Mergers and acquisitions of firms: A (further) year of record figures
2018 has been a year of major activity and growth for Gold League corporate law firms worldwide. The American Lawyer recently published its famous AM LAW 200 ranking and an in-depth analysis allows us to draw some interesting conclusions, both in regard to organic growth and inorganic growth transactions, which, for one further year, have surpassed those recorded in the previous year.
2018 has been a great year for the American firm Kirkland & Ellis, which, with 973 partners (24.3% of whom are women), over 2,500 lawyers and a 19.4% rise in revenue to 3.165 billion dollars, leads the world ranking of revenue of elite law firms. The second position is for Latham & Watkins– elected Firm of the Year in Spain at the Legal Marcom 2018 gala. The firm founded by Dana Latham in 1934 has grown by 8.5% on the previous year to record revenue of 3.064 billion. The third and fourth positions are held, respectively, by Baker McKenzie (with revenue of 2.670 million dollars and growth of 1.9%) and DLA Piper, which moves past Skadden Arps Slate Meagher & Flom, partially as a result of the international mergers and integrations carried out over recent years, which have allowed its revenue to exceed 2.634 billion dollars (a rise of 6.6% on the previous year).
For the firm – which has its origins on both sides of the Atlantic: DLA (UK), PiperRudnick (USA) and GrayCary (USA) – integrations and associations have been a constant factor since its birth in 2005. If in the article “2018: La edad de oro de las fusiones entre despachos” [2018: the golden age of mergers between firms] published in Expansión (29/12/2017), we mentioned the merger in Chile that DLA Piper carried out with Dahamondez Álvarez & Zegers, in 2018 it has also added in the same country Noguera, Larraín & Dulanto – 30 lawyers – to become DLA Piper BAZ|NLD. In addition, in Denmark it has integrated Delacour, thus adding a further 60 lawyers. In the previous year, it had already integrated Liner (Los Angeles) – 60 lawyers –, ABBC (Lisbon) – 50 lawyers – and LETT (Copenhagen) – 150 lawyers. However, probably the most difficult integration of the last decade is that which was carried out in 2011 with the Australian firm Phillips Fox – 700 lawyers.
Law firm mergers reach new record
The largest transatlantic merger over the last year was that between the US firm Brian Cave – 870 lawyers – and the UK’s Berwin Leighton Paisner (BLP) – 612 lawyers. The British firm had a brief dalliance with Greenberg Traurig, located in Miami, but the cultural differences put an end to the affair. The resulting Bryan Cave Leighton Paisner already has revenue of over $900 million. On this occasion, the agreement is presented as a merger between equals, with the aim of achieving their mutual interests in the US market. All of this under the watchful eye of Deloitte, the deal’s leading advisors.
Another of the most interesting mergers in 2018 worldwide was that between Hunton & Williams with revenue of $541 million – 661 lawyers – and Andrews Kurth Kenyon, with $289 million – 327 lawyers – in the United States. The merger of the new Hunton Andrews Kurtled to the firm having over 1000 lawyers spread over its 15 offices, which has allowed it to enter the select top 50 of the Gold League world ranking.
The increase in cross-border merger activity in the last three years has mainly been driven by Dentons. Despite its merger with Dacheng in 2015, the firm has not quenched its thirst for growth.
What is more, Dentons participated in four of the five cross-border mergers completed in the third quarter of 2018. But none of this is new. It had already participated in 46% of the cross-border mergers in 2016 and in 32% of such mergers in the following year. The polycentric firm carried out the second largest merger of the quarter in the United States after integrating Alston Hunt Floyd & Ing (Hawaii), as well as four other firms, adding a total of 160 lawyers. In parallel, it is already working on another four cross-border deals for 2019.
Finally, we could not leave out CMS. As we mentioned in the previous article, the three-way merger between CMS, Olswang and Nabarro has proved to be a success. CMS ended the 2017/18 financial year with total growth of 38.80%, with its revenue rising from 1.0578 billion to over 1.4683 billion dollars. The other firms that make up the top 5 firms with the highest growth in 2017/18 worldwide are the British Eversheds (+69%), the American Arnold&Porter (+52.3%) and the Chinese Yingke (+45.9%) and AllBright (+43.4%).
What is to come in 2019?
Frenetic activity is expected for 2019. On the one hand, there is talk in the market of the possible sale/integration of a Spanish firm with revenue of over 50 million euros, which will be taken over by an international firm. If this ends up coming to fruition, it would certainly be one of the major news events of the year. On the other hand, there is also talk of a US/UK firm that is looking to add a firm in Madrid with revenue of between 10 and 20 million euros.
And speaking of frenetic activity, will we see Juan Picón (former world co-president in DLA Piper) and José María Aznar (former president of the Spanish Government) making it big in the Americas again this year, this time for the Latham & Watkins team? It should not surprise anyone. What is certain is that there are some Spanish middle-market firms that will enter Latin America (Peru, Colombia and Mexico). One of these deals will be announced between January and February 2019.
In conclusion, in addition to paying great attention to the development of the Big Four and the growth of their legal branches, firms continue to seek to improve their competitiveness in order to be prepared for ongoing turbulence.
If we experienced the age of mergers in 2017 and the golden age of mergers between law firms in 2018, looking forward to 2019, there are few reasons to expect that the pace of merger and integration talks will fall compared with this last year. And if several of them manage to reach their peaks, the coming year may once again beat the record for mergers and integrations.
About the Author
Gericó Associates focuses on helping law firms to improve their market positioning. He has been -joint his business partner Alfonso Everlet- the creator and driver of the Legal Marketing & Communications Awards, celebrated biennially in Spain.
Besides, he worked as Reputation Advisor of the Bankruptcy Administration of Banco Madrid, he takes part in World Law Congress Organizing Comittee and he is a collaborator of General Council of Spanish Lawyers. Speaker on the ICAM (Madrid Bar Association), ICAB (Barcelona Bar Association), Malaga Advocacy Congress, University Carlos III, etc.; he has had several radio and TV interviews about the current situation of the law firms.