firms often provide more personalized service, and clients may represent a more significant portion of their business, fostering stronger relationships and potentially more flexible billing arrangements. While large firms can offer immense resources and expertise, for many in-house legal teams, the balance between cost, service quality, and efficiency can tilt in favor of smaller legal providers.
In conclusion, while mega-firms may be suitable for certain legal needs, corporate legal departments should critically evaluate whether the purported efficiencies and services align with their actual needs. Chesnut advises that consolidating with a few large firms might seem beneficial initially, but it could lead to various hidden costs and inefficiencies that outweigh the advantages.