Appetite for growth leading to more law firm mergers

February 26, 2016

There’s a growth spurt happening in the legal industry expected to drive more mergers and acquisitions as law firms get increasingly aggressive with their strategic growth plans.

The question for local firms is whether they’ll seek combinations that grow their hometown presence, bolster practices in other markets or enter new ones. 

Depending on whom you ask, the answers will vary. 

For midsize Cleveland law firm Walter | Haverfield, smaller local firms are more likely on the radar than those outside Northeast Ohio. 

“We are very much in the acquisitive mode in terms of trying to find and identify potential firms and groups of lawyers that could support our growth as we continue to expand our footprint in Northeast Ohio,” said managing partner Ralph Cascarilla.

Walter | Haverfield hasn’t made any significant firm acquisitions since Cascarilla joined in 1994, although they’ve been open to them for many years, he said. 

Yet the interest in mergers is being shared throughout the industry.

There’s no doubt firms are looking at acquisitive growth more aggressively now, whether that’s a larger firm absorbing a smaller one or two boutique firms joining forces, said Ward Bower, a principal at Altman Weil in Newtown Square, Pa., a company that provides management consulting to law firms.

There were a record number of law firm mergers in 2015, according to Altman Weil, with 91 mergers announced in the United States last year — the highest number in the nine years the firm has tracked law firm combinations. Of those, 23% involved the acquisition of a Midwest firm, although most centered around Illinois, according to Altman Weil. Comparatively, the most of the combinations overall (28%) involved firms based in the southern states.

Acquisitive growth

Gaining size and growing footprints are certainly not new goals for most law firms. 

 

However, firms in general are clearly more interested in mergers today, Bower said — even if law firm managers are reticent to discuss their growth strategies publicly.

That’s largely because firms are no longer in survival mode. Even those that performed well through the recession generally saw revenue growth slow, stall or fall. Many offices today are doing financially better now several years removed from that last economic downturn that dried up clients’ legal budgets, leaving many firms and practices reeling as demand for legal services tanked during and immediately after the recession. 

“In recent years, we’ve seen a revitalization of the merger market,” said Bower. “Firms are dusting off strategic plans or updating them and proceeding with more aggressive growth strategies because now they can afford to.”

Larger firms, like Squire Patton Boggs, are more likely to eye combinations through a more national and global lens. One of this region’s most prominent mergers in recent years, in fact, came with the combination of Squire Sanders with Washington, D.C., lobbying powerhouse Patton Boggs in 2014, which marked a Cleveland-based firm making a substantial acquisition outside the region.

The firm maintains interest in additional combinations today. But those almost certainly would come with firms outside Ohio, said Michele Connell, partner-in-charge of the Cleveland office and a member of the firm’s executive committee. 

“Our growth strategy, whether incremental or through larger mergers, is driven by the long-term goal of being positioned to help clients,” Connell said. “There may be areas where we want to go deeper, but our (growth) strategy is driven by where we need to be.”

Of course, Squire Patton Boggs and Walter | Haverfield are on different ends of the legal spectrum. They specialize in different areas and operate at much different sizes. Squire has some 1,500 attorneys worldwide to Walter | Haverfield’s 64 in Ohio.

Yet, the theme remains that firms large and small are increasingly interested in acquisitive growth.

And while there’s always some exceptions, Northeast Ohio firms, particularly larger players, are more likely to seek combinations outside the state. 

“I think for the most part what you’re going to see in Cleveland and Northeast Ohio is firms doing one of two things: small firms combining to increase breadth and depth of service practice capabilities, or Cleveland firms located elsewhere getting to new markets or strengthening positions in markets outside Northeast Ohio,” Bower said.

 

As for smaller firms

While firms are seeing revenues grow in today’s market, better finances aren’t always the only motivation — particularly for smaller offices.

 

Bower notes that smaller firms are more likely to merge in today’s market all the same, whether that’s through an absorption by a larger firm or a true merger of equals providing additional scale and making smaller operations even more competitive by improving services.

