August 11, 2014
Historically, a select few Large Law firms have dominated the higher end of the Mergers & Acquisitions market, but new data analyzed by the Wall Street Journal indicates that may not be the case much longer — if it is not history already.
The newspaper found that less expensive rates are making Midsized Law firms more appealing than their Large Law counterparts because clients are sustaining their interest in cost-trimming and reducing legal spend.
Last year, 52 percent of “high-value” M&A work, which was defined as generating more than $1 million in legal fees, went to law firms with between 501 and 750 attorneys, the paper reported. That is the second year in a row firms of that size claimed the majority of high-value M&A work.
For comparison, Large Law firms (defined here as those with more than 750 lawyers) claimed 29 percent of high-value M&A legal fees.
For broader perspective, remove the “high-value” part of the equation – the average M&A transaction costs between $43,000 and $272,000 – and Midsized firms took in 37 percent of fees, Large Law firms took in 30 percent and firms with between 250 and 500 law firms took in 33 percent.
As far as motivating factors, price was the obvious driver. Among the firms studied, lawyers at Midsized firms charged an average of $597 an hour, whereas Large Law attorneys commanded $706 per hour.
This is not the first time that Large Law firms have been sent a loud, clear message that their traditional messages of premiere service and pedigree are not connecting with clients anymore. That Midsized firms are encroaching on traditional Large Law territory is something we have seen for awhile, but M&A work was one of those rare areas that seemed unassailable. Will the fact that we have seen two years in a row of Midsized firms grabbing the lion’s share of the M&A market be enough of a wake-up call?
(For a related news item on M&A trends, read this article on high-profile deals and busts from the New York Times Dealbook.)