Is Law Firm M&A Really On the Up? — Let’s Look Closer at the Numbers

Photo by Matthew Bernhardt (Flickr/Creative Commons)

Editor’s Note: The authors of this post are consultants to law firms. 

By Lisa Smith and Kristin Stark, Principals, Fairfax Associates

In 2015, some reports showed record numbers of law firm mergers, but our numbers actually show that the total number of mergers for 2015 was lower than the last two years.

At Fairfax Associates we tracked 49 completed/effective mergers that involved at least one U.S. firm and with a minimum of five lawyers in 2015. This is actually down from 57 mergers in 2014 and 58 mergers in 2013. Merger activity last year was more closely aligned with 2011 and 2012, when we recorded 45 and 43 mergers respectively. Much of the difference in the reports is attributable to mergers under 5 lawyers, which we view as more akin to lateral groups than mergers and often create limited market impact.

Although small mergers have dominated the numbers across the years, we did see an interesting uptick in larger mergers in 2015. Sixty-five percent of 2015’s mergers involved firms with between 5 and 20 lawyers, which is down from 75 percent in 2014 and 72 percent in 2013. In fact, the drop in number of mergers in 2015 was all in the smaller firm category.

At the same time there was a noticeable bump up in the number of mergers involving firms with greater than 100 lawyers. In 2014 there were two mergers in this category; in 2015, there were six mergers, two of which were international combinations. They were Dentons + Dacheng Law Offices in China and separately with McKenna Long; DLA Piper + Davis LLP in Canada; Dykema + Cox Smith Matthews; Locke Lord + Edwards Wildman; and Nixon Peabody + Ungaretti & Harris.

This year, there’s already been robust merger activity, with 19 mergers announced with effective dates in 2016. Two of those mergers involve firms with greater than 100 lawyers – Dentons’ mergers in Australia and Singapore.

The South and the Midwest were particularly active regions in 2015, especially Chicago, Texas and Florida. The big story was Chicago, with six combinations — the two largest being Nixon Peabody’s combination with 102-lawyer Ungaretti & Harris and Cozen O’Connor’s combination with 60-lawyer Meckler Bulger Tilson. There were five combinations in Texas, the largest being Dykema’s combination with Cox Smith Matthews, a 118-lawyer firm in San Antonio. In Florida, there were four small combinations, three of which occurred in Tampa, including Bradley Arant Boult Cummings’s combination with 12-lawyer Glenn Rasmussen.

In California, there were three combinations, the largest of which was Mitchell Silberberg’s combination with 14-lawyer LA corporate boutique Richardson & Patel.

Upstate New York has seen particular consolidation with upstate firms accounting for two mergers in 2015 and another two thus far in 2016.

U.S. firms continue to look to expand internationally. There were five cross-border combinations in 2015 involving one U.S. firm:  DLA Piper + Davis LLP in Canada and separately with Gallastegui y Lozano in Mexico; Dentons + Dacheng Law Offices in China; Morgan Lewis & Bockius + Stamford Law in Singapore; and Littler Mendelson + Vangard, a labor and employment boutique in Germany. Dentons combination with Dacheng created the largest law firm in the world with over 6,600 lawyers, setting a new record in the industry.

Based on the 19 mergers already effective or announced for completion in 2016, and the ongoing discussions among firms, we expect to see merger activity continue at least at 2015’s levels, and possibly resuming the levels of 2013 and 2014.