Law firm mergers are back in vogue, if smaller, with California losing little of its appeal as a destination market, according to the latest report by Boston consulting outfit Altman Weil.
No fewer than 14 law firm mergers and acquisitions were announced across the nation in the third quarter of 2011, Altman Weil MergerLine said Monday. Total 2011 combinations is 43, up 79 percent compared to the same nine-month period in 2010.
The desire to expand into new regions continued to be a driver, with Los Angeles a target for three firms. In September, Dallas-based litigation firm McKool Smith announced its acquisition of 35-lawyer Los Angeles firm Hennigan Dorman. In August, Philadelphia’s Fox Rothschild announced it was scooping up the three-attorney Chan Law Group, and in July, Kansas City-based Polsinelli Shugart picked up six-attorney Quateman.
The largest law firm combination announced in the third quarter was 500-lawyer, Boston-based Edwards Angell Palmer & Dodge’s acquisition of Wildman Harrold Allen & Dixon, a 160-lawyer Chicago firm.
Altman Weil principal Ward Bower said he’s seeing a shift in motivation from survival mode to strategic mode this year. Some of the 2006-2008 merger mania was fueled by a “me-too” mentality, with some firms merging because others were doing it. That trend led to a dip in the number of mergers in 2009 and 2010, he said. “Nobody had confidence to try to do deals,” Bower said. “We’re seeing a release of pent up demand.”
The increase in smaller firms folding into bigger firms isn’t necessarily a sign of desperation, Bower noted. Especially in markets that have seen an invasion from big out-of-town firms, some smaller firms have done their long-term analysis and concluded their prospects might be better inside a bigger firm, he said. In Los Angeles, many firms depended heavily on the real estate market, he said, which hasn’t come back. Midsize and smaller firms in Northern California appear to be healthier.