September 24, 2014
Last week, news broke that Bingham McCutcheon and Morgan, Lewis & Bockius have agreed to merge, forming a 2,000-lawyer firm with $2 billion in revenue. Earlier this month, Locke Lord and Edwards Wildman announced that they planned to combine themselves. The new firm, Locke Lord Edwards, would have $675 million in annual revenue and around 1,000 lawyers.
As this blog has noted before, merging is a pronounced trend among Large Law firms. Altman Weil estimated that there were 70 mergers between Large Law firms in 2013, the most since the start of the Recession of 2008.
However, not everybody thinks mergers are a good idea. Critics of the Large Law firm business model point out that merging to get bigger only perpetuates structural problems and makes minimal, if any, strides toward the reinvention they say law firms need to implement.
So, why do Large Law firms continue to merge?
- Most legal industry observers agree that demand for legal services has remained relatively static and is not poised to climb any time soon. In such a market, one of the few ways a law firm can grow is through lateral hires, which hopefully secure attorneys’ existing and loyal clients. A merger, of course, is akin to a lateral hire writ large.
- Although it is a tough time for law firms of just about any size, the very biggest law firms are prospering. The top 20 biggest law firms greatly outpaced their peers in The American Lawyer’s list of top 100 law firms. All law firms would like to join that rarified echelon, and a merger is much quicker than organic growth.
- There is also something to be said for the appeal of business as usual. Even as the calls for a new legal business model grow louder, many people see mergers as a tried-and-true tactic. Whether they are is debatable, given the changed business landscape, but in a tradition-honoring industry like law, there is comfort to be found in what has worked before.
It will be interesting to see how long these justifications perpetuate the trend of Large Law firms merging. Some, like attempting to join the “super-rich” Top 20 biggest law firms, make more sense than others. As the legal industry continues to heave and shift, it will get easier to deliver a final verdict.