Strategic Expansion: Mergers

This article is reprinted with permission from LexpertMagazine.  ©2007 Lexpert, All rights reserved.  Lexpert Magazine is Canada's leading source of news and information about the business of law.

In a prior case study, we looked at the strategy development process for a large firm that was built primarily via lateral acquisitions. This month we will contrast that approach with a firm that is the result of combining several firms in different cities to create a "national" law firm.

Fraser Milner Casgrain LLP (FMC) has more than 500 lawyers distributed across seven offices in Canada and New York City. To learn more about FMC’s experience with strategic planning, I interviewed Doug Knowles, who is a partner in the firm’s Vancouver office, the former office managing partner (OMP) for that office, and the former chair of FMC’s national strategic planning steering committee.

The purpose of this book, intended for partners and others in senior management positions in mid-size to large law firms, is four-fold: (i) to assist such firms decide whether they should consider merger; (ii) to guide firms that decide to merge through the process of identifying a suitable partner; (iii) to provide guidelines to undertaking successful merger negotiations; (iv) to help ensure that firms do realize the anticipated benefits of merger through effective post-merger integration.

The revised and updated Third edition of Anatomy of a Law Firm Merger by Hildebrandt International provides you and your firm – no matter what size or type of practice – with the expert advice on what you need to consider when contemplating a merger, and how to successfully make it happen. The Third edition now features a completely updated financial perspective for today’s changing financial picture, plus a revised discussion of the economic balance sheet — to help quantify the value each firm brings to the merger.

Somerset, N.J., Jan 7, 2009 –According to Hildebrandt Baker Robbins, leading consultants to the legal industry, law firm merger activity continued at an active pace in 2009, with a total of 57 completed mergers and acquisitions involving U.S. law firms, up slightly from 55 in 2008. The level of completed mergers in 2009 is consistent with the number over the past 5 years, with 54 completed mergers in 2007, 59 in 2006 and 52 in 2005. As has been the case in each of the last 5 years, the busiest quarter in 2009 was the first quarter with 33 mergers, [compared with 22 in the first quarter of 2008] followed by 9 in the second quarter, 7 in the third quarter and 8 in the fourth quarter.

According to Hildebrandt, leading consultants to the legal industry, law firm merger activity was slower during the third quarter of 2009, with a total of seven completed law firm mergers and acquisitions involving US law firms. This compares with 13 completed US mergers in the third quarter of 2008, and 10 in the third quarter of 2007. On an annualized basis, the number of mergers in 2009 is on track with 2008, due largely to the high number of mergers completed in the 1st quarter of the year.

According to Hildebrandt, leading consultants to the legal industry, law firm merger activity declined somewhat during the second quarter of 2009, with a total of nine completed law firm mergers and acquisitions involving US law firms. This compares with 14 completed US mergers in the second quarter of 2008, as well as 14 in the second quarter of 2007. Because the first quarter was a very active period, merger activity for the first six months of 2009, with 42 completed mergers, remains ahead of last year. One merger has been announced and will be completed in the third quarter.

According to Hildebrandt, leading consultants to the legal industry, law firm merger activity significantly increased during the first quarter of 2009, with a total of 33 completed law firm mergers and acquisitions involving US law firms. This compares with 22 completed US mergers in the first quarter of 2008, and 23 in the first quarter of 2007. Six additional mergers announced during the first quarter are to be completed during the second quarter of 2009, for a total of 39 thus far in 2009. Lisa Smith, head of Hildebrandt's Law Firm Strategy and Merger Practice, said “As we predicted at the beginning of the year the pace of consolidation in the legal industry has accelerated. We continue to see high interest in mergers and acquisitions, particularly as firms complete their internal restructuring processes and turn to strategic positioning.”

According to Hildebrandt, leading consultants to the legal industry, law firm merger activity was slower during the third quarter of 2009, with a total of seven completed law firm mergers and acquisitions involving US law firms. This compares with 13 completed US mergers in the third quarter of 2008, and 10 in the third quarter of 2007. On an annualized basis, the number of mergers in 2009 is on track with 2008, due largely to the high number of mergers completed in the 1st quarter of the year.

According to Hildebrandt, leading consultants to the legal industry, law firm merger activity declined somewhat during the second quarter of 2009, with a total of nine completed law firm mergers and acquisitions involving US law firms. This compares with 14 completed US mergers in the second quarter of 2008, as well as 14 in the second quarter of 2007. Because the first quarter was a very active period, merger activity for the first six months of 2009, with 42 completed mergers, remains ahead of last year. One merger has been announced and will be completed in the third quarter.

According to Hildebrandt, leading consultants to the legal industry, law firm merger activity significantly increased during the first quarter of 2009, with a total of 33 completed law firm mergers and acquisitions involving US law firms. This compares with 22 completed US mergers in the first quarter of 2008, and 23 in the first quarter of 2007. Six additional mergers announced during the first quarter are to be completed during the second quarter of 2009, for a total of 39 thus far in 2009. Lisa Smith, head of Hildebrandt's Law Firm Strategy and Merger Practice, said “As we predicted at the beginning of the year the pace of consolidation in the legal industry has accelerated. We continue to see high interest in mergers and acquisitions, particularly as firms complete their internal restructuring processes and turn to strategic positioning.”

In these challenging times, it is critical to have up-to-the-minute, actionable information about the performance of your firm and how it compares to peer firms. Hildebrandt Peer Monitor is an innovative real-time benchmarking program delivered online anywhere and anytime you need to access your data. Peer Monitor provides law firm decision makers with benchmarking data as current as the most recent monthly financial statements. Key metrics such as demand, rates, productivity and expenses are broken out by practice groups, offices and individual timekeepers. Key insights on a member firm's performance relative to peers are available via a Web-based dashboard, along with an economic index and custom analytics. I have included a link to the just-published 2008 Q4 Peer Monitor Index to give you a firsthand look at the type of information available.  I think you'll find the insights on the marketplace to be interesting reading.

Over the last few weeks, many of the top 100 UK firm’s 2010¹ provisional revenue and profitability figures have been announced. The full and underlying financials are yet to be published (we are awaiting more detailed information on productivity, leverage, costs, margin, etc.) but in the meantime enough indicative data is available to begin to discuss the potential drivers of this year’s results and expectations for the future.