Law firms get big to serve the big
Consolidation in one industry leads to consolidation in other industries. The growth of food giants has fed a growth in supermarket giants. Big fast food restaurant chains lead to big beef companies and big potato producers. Big cable companies cause big media companies and vice versa.
This trend is particularly marked in business services. Multinational oligopolies need banks that have a full breadth of services and that have offices in Dallas, Delhi, and Düsseldorf. Staffing companies have to handle hiring and interviewing from Japan to South Africa. Accounting firms need to have staffing levels and local expertise wherever the company does business.
Law firms have the same issues, and the result has been an explosion in mergers over the past decade. According to one consulting service (Hildebrandt International), law firm mergers have in the last few years proceeded at "record levels."
What is particularly notable about recent mergers is the increasing size and complexity of the transactions. General practice firms in major markets are increasingly feeling that 150-300 lawyers is only mid-sized, both from the perspective of clients and recruits. Consequently, many of these firms are exploring expansion opportunities.
Among the reasons given for expansion are expanding geographical reach, the ability to service bigger clients, the ability to recruit better staff, and the ability to extend the firm's reach in a specialty such as technology, intellectual property, or international trade.
One Atlanta lawyer whose firm is looking for merger partners is quoted as stating, "There is a sense that you've got to be a certain mass, a certain size, to be attractive to the larger clientele, the bigger corporations…. Business is so competitive with lawyers coming to clients from so many different angles, a lot of firms conclude that they can't be stuck in the middle."
And the mergers are not restricted a single country. In the past few years for example, there have been several major US-UK mergers, creating large firms with transatlantic expertise. Other firms are eager to get expertise in Chinese law, as more and more multinationals are getting deeply involved in China. And the mergers go both ways; there have been major takeovers of US firms by British firms as well as the reverse. And the European Union is making the merger of European law firms all the easier.
And acquisitions are a short cut that avoids the need to hire experts and develop a specialist practice lawyer by lawyer. According to the East Bay Business Journal's take on the situation, the scramble to get big fast is happening all over the legal profession.
Increasingly, the most effective way to do that is for a firm to acquire the
talent rather than take years which the increasingly competitive legal marketplace won't allow to develop its own expertise.
All these mergers and acquisitions are changing the nature of law practice both nationally and internationally, according to the article. It wasn't so long ago that a law firm with over 199 lawyers was pretty rare, according to the East Bay Business Journal article. Now firms with 500 lawyers are commonplace.
Some biggies:
- Clifford Chase, LLP, which is generally considered to be the world's largest law firm has over 3,500 lawyers on staff, office in 19 countries, and oligopoly clients like Pfizer, Siemens, and Citigroup. The bank is the result of a 200 merger between UK's Clifford Chase, the US's Rogers & Wells and Germany's Pünder Volhard Weber & Axster.
- Chicago-based Baker & McKenzie employs 3,000 lawyers, has clients like Microsoft and Verizon, and operates in 35 countries, with extensive operations in both Russia and China
- New York-based Skadden, Arps, Slate, Meagher & Flom employs 1,800 lawyers with clients including Tyson, DaimlerChrysler, and Warner-Lambert
- Cleveland-based Jones Day has 1,600 attorneys on its staff, and clients like General Motors, Nabisco, and BP Amoco.
- Sideley, Austin, Brown & Wood LLP (Chicago) has 1,500 lawyers, clients like General Electric and RR Donnelley, and a major presence in Japan and China.
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