International Mergers Up Sharply in Q3, Says Hildebrandt Institute MergerWatch Report

Law firm mergers through the third quarter of 2012 were on par with the same period last year, according to the latest Hildebrandt Institute MergerWatch Report.  The Hildebrandt Institute tracked eight completed mergers that involved U.S. firms in the third quarter of the year.  This brings the total of mergers in the first three-quarters of the year to 33, higher than the 31 mergers completed in 2011 and the 20 mergers completed in 2010.  However, merger activity still lags behind 2009, which saw 49 completed mergers in the same time period.

While we are seeing a continuing trend of low to moderate merger activity in the U.S., merger activity outside the U.S. is quite robust, particularly in the UK and Australia, a trend observed since the beginning of the year.

U.S. Mergers

With the exception of the merger between personal injury law firm Jacoby & Meyers and Chicago-based Macey Bankruptcy Law in July, which created a 300-attorney firm, the combinations continue to be rather small in scope, an indication of a U.S. legal market that has little room for further segmentation at the top end.  Firms continue to make small acquisitions, either to expand their geographic footprint, build upon an existing regional presence or to create strength-in-depth, a trend that we are also observing in the Australian domestic market, described below.

Three of the domestic combinations involved firms located in New York:

• ASK Financial based in St. Paul combined with Neiger LLP, a six-lawyer bankruptcy practice
• Richmond, Virginia’s Murphy & McGonigle combined with Wall Street’s Krebsbach & Snyder
• Former FBI Director Louis J. Freeh’s firm, Freeh Sporkin & Sullivan, joined with Philadelphia-based Pepper Hamilton

The remaining four domestic mergers took place in the West and South:

• In Nevada, 23-lawyer firm Jones Vargas joined with Phoenix-based Fennemore Craig
• Kansas City’s Spencer Fane Britt & Browne combined with Denver’s 21-lawyer Grimshaw & Harring, giving Spencer Fane a new office in the Mile High City
• Sacramento’s Weintraub Genshlea Chediak Tobin & Tobin merged with Los Angeles entertainment law firm Weissmann Wolff Bergman Coleman Grodin
• Kentucky’s Wyatt, Tarrant & Combs boosted its Memphis office with the addition of Williams McDaniel

Non-U.S. Mergers

In contrast to the domestic U.S. legal market, international merger activity was up sharply in the third quarter. The number of combinations involving two non-U.S.-based law firms in the third quarter was 21, more than double the nine mergers tracked in 2011. For the first three quarters of 2012, there were 61 mergers.  The number of combinations thus far in 2012 is almost two times greater than for the first three quarters of 2011, which saw 32 mergers, as well as for prior years, which saw 32 combinations in 2010 and 35 in 2009.

The brisk pace of law firm consolidation in the U.K. is ongoing, with a number of combinations completed this quarter including between Anderson Fyfe in Glasgow and TLT in Bristol (Jul 1); Glasgow’s Biggart Baillie and DWF in Manchester (Jul 1); and DAC Beachcroft and Glasgow’s Andersons Solicitors (Sep 3); and Shakespeares and Harvey Ingram (Sep 1).

Rapid change is also occurring in the Pacific Rim legal market.  The region remains a desirable location for law firms and notably, U.K. firms continue to show strong interest in the Australian market.  Herbert Smith and Australia’s Freehills merged to create Herbert Smith Freehills with 2,800 lawyers, effective October 1.  Global law firm K&L Gates and Australian national law firm Middletons have acknowledged that they are in discussions regarding a possible combination that if approved, would create a firm of more than 2,000 lawyers.  As we noted above, the Australian domestic market is also undergoing significant change as a number of middle market firms tie up to reposition themselves to compete more effectively for domestic work.  Sixteen domestic combinations have been announced since 2010, including seven so far this year, almost double that of 2011.

Posted by Marianne Purzycki