In Cleveland, a couple of those combinations were announced in just the past month. 

Spieth, Bell, McCurdy & Newell Co. LPA announced plans to merge with Schneider, Smeltz, Ranney & LaFond. The combination of two long-established Cleveland offices results in Schneider Smeltz Spieth Bell LLP, which will have a total headcount of about 50 employees and 25 local attorneys. The two offices are combining in a new space at One Cleveland Center in downtown soon. 

The merger preserves independence for both offices — managing partners at each say they had been approached over the years by larger firms about a combination, but weren’t interested in merging. Schneider, Smeltz president Jim Vail will serve as managing partner of the new firm, while Spieth, Bell managing partner Jim Bright will serve as a partner on the executive committee. 

It also adds some new services for clients of each and bolsters their collective practices in trust and real estate law and deepens the talent pool. 

“We saw the opportunity to bring a lot of smart people to us with good practices, and that enables us also to use some of our practice areas for their clients,” Vail said. “But I envision we will continue to stay relatively small. We have no aspirations to become a large law firm.”

Meanwhile, boutique firms of The Law Offices of Brian J. Halliday and The Law Offices of Marin K. Ritter joined together in January to form Ritter Halliday LLP. Both went solo between 2008-2009 with a focus on immigration and employment law, but saw the value in combining forces as business ticks up. The duo is looking to possibly hire a couple more attorneys this year. 

“We could’ve stayed solo, hired more people. But it just makes more sense in terms of workload and overhead to join forces,” Halliday said. “Now we’re in a position where we can better absorb the shocks up and down and weather an increase in business that could happen all of a sudden.”

While more mergers are anticipated, Bower postulates that larger firms, in particular, are more likely to target firms outside the state simply because of the tight legal market here. 

Meanwhile, smaller and midsize firms around Northeast Ohio are less likely to be targeted by outside firms. 

“We don’t see Cleveland being a hot target area for firms outside Cleveland,” Bower said. “That’s partly because it’s so competitive with so many good firms — it would be hard to get a foothold there.”

There’s a growth spurt happening in the legal industry expected to drive more mergers and acquisitions as law firms get increasingly aggressive with their strategic growth plans.

The question for local firms is whether they’ll seek combinations that grow their hometown presence, bolster practices in other markets or enter new ones. 

Depending on whom you ask, the answers will vary. 

For midsize Cleveland law firm Walter | Haverfield, smaller local firms are more likely on the radar than those outside Northeast Ohio. 

“We are very much in the acquisitive mode in terms of trying to find and identify potential firms and groups of lawyers that could support our growth as we continue to expand our footprint in Northeast Ohio,” said managing partner Ralph Cascarilla.

Walter | Haverfield hasn’t made any significant firm acquisitions since Cascarilla joined in 1994, although they’ve been open to them for many years, he said. 

Yet the interest in mergers is being shared throughout the industry.

There’s no doubt firms are looking at acquisitive growth more aggressively now, whether that’s a larger firm absorbing a smaller one or two boutique firms joining forces, said Ward Bower, a principal at Altman Weil in Newtown Square, Pa., a company that provides management consulting to law firms.

There were a record number of law firm mergers in 2015, according to Altman Weil, with 91 mergers announced in the United States last year — the highest number in the nine years the firm has tracked law firm combinations. Of those, 23% involved the acquisition of a Midwest firm, although most centered around Illinois, according to Altman Weil. Comparatively, the most of the combinations overall (28%) involved firms based in the southern states.

Acquisitive growth

Gaining size and growing footprints are certainly not new goals for most law firms. 

 

However, firms in general are clearly more interested in mergers today, Bower said — even if law firm managers are reticent to discuss their growth strategies publicly.

That’s largely because firms are no longer in survival mode. Even those that performed well through the recession generally saw revenue growth slow, stall or fall. Many offices today are doing financially better now several years removed from that last economic downturn that dried up clients’ legal budgets, leaving many firms and practices reeling as demand for legal services tanked during and immediately after the recession. 

