Mergers of large law firms resumed in 2021, with more deals in store

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  • 2021 saw Holland & Knight merge with Thompson & Knight, two deals with Dentons in the United States
  • Arent Fox and Schiff Hardin to merge next year

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(Reuters) – The merger activity of large law firms has increased this year after the pandemic led to a steep decline in 2020, and industry consultants have said they expected a further increase in the next year.

This year, several large US companies have used mergers with smaller companies to enter new markets. Spencer Fane, Thompson Coburn and Crowell & Moring have absorbed mid-size companies in Nashville, New York and Chicago, respectively, expanding their national footprint.

Dentons also continued to expand in the United States, partnering with companies in Iowa and Alabama. Holland & Knight has significantly strengthened its presence in the popular Texas legal market by merging with Dallas-based 275 attorney Thompson & Knight.

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And 2021 ends with another major merger on the horizon – Schiff Hardin and Arent Fox said they will combine on March 1 in a firm that will have 600 lawyers and policy professionals and a combined turnover of more than $ 475 million.

Law firm Fairfax Associates said it had tracked 33 completed mergers through the third quarter of 2021, up from 32 at that time last year and 46 at the end of the third quarter of 2019.

“We have seen a lot of interest from the companies, a lot of discussion going on,” said Lisa Smith, director of Fairfax Associates.

Smith, who is among those who predict even more activity in 2022, also said there was more interest among companies in merging or combining with another company of comparable size.

But she said it’s not clear whether such “mergers of equals” will constitute a larger proportion of merger deals made next year.

“They’re harder to make, so whether we’ll see more of them is another question,” Smith said.

U.S. law firms have fought fiercely to recruit partners this year, raising salaries and handing out large bonuses to avoid falling behind. Partners, based on their practices and customer lists, were also in high demand.

This pressure is also pushing law firms to seek mergers, said Kent Zimmermann, consultant for the Zeughauser Group.

“Despite the time and money they spend on large-scale growth, they feel like they’re walking on water,” Zimmermann said. “For every person or team they are able to recruit, another person retires or leaves.”

Although he also expects a slight increase in merger activity, Brad Hildebrandt of Hildebrandt Consulting questioned its importance. Given the booming US legal market, fewer businesses might be looking for lifelines, he said.

The industry is poised for another solid year of revenue growth – Wells Fargo Private Bank’s legal specialties group forecast an average growth of 14% among law firms surveyed last month.

“The incentive to merge may not be as strong as it once was,” Hildebrandt said.

But stronger financial performance can also be a driver of merger activity, Zimmermann said, if companies invest the profits heavily in raises and recruiting. The merger with another company could mitigate the risk of poaching, he said.

Read more:

Arent Fox and Schiff Hardin to Merge to Form $ 475 Million Revenue Company

Spencer Fane to merge with Nashville firm Bone McAllester

Holland & Knight flexes Texas muscles after Thompson & Knight deal

Thompson Coburn Makes New York Debut With Mid-Sized Merger

Crowell & Moring Merges with Intellectual Property Firm Brinks in Midwestern Expansion

Dentons marries Alabama law firm in latest midsize US combo

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