Law Firms Encounter Slowdown in M&A Since Last Year
There were only 20 acquisitions and mergers among law firms during the third quarter nationwide, according to a report released by Altman Weil MergerLine.
Q3 has Most Quarterly Transactions of 2020
The three-month period that ended September 31st saw the most quarterly transactions among law firms so far this year. There were just seven in the second quarter, and 17 in the first. The nine-month total stands at 44. However, the deal volume is about half what it was during the comparable period in 2019. That was a record year for acquisitions with 115 all of 2019.
“Law firm merger activity is starting to bounce back,” Altman Weil principal Tom Clay told Crain’s Cleveland Business. “Most deals are between smaller law firms seeking to fortify themselves in a COVID-weakened legal market, but midsize and larger law firms are beginning to reengage in strategies to acquire smaller firms.”
Third Quarter Data for Law Firms
The third quarter moved 2020’s total beyond the record low seen in 2010 when there were only 39 acquisitions for the entire 12 months. The third quarter deals were small, with the average acquired law firms employing just a dozen lawyers. The average acquirer size was 1,149.
Highlighting the third quarter was Pittsburgh-based K&L Gates’ announcement in August that the three lawyers of Chicago-based Richards Patent Law were joining the firm as part of its intellectual property procurement and portfolio management practice. K&L Gates employs 1,700 lawyers and about 200 in its firmwide IP procurement and portfolio management practice. K&L Gates has offices all over the world.
Dentons, a New York based global law firm, made the biggest transaction of the third quarter among law firms. The law firm is in constant acquisition mode and announced its intention to combine with 96-lawyer Salt Lake City firm, Durham Jones & Pinegar. The acquisition is part of Dentons’ 'Golden Spike' US expansion plan.
In January, Dentons launched the combination of Bingham Greenebaum and Cohen & Grigsby, together with Dentons US, which it said was the first step in forming “a truly national law firm” in the United States as part of Dentons’ “Project Golden Spike.” In a press release, Dentons said, “Clients benefit from a model that ensures they are served by the partners they know and trust while also having access to the best technology and more talent in more places across the country and around the world.”
Dentons also said they will combine with 18-lawyer East African Law Chambers in Dar es Salaam, Tanzania. This was the only international law firm deal in the quarter.
Other deals among law firms included Fennemore Craig, a 124-lawyer Mountain West firm based in Phoenix, making its foray into the California legal marke. Fennemore Craig added 46-lawyer Dowling Aaron. Observers say that the merger has formed a combined firm with up to about $95 million in combined gross revenue. The focus is on agricultural and environmental clients. The merger was effective October 1st but was announced in July. Dowling Aaron had four offices in California—including Bakersfield, Fresno, and Sacramento—and maintained strong agricultural legal business, as the state’s Central Valley is the largest food-producing region in the United States. The region is also a water hub for the western part of the country.
Additional Mergers and Acquisitions Among law Firms
A few other AmLaw law firms made small acquisitions. Bond Schoeneck, based in Syracuse NY, acquired The Wolford Law Firm, a three-attorney litigation boutique in Rochester, New York.
Miles & Stockbridge acquired 2-lawyer immigration firm, Taylor & Ryan in Pikesville, Maryland. Miles & Stockbridge has seven offices in and around Washington, DC and Baltimore. The firm recently brought on 43 minority-owned businesses as new clients since July, after launching its Black Business & Startup Initiative.
Overall, 90% of Q3 deals were acquisitions of firms with 20 or fewer attorneys, and 65% were small same-state mergers. Research shows that merger activity in the quarter was about the same across all regions of the US.