Law firms that rely on mergers for growth face the significant challenge of forging a new, cohesive identity. While financial compatibility and hourly rates are often scrutinized before a merger, crucial cultural elements are frequently deferred until the post-decision phase. Laura Saklad, a consultant at Intapp and former COO at Orrick Herrington & Sutcliffe, suggests that this delayed attention to culture can be likened to “lateral partner integration on steroids.”
This issue is pivotal as many firms consolidate their operations. Troutman Pepper Hamilton Sanders plans to finalize its second merger in five years by January, while Taft Stettinius & Hollister is set to complete its third merger in the same span. According to Fairfax Associates, 29 mergers occurred in the first half of this year alone, highlighting a growing trend. The mergers between Ballard Spahr and Lane Powell, and Taft Stettinius & Hollister and Sherman & Howard are notable recent developments.
The loss, or even the potential loss, of a firm’s culture presents a significant hurdle. Sherman chief executive Stefan Stein underscored the importance of “client-focused, people-first cultures” in their decision to merge with Taft. Similarly, new leadership at firms like Sidley Austin and Pryor Cashman has echoed the necessity of preserving firm culture amidst these changes. However, the reality can be starkly different. Jon Truster, a New York-based legal recruiter, noted, “The firm loses its culture a little bit when these rapid mergers are going on.”
Troutman Pepper exemplifies the evolving nature of merged entities. Formed in 2020 through the merger of Troutman Sanders and Pepper Hamilton, it is now set to add another 500 lawyers by combining with Locke Lord. Nevertheless, former partners have observed a shift towards a business-focused approach, favoring lucrative practices over those with lower rates.
The newly-formed A&O Shearman, a fusion of Allen & Overy and Shearman & Sterling, faces its own integration challenges. Despite anticipated growth opportunities, the firm is cutting its global partner count by 10% and closing some operations to streamline post-merger integration.
Ballard Spahr and Lane Powell, in contrast, confront the challenge of merging differing partnership tiers. As Ballard Spahr chair Peter Michaud noted, the firm is considering whether to implement a two-tier system in an effort to integrate the new partnership seamlessly.
Some firms, wary of the potential cultural clash, opt out of the merger game altogether. Ronald Shechtman, managing partner of Pryor Cashman, speaks to the enormous risks of changing economic models and values, while Michael Ferachi of McGlinchey Stafford prefers slow, measured growth through lateral hiring and group acquisitions.
The intricacies of merging law firms undoubtedly pose significant challenges. Yet, the trend of consolidation shows little sign of abating, prompting firms to navigate the delicate balance between growth and cultural preservation.
For more information, please read the full article on Bloomberg Law.