In an era defined by large-scale consolidation, many of the United States’ largest law firms are increasingly leveraging mergers as a strategy for growth. However, analysis by Bloomberg Law reveals that most firms lag behind their rivals post-merger. Around two-thirds of the 18 major mergers over the past 15 years saw these firms increase profits per partner and revenue per lawyer at a slower pace than competitors. All but three mergers fell short of the average gross revenue growth among the top 100 firms nationally.
The era of consolidation in the legal industry has been catalyzed by significant advances at some of the country’s preeminent firms. Notably, a spate of large mergers was finalized this month. Leaders often perceive mergers as panaceas, addressing financial or operational issues without sufficiently evaluating potential yield in new business or increased billing capacity. McKinsey & Co.’s Albert Bollard highlights the pitfalls of treating mergers as standalone strategies, noting that many firms lack lawyer buy-in from pivotal practice groups during these transitions.
Initial financial improvements in the first year post-merger, largely due to combined revenue and favorable profit calculations, often diminish in subsequent years, coinciding with mass lawyer departures. Law firms like Missouri’s Bryan Cave Leighton Paisner, Texas-based Locke Lord, and Pittsburgh-headquartered K&L Gates are prime examples of firms struggling with growth post-merger. BCLP, for instance, saw a significant decline in revenue and equity partnerships following its latest merger, struggling to keep pace with competitors like the Am Law 100 mean growth rates. The dearth of consistent strategic planning and failure to genuinely integrate merged entities are cited as fundamental reasons for these struggles.
Contrastingly, firms that surpassed average growth rates, such as Husch Blackwell and Hogan Lovells, exemplify the necessity of thorough integration planning. Husch Blackwell’s success is attributed to pre-merger integration efforts and strategic meetings with key partners from both firms. The case of Hogan Lovells further illustrates the transformative potential a well-executed merger can have, propelling the firm into global prominence and significantly expanding its service capabilities.
For firms at the lower end of the profitability spectrum, the rationale for mergers can often be survival rather than growth. Kristin Stark of Fairfax Associates elaborates that for some firms, mergers present a means of navigating financial instability, even if not resulting in substantial economic growth. Yet, firms like Ballard Spahr demonstrate that meticulously calculated mergers aimed at strategic capability enhancement can yield significant performance improvements.
Ultimately, the ongoing trend in legal mergers remains consistent with broader corporate strategies among clients, where the focus remains on creating synergies and expanding competitive advantages despite inherent risks. Lessons from successful integrations underscore the importance of pre-merger planning, integration, and retaining key talent to ensure long-term viability and performance.