An Introduction To Law Firm Mergers

Introduction

A law firm merger is an act of two law firms entering into a merger to amplify their profit margins. There are a multitude of reasons for law firms to enter into one, such as allowing them to have a bigger bench of experts in an area of law or by delivering increased economies of scale. Merged firms can consolidate their resources in one place, thus saving on additional rent. It also means hooking all the staff to the common IT systems and to the same back-office functions. Thus improving overall cost-to-income ratios.

Lower costs also mean more money to reinvest in providing a better service for clients. Minimising costs has become particularly important as billable hours are falling for top law firms. Billable hours fell 8.3% for equity partners at the top 10 biggest firms in the UK over the last year [1].

It is safe to say that since the advent of time, the demand for exceptional lawyers has always been significant, therefore giving rise to mergers as well, making larger firms win in the ‘war of talent’ with the average number of lawyers rising from 12 to 17 over the last decade. As the average size of legal firms has increased, the total number of law firms has decreased by 13%, from 10,867 in 2013 to 9,498 in 2023. A large portion of this decrease can be attributed to mergers, which saw a 23% increase from 99 reported in 2021 to 122 in 2022 in the UK [2].

Challenges Faced in a Law Firm Merger

Mergers have become a prevalent strategy in today’s world. Despite their numerous advantages, there are several challenges faced in the real-world scenario. The failure of law firm mergers often stems from cultural, strategic, financial, leadership, client, and communication challenges[3].

  1. Cultural Misalignment: Differences in values, work ethic, and management style hinder collaboration.
  2. Strategic Misalignment: Divergent visions and goals complicate establishing a unified direction.
  3. Financial Incompatibility: Discrepancies in financial structures and profitability pose negotiation challenges.
  4. Leadership and Governance Issues: Differences in leadership styles and decision-making processes impede integration.
  5. Client Conflicts and Loss: Resistance to transitioning and conflicts of interest can lead to client loss.
  6. Communication and Transparency: Poor communication erodes trust and creates uncertainty.


Recent Law firm Mergers

a) Indian Centric[4]

  1. Dentons Link Legal

Global law firm Dentons officially launched its collaboration with Indian law firm Link Legal on May 15, 2023. Dentons is the first global law firm to combine with a law firm in India.

  1. A&O Shearman

International law firms Allen & Overy and Shearman & Sterling LLP announced a merger to create a global law firm named Allen Overy Shearman Sterling (A&O Shearman). With 250 years of combined experience, A&O Shearman boasts 3,900 lawyers and 800 partners across 49 offices.

  1. VMCO and KBV

In January 2023, Vishnu Mehra & Co. Law Offices welcomed Kulbhushan Verma & Associates (KBV) in a collaboration aimed at providing services related to company and LLP incorporation, secretarial audits, and more.

  1. VMCO and SS Legal

In March 2023, VMCO initiated a cross-border collaboration with SS Legal, based in Nepal. This partnership leverages the strengths of both firms, enhancing their presence and capabilities.

  1. Saraf and Partners and SRGR Law Offices

In the same month, SRGR Law Offices combined forces with Saraf and Partners, with co-founders Saroj Kumar Jha and Ravi Bishnoi joining as equity partners, along with a team of 20 lawyers.

  1. Water and Shark Legal LLP and Solid Law Firm Egypt

In April 2023, Water and Shark Legal LLP collaborated with Egypt’s Solid Law Firm, marking an expansion into Africa and exploring newer avenues globally within the law sector.

  1. Luthra and Luthra Law Offices India and Atlas Law Partners

In August 2023, the entire team of Atlas Law Partners merged with Luthra & Luthra Law Offices, with Atlas’ Harry Chawla assuming the role of managing partner. The team from Atlas comprised seven partners, including Ritu Bhalla and Niti Paul, as well as 26 associates.

  1. Bar & Brief Attorneys and Desai Billimoria and Associates.

November 2023 witnessed the formation of a referral alliance between full-service Mumbai law firms Bar & Brief Attorneys and Desai Billimoria & Associates. Through this collaboration, the firms aim to expand in terms of practice areas and geographical reach while maintaining their individual identities.

B) European Centric[5]

  1. CMS

One of the biggest mergers in recent years is a great example of all the issues that are at play when firms join forces. The three-way combination of CMS, Nabarro, and Olswang became official in 2017. Trading under the name CMS, the firm became the sixth biggest by revenue in the UK and the sixth biggest by headcount in the world.

      2. Birketts LLP and Batchelors Solicitors

At the end of March 2023, Birketts LLP, a UK Top 50 law firm, completed its merger with Batchelors Solicitors, increasing the firm’s headcount to more than 1,000 people. Birketts’ acquisition of Batchelors Solicitors strengthened the firm’s London team and extended its reach further into the South East. Alongside the merger, the firm opened a new office in Sevenoaks, taking its office headcount to six.

      3. Mishcon de Reya LLP and Taylor Vinters LLP

In January 2023, Mishcon de Reya LLP and Taylor Vinters LLP merged, with more than 200 staff said to have joined Mishcon, including 145 fee-earners and 60 business operations and legal staff.

      4. Clifford Chance and Rogers & Wells

More recently, it marked the first fusion between a London-based magic circle firm and its US counterpart since the merger of Clifford Chance and Rogers & Wells in 2000.

Conclusion

In recent years, law firm mergers have emerged as a strategic maneuver to enhance profitability and bolster capabilities. These mergers offer a multitude of benefits, such as increased expertise, economies of scale, and expanded geographical reach. However, the journey towards successful integration is fraught with challenges stemming from cultural, strategic, financial, leadership, client, and communication complexities.

Despite these obstacles, recent law firm mergers across various regions, such as India and Europe, showcase a trend towards collaboration and consolidation within the legal industry. From global giants like Dentons joining forces with Link Legal to regional players like Birketts LLP merging with Batchelors Solicitors, these partnerships demonstrate a commitment to adapting to market demands and leveraging synergies for growth.

Furthermore, the evolution of law firm mergers reflects broader shifts in the legal landscape. By embracing strategic alliances and capitalizing on complementary strengths, law firms aim to navigate these challenges and position themselves for sustained success in an ever-evolving marketplace.

By proactively addressing cultural, strategic, and operational considerations, law firms can maximize the benefits of mergers while mitigating potential risks, ultimately positioning themselves for long-term viability and competitiveness in the legal industry.


 

[1] https://www.lawgazette.co.uk/practice-management/why-law-firm-mergers-are-on-the-rise/5118319.article

[2] Ibid.

[3] https://alfma.com/unravelling-the-reasons-behind-failed-law-firm-merger-discussions/

[4] Bar and Bench December Newsletter 2023, titled “New Indian Law Firms, Mergers, and Collaborations in 2023’

[5] https://www.lawcareers.net/Explore/Features/18072023-A-guide-to-law-firm-mergers

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