When Lawyers Weekly publishes its annual list of the largest law firms in the Carolinas next spring, some of the mainstays of the rankings will be bearing new names on their marquees, part of a growing trend of local and regional law firms partnering up with big national firms.
As of Oct. 1, there have been 56 law firm mergers in the country this year, more than in any previous year, according to figures released by Fairfax Associates, a Washington, D.C. consulting firm that helps law offices navigate the merging process.
Since then, Smith Moore Leatherwood, a 131-member firm which had six offices, including four in North Carolina and one in South Carolina, consummated its merger with Fox Rothschild, an 816-member national firm. And McNair Law Firm, an 84-member firm with six offices in South Carolina and one in North Carolina, has announced a merger with Burr & Forman, a 282-member Southeast regional firm.
Mark Silow, chairman of Fox Rothschild, said that there are several common themes when firms are making the decision to merge. One is economies of scale–smaller practices need to be able to make expensive investments in improving their technology and infrastructure. For the national firms, merging with an existing firm is a much more economically efficient means of expanding into a new market than trying to hire new attorneys to staff newly established offices.
Another impetus is that clients now are more frequently looking for a one-stop-shop law firm that specializes in many areas, not just a few. As the legal industry becomes more complex and more specialized, it’s very difficult in small and mid-sized practices to have all the specialties that firms need to serve sophisticated clients. The mergers, attorneys said, would enable firms to expand the breadth of their practice areas.
As another benefit, larger firms have an easier time both attracting young and talented attorneys and retaining more experienced lawyers.
“We already are hearing from laterals who are more interested in speaking with us because of this acquisition,” said David Tigges, managing shareholder of McNair.
The rapidly-growing Carolinas are a particularly attractive market for larger law firms to move into, and in the cases of both mergers, the tie-up helped fill a noticeable gap in the larger firm’s footprint.
“The legal landscape in the Carolinas is in a period of intense growth as more businesses seek access to the region’s economy and opportunity in a location that provides a low cost of living and incredible quality of life,” said Ed Christian, CEO of Burr & Forman. “Law firms are following clients as they grow and expand.”
In that sense, the more recent mergers differ notably from a 2017 one between North Carolina-based Womble Carlyle and the UK-based Bond Dickinson, as the two firms were then known. At the time, Womble Carlyle already had more than 500 attorneys, almost as many as Bond Dickinson had, and had extended its footprint well beyond the Carolinas.
But many local firms remain resistant to merging with larger ones, said Lisa Smith, managing partner of Fairfax Associates, the consulting firm.
One downside of a merger, she said, is that acquiring a new firm can lead to conflicts of interest–firms can lose a great opportunity because they’re already representing the other side in a dispute. Some firms don’t even like to bring in lateral partnerships, she said.
“They feel like there is a benefit to having homegrown partners and people coming up through the system,” she said. “They are also protective of their cultures and don’t want to disrupt that culture. And then there is always fear of the unknown.”
Indeed, attorneys at all of the merging firms said that having compatible firm cultures is essential to making a partnership successful.
“The cultural fit we share with Burr & Forman made this an easy decision for our shareholders,” Tigges said. “This acquisition serves to deepen the bench and accelerate opportunities for growth for both our clients and our people.”
Lawyers Weekly reached out to some of the largest firms in the Carolinas that have thus far declined to enter into mergers in order to get their own perspectives on the trend, but was not able to speak to any attorneys on the record.
Nevertheless, attorneys at the merging firms said that they felt that they were early adopters of a trend that is likely to continue rippling through the legal profession. Smith said that she expects continued consolidation in the legal industry in 2019 and beyond. Some will certainly come through mergers, although many firms will also achieve growth through lateral hires.
But Silow, the Fox Rothschild chairman, said that economic logic would continue to make mergers an attractive option for firms looking to expand.
“It’s pretty much an established fact that organic growth is very difficult in the legal profession,” Silow said. “I think all firms aspire to grow organically, and it is a priority for us, but it is hard to do that in a meaningful way on a year-to-year basis.”