“In recent years, we’ve seen a revitalization of the merger market,” said Bower. “Firms are dusting off strategic plans or updating them and proceeding with more aggressive growth strategies because now they can afford to.”

Larger firms, like Squire Patton Boggs, are more likely to eye combinations through a more national and global lens. One of this region’s most prominent mergers in recent years, in fact, came with the combination of Squire Sanders with Washington, D.C., lobbying powerhouse Patton Boggs in 2014, which marked a Cleveland-based firm making a substantial acquisition outside the region.

The firm maintains interest in additional combinations today. But those almost certainly would come with firms outside Ohio, said Michele Connell, partner-in-charge of the Cleveland office and a member of the firm’s executive committee. 

“Our growth strategy, whether incremental or through larger mergers, is driven by the long-term goal of being positioned to help clients,” Connell said. “There may be areas where we want to go deeper, but our (growth) strategy is driven by where we need to be.”

Of course, Squire Patton Boggs and Walter | Haverfield are on different ends of the legal spectrum. They specialize in different areas and operate at much different sizes. Squire has some 1,500 attorneys worldwide to Walter | Haverfield’s 64 in Ohio.

Yet, the theme remains that firms large and small are increasingly interested in acquisitive growth.

And while there’s always some exceptions, Northeast Ohio firms, particularly larger players, are more likely to seek combinations outside the state. 

“I think for the most part what you’re going to see in Cleveland and Northeast Ohio is firms doing one of two things: small firms combining to increase breadth and depth of service practice capabilities, or Cleveland firms located elsewhere getting to new markets or strengthening positions in markets outside Northeast Ohio,” Bower said.

 

As for smaller firms

While firms are seeing revenues grow in today’s market, better finances aren’t always the only motivation — particularly for smaller offices.

 

Bower notes that smaller firms are more likely to merge in today’s market all the same, whether that’s through an absorption by a larger firm or a true merger of equals providing additional scale and making smaller operations even more competitive by improving services.

In Cleveland, a couple of those combinations were announced in just the past month. 

Spieth, Bell, McCurdy & Newell Co. LPA announced plans to merge with Schneider, Smeltz, Ranney & LaFond. The combination of two long-established Cleveland offices results in Schneider Smeltz Spieth Bell LLP, which will have a total headcount of about 50 employees and 25 local attorneys. The two offices are combining in a new space at One Cleveland Center in downtown soon. 

The merger preserves independence for both offices — managing partners at each say they had been approached over the years by larger firms about a combination, but weren’t interested in merging. Schneider, Smeltz president Jim Vail will serve as managing partner of the new firm, while Spieth, Bell managing partner Jim Bright will serve as a partner on the executive committee. 

It also adds some new services for clients of each and bolsters their collective practices in trust and real estate law and deepens the talent pool. 

“We saw the opportunity to bring a lot of smart people to us with good practices, and that enables us also to use some of our practice areas for their clients,” Vail said. “But I envision we will continue to stay relatively small. We have no aspirations to become a large law firm.”

Meanwhile, boutique firms of The Law Offices of Brian J. Halliday and The Law Offices of Marin K. Ritter joined together in January to form Ritter Halliday LLP. Both went solo between 2008-2009 with a focus on immigration and employment law, but saw the value in combining forces as business ticks up. The duo is looking to possibly hire a couple more attorneys this year. 

“We could’ve stayed solo, hired more people. But it just makes more sense in terms of workload and overhead to join forces,” Halliday said. “Now we’re in a position where we can better absorb the shocks up and down and weather an increase in business that could happen all of a sudden.”

While more mergers are anticipated, Bower postulates that larger firms, in particular, are more likely to target firms outside the state simply because of the tight legal market here. 

Meanwhile, smaller and midsize firms around Northeast Ohio are less likely to be targeted by outside firms. 

“We don’t see Cleveland being a hot target area for firms outside Cleveland,” Bower said. “That’s partly because it’s so competitive with so many good firms — it would be hard to get a foothold there.”

By: Jermey Nobile 

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