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We're barely halfway through 2015 and it already looks like this will be the year of the law firm merger. Firms are merging at a record rate, with 48 mergers thus far, according to the consultancy group Altman Weil. That's the highest rate since the company began recording mergers.
That number is expected to grow even more in the second half of the year, when long-term deal making comes to fruition. Much of the growth is driven by larger firms gobbling up smaller competitors. But of course, not everyone is happy going from boutique to behemoth.
What's the Drive Behind Merger Mania?
Law firms are facing pressure to grow, but many are reluctant to do so simply through hiring -- hence, the focus on acquiring other, smaller firms. Executive committees are worried about the time and risk involved in lateral hires, legal management consultant Kent Zimmermann told Bloomberg's Casey Sullivan (no relation). The "prevailing thinking" is that absorbing an established firm can allow for growth with a lower level of risk.
Mergers are also being driven by lack of succession planning among small and boutique firms, Bloomberg reports. Lack of succession planning allows larger firms to sweep in during times of leadership turnover.
Denton Leads the Way -- in Size, at Least
Few of the mergers are leading to truly monstrous-sized firms. That is, with the exception of Dentons. The firm, the largest in the world, was itself the product of the recent merger of three large law firms. Dentons can't seem to stop growing, either, having sucked up Atlanta-based McKenna Long & Aldridge last week, with China's Dacheng Law Offices soon to follow. Dentons now has over 6,500 lawyers spread through 120 offices. Talk about growth.
Of course, not every lawyer's dream is to see their firm subsumed into a multinational leviathan. When McKenna Long, itself not the smallest of firms, announced its merger with Dentons, more than a handful of lawyers decided to leave. Part of the reason is the increased conflicts a massive firm brings. Former McKenna Long lawyer Timothy Tosta went lateral after the merger was announced, partly because he could lose up to 20 percent of his business. Tosta, like many who left, moved to firms that were only a fraction of Dentons' size.