By Adv. Zohar Fisher.
Law firms around the world are into the same thing - to increase growth every year in order to maximize profits. Thus, all firms must adapt themselves to the dynamic reality of the market, whether by starting to practice new law fields, recruiting more employees or by another common way - merging with other firms.
Nowadays, many law firms want to be a part of the merger trend, even firms that may not have considered it before the pandemic.
Some firms are considering it at this stage, whereas some others have already merged with others. Reasons for mergers are varied, but usually include financial pressures and opportunities, client demand, increase of geographical reach and the will to enter new market sectors.
Up until 2019, the world expected to see an increase in mergers between law firms as a part of the worldwide tendency. Surprisingly enough, 2020 disrupted the merger plans (as well as many other plans we have all had).
The pandemic began and Covid-19 put all law firm merger activity on ice as the firms struggled to cope with the new situation. In the US for example, law firm merger announcements in 2020 were lower by 43%, compared to 2019. In 2020 there were 65 announced mergers tracked, whereas in the previous year 115 mergers were inked.
Luckily, 2020 is over and we are all hoping for a better year. 2021 brings good tidings so far, as the firm mergers rebound after the slowdown last year. Many firm leaders are returning to a longer-term work and a more strategic focus with new tactics that lead to merger decisions. Moreover, 2021 brings mergers out of geographic zones, which were not seen in 2020 or earlier.
Tom Clay, a principal at Altman Weil says that it would not be a surprise to see the number of announced mergers climb back over 100 by the end of the year. Lisa Smith, a principal at FairFax adds a few words about the rising mergers trend and says that we would be seeing many mergers with or without the pandemic due to the segmentation and the scaling of the market.
Yet, she admits the pandemic has had an impact on mergers. To her opinion, it led to even more merges as firms are now more willing to embrace change and more willing to consider mergers that were outside their core geographics in the past. So Covid did have some good impacts…
With or without Covid remaining in our near future, we will be witnessing a major merger bounce back. It won’t be immediate since the firms have to fully recover and stabilize again, but eventually mergers will rise back.
The pandemic has not only changed the market, it changed us as humans - and as managers / partners as well. We became more risk takers and more adaptable to changes, we understand that virtual conferences for example can be a thing from now on and that a new strategic planning is required.
Another factor in law firm mergers – especially in the UK - is succession. This will either be an ambition to grow the firm sufficiently so that it is more attractive for junior lawyers to buy in and facilitate the senior partners retiring, or more often - with smaller firms certainly (those sub £5m), the junior ranks do not wish to take on the historic liabilities and so the only option the current owners have (due to insurance) is to find a merger partner.
This combined, with access to private equity and the possibility of an eventual listing - has led to a new breed of consolidator law firm.
In the first instance, a firm has to decide if it is the predator in the process - or the prey - and act accordingly. Once this key decision has been made, time spent putting together a detailed information pack is time well invested.
When the firm is ready to act it has to be sure that it finds and talks to the right targets rather than just 'the firm down the road' - and once it is in those conversations, the leaders must focus on the process and not get distracted with the day job or momentum can very easily be lost and the right deal could easily fall away.
This is likely to be the biggest deal in the firm's history and investing in proper professional help can make all the difference.
That being said, along with the rapidly changing industry, firms will have to adapt to changes in order to survive and grow. With specific market sectors rising and new opportunities coming up, seems like mergers is the best way to do so.
About the Author
Adv. Zohar Fisher is one of the leading veteran strategy consultants in the field of legal marketing, legal technology, mergers and legal outsourcing, holding vast experience and well know reputation of more than a decade in the legal practice field. He has acquired unprecedented professional experience and knowledge while closely and personally accompanying dozens of law firms around the world, lauded not once as the 'law firm whisperer'. He can be reached at: firstname.lastname@example.org