BlogsPotential Law Firm Mergers

May 5, 2021
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For years, law firm merger activity steadily increased, reaching an all-time high in 2019 of 115 mergers. However, with the pandemic and its accompanying economic fall-out, there were only 65 mergers in 2020.

As firms capitalize on post-pandemic growth, experts expect significantly higher numbers in 2021 and beyond. In the first quarter of 2021, there were already 26 mergers recorded. Experts predict 2021 law firm mergers numbers could overtake those in 2019.

Many law firms offset revenue losses in 2020 with cost controls. After a year of crisis management, law firms have again focused on long-term growth. In a year of uneven economic recovery, law firms might search for growth opportunities through mergers.

Benefits of Law Firm Mergers

A merger strategy allows law firms to achieve the desired business goal, like growth, geographic expansion, or diversification. Merging with another firm should always increase your firm’s value. There are many specific goals a law firm could achieve through a merger.

  • Add New Services – If your law firm specializes in litigation exclusively, merging with a full-service firm expands the services you can sell to your clients. This promises significant practice growth.
  • Add Clients – Merging with another law firm gives you access to all their clients and vice versa. Explore the type and level of collaboration amongst attorneys at new firms.
  • Increase Billable Rates – Billing rates are not uniform across the legal landscape. Attorneys benefit from upwardly adjusting hourly bill rates when merging with a firm whose clients find the higher bill rates in line with the value they provide.
  • Decrease Billable Rates – If your clients do not want the upper market rate, reduce rate pressure and move to a firm that is mid-market.
  • Manage Your Practice, Not Your Business – Many smaller firms enjoy the freedom from having to manage a business as they merge with another firm that takes over operations.
  • Expand to New Markets – Opening a second office in a new city is expensive and involves hiring new lawyers and administrative personnel. Many firms find it’s more cost-effective to merge with a firm in a different town rather than starting from scratch. You can also benefit from the firm’s existing reputation, reducing the legwork needed to become known in your new city.
  • Fill Knowledge or Experience Gaps – Sometimes, merging with another law firm is the best way to fill gaps in your team. If you wish to expand in a specific area of law, but your team lacks experience or qualifications, merging with another company is a valuable opportunity for both your firm and your attorneys.

Although mergers of law firms with a similar ethos and work culture provide many benefits, the strength of each merger centers around human capital. While financial and cultural benefits are meaningful, law firms require excellent legal staff that brings lucrative clients.

Should Your Law Firm Merge in 2021?

In April 2021, approximately 229 million Americans had received at least their first dose of a COVID-19 vaccine. With these numbers rising, many law firms are optimistic about their economic future. As restrictions ease, court systems can reopen, legal business will increase, and firms can expect a more predictable cash flow.

Despite the struggles faced by the legal industry during the pandemic, it responded with innovation and experimentation. To continue growing in 2021, firms keep innovating. Moving forward, firms are re-evaluating office space needs, optimizing talent management, and monitoring their employees’ morale and wellbeing. Although employees may return to the office, firms may choose to maintain their paperless environment while protecting and enhancing client relationships through virtual and in-person contact.

Merging with larger firms can help small firms continue innovating. With more financial stability, firms can afford to trial new technologies or policies. The firm may also require more staff, which Collier Legal Search can provide.

Additionally, as the economy grows, so will client businesses. Smaller firms may find clients leaving for larger law firms who can provide the legal services they require and be in the places they need to be. Larger firms also tend to have a more influential brand name, appealing to both high net worth clients and legal hires. By merging, smaller firms can hold on to their growing clients and serve them better.

Rebuild

Before you can negotiate and accomplish a successful merger, carefully analyze your firm’s current market position. Review your firm’s objectives, and alter them if necessary to align with the current market and your clients’ needs.

To put your law firm in a better position as you rebuild, either by merging or growing on your own, ask yourself these questions:

  • Are any of our pandemic innovations of value to our clients? How can we maintain and gain new clients with these innovations?
  • Do we need to review our talent to make sure it is in alignment with new demand?
  • How have our competitor firms changed? Are any firms in distress and therefore receptive to negotiate a merger?

Collier Legal Search is Here to Help

Merging is one way for a law firm to expand and recover after the difficulties of 2020. Choosing the right time and firm to merge with could be the difference between surviving the pandemic and your firm failing.

However, after a merger, you may need to increase your staffing levels with competent workers who bring valuable experience. At Collier Legal Search, we understand that each law firm has specific needs, and we tailor our approach to ensure you hire the best employees for your firm.

Collier Legal Search is a full-service legal staffing company. We place well-credentialed partners, associates, and legal professionals at every level in law firms and corporations. Our experience, connections, and unique approach to building our candidate database deliver consistent results on which our clients can depend. We are committed to the success of our clients and our candidates. Call us today to learn how we can support you as the legal industry and the country navigate a post-pandemic era. Contact us at 832-239-5253.