Law Firm M&a Activity Set To Be Strong In 2011
Law Firm M&A Activity set to be strong in 2011
by Caroline Clayfield
New figures show a significant rise in merger and acquisition activity among US law firms this year. So what are the trends emerging and why is there a sudden rush to merge?
Those in the legal industry have been avidly discussing the results of the latest quarterly MergerLine report from consultancy firm Altman Weil this week. The report showed merger activity to be up by 79 per cent in the first nine months of 2011 compared with the same period a year ago.
Between January and September this year, a total of 43 law firm mergers and acquisitions have taken place, with 14 of these occurring in the third quarter. The largest of the deals struck so far this year was the takeover of Chicago-based Wildman Harrold Allen & Dixon, a 160-lawyer practice, by 500-lawyer-strong Edwards Angell Palmer & Dodge, which is based in Boston.
The growing activity in the legal M&A market prompted Ward Bower, a leading Altman Weil consultant, to assert, "It looks like the law firm merger market is back." He added, "This is the fourth strong quarter in a row weve seen and were aware of a lot of activity in the pipeline."
Indeed the activity levels of the first three quarters are expected to continue over the remainder of the year. In fact, it is in the fourth quarter that most law firms traditionally prefer to announce mergers or acquisitions, as it means they will have it in the books by the beginning of the next financial year. In 2010, for example, some 15 of the 39 mergers that took place were announced in the fourth quarter and, if a similar trend occurs this year the total for 2011 could even surpass the 53 deals announced in 2009.
A number of M&As have already been revealed in the fourth quarter. The merger of Roetzel & Andress with Lewis, Overbeck & Furman became effective on October 1st. The former is a large law firm with offices spread all over the US, and Lewis, Overbeck and Furman presented a great opportunity to move into the much-coveted Chicago market.
Timothy J. Ochsenhirt, the chief executive officer at Roetzel & Andress, explained, "Entry into the Chicago market has been in our plans for several years and establishing a presence in one of the nation's largest and most dynamic centers of business is a significant part of our firm's strategic growth plan." Mr. Ochsenhirt added that the firm is intent on expanding further into the Chicago market and is looking for talented lawyers to help it do so.
It is this appetite for movement into new markets that seems to be driving the latest bout of deals. The trend so far this year, despite the odd large deal as detailed above, is for smaller law firms to hold much more influence in the M&A market. They do, after all, offer some of the best opportunities for large firms to move into new markets, particularly in regions that are enjoying economic growth at the moment. After a long period of economic downturn, law firms are eager to get a foot in the door when regions start to show shoots of recovery and buying up small regional law firms offers a good value way of achieving this goal.
An example of where this has happened effectively is in Denver where Kansas-based Polsinell Shughart, which employs 466 lawyers, merged with local firm Hensley Kim - gaining just 13 lawyers in the process, but giving them a valuable presence in a growth market.
The importance of thorough due diligence and strategic planning should not be underestimated in the rush to get a footing in a regional market, however, as economic recovery is anything but guaranteed and caution is still an important attribute for any prospective dealmaker.
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