mid-level law firms looking to expand- an alternative solution to mergers

8/8/2019 Mid-Level Law Firms Looking to Expand- An Alternative Solution to Mergers

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SMALL AND MEDIUM LAW FIRMS LOOKING TOEXPAND- AN ALTERNATIVE SOLUTION TOMERGERS

HOW SMALL AND MEDIUM LAW FIRMS CAN GROW WITH THE HELP OF A SUPPORTINGLEGAL PROCESS OUTSOURCING UNIT.

Most law firms always wish to expand and encourage growth ofbusiness. What mid-level law firms do is that they merge with othersimilar firms in the hope of creating a larger and better collaboratedfirm. However, that is not the only alternative available to them. In thisarticle, I will try to put forward my view of the alternative- how smalland medium law firms can grow with the help of a supportingLegal Process Outsourcing Unit.

In this regard, I shall be writing this article in three major parts. Thefirst part of it will look into the law firm mergers over the last fewyears and what the firms look for while merging with another similar ora larger firm. The second part will try to analyze the alternative, thepossible greater growth of law firms if they outsource to LPOs. Theanalysis in both these cases will be theoretical, though some areas willbe spiced up with the use of statistics. In the third part, I will try toanalyze the two alternatives, with respect to different benchmarks andtry to ascertain which the better option for mid-level law firms is.

PART- I

ARE MERGERS THE ANSWER TO MID-LEVEL LAW FIRMGROWTH?

An Analysis.

Before I delve into the analysis of this question, I need to make it clearthat in this piece, I will be looking into mergers for both kinds of lawfirms over the last few years- large and medium. This will entail us tounderstand the difference between a merger of two large law-firmsand two smaller ones and also the scope of such a merger. This willonly further our main topic Small and medium law firms looking toexpand- An alternative solution to Mergers available at.
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We are extremely pleased to join Phelps Dunbar, LLP, whoseregional presence from Texas to Florida allows the combined firmto better serve our existing clients and provide a wide array ofcomprehensive legal services to new clients within our expandedgeographical area. We will now have the resources andmanpower to grow our practice with one of the nation's mostrespected law firms, said Cooper Thurber, President, Lyons,Pipes & Cook, PC.

For large law firms large scale mergers has been the norm for quitesome time. This can be illustrated by the recent talks of mergersbetween Orrick Herrington & Sutcliffe LLP and Akin GumpStrauss Hauer & Feld LLP. Such a deal would result in an unified lawfirm with about 1,740 attorneys around the world.i Apart from this,

Hogan and Hartson has already tied up with Lovells with projected joint revenue of $1.9 billionii, and SNR has done the same withDenton. Trans-Atlantic mergers seem to be the rage, but they are onlytrue and successful in the case of large law firms or mega-firms, whoeven without the merger would have been quite capable of individualsurvival. But is the same true in the case of smaller law firms, who lookto mergers as an actual opportunity to grow as they cannot growotherwise independently?

To answer this question, I will be looking into some recent mergers ofnot-so-large law firms. My approach will be simple. I will mainly try to

look into the reasoning given by the merging firms in order tosubstantiate their merger. From thereon, I shall try to derive thefundamental justifications behind mergers in the case of small andmedium law firms. Finally, I shall look into whether the desired purposeis achieved through a merger.

ANALYSIS:

MERGER 1: PHELPS DUNBAR and LYONS, PIPES AND COOK

Source: http://www.phelpsdunbar.com/firm-news/press-release/article/two-of-the-southeasts-oldest-law-firms-combine-1460.html
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Phelps Dunbars capacity of lawyers has increased to 284, but in thisarticle, I am interested in noting the reasons behind LPC accepting themerger proposal. As the words of its President clearly indicate, thesmaller law firm was looking to expand business to a greatergeographical area. Also, in his reasoning, he also clearly indicates

the lack of sufficient manpower as well as the lack of resourcesas a fundamental reason for the merger. This merger follows anotherNew Orleans firm merger in 2008, that of Jones Walker and Miller,Hamilton, Snider & Odom LLC.

MERGER 2: JONES WALKER and MILLER, HAMILTON, SNIDER &ODOM LLC.


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Source: http://www.joneswalker.com/news-room-779.html

From these comments of the respective Managing partners of thefirms, we can see that while the larger firm of Jones Walker is lookingto expand mainly into the banking sector as well as keeping its largerclients intact, the smaller firm of Miller Hamilton is the one looking to

expand. They look hopeful of offering a full range of legal services. Thisclearly indicates and substantiates one of the fundamental reasons fora merger- that of lack of sufficient manpower. Expansion ofbusiness is THE primary objective for all law firms and the only waythey can do so is if they have sufficient manpower. So what small andmedium law firms are looking to expand their business is increasingtheir work-force. A merger with another small or medium law-firmseems to make a lot of sense because this provides easy increase inmanpower. But what they fail to note is that the amount of businessflowing in is the same as before and does not increase substantially.

A simple example here can illustrate my point better.

Say there are two law firm- Law firm A comprising of three lawyers andlaw firm B comprising of two lawyers. Say the capacity of work that canbe done by each lawyer is two projects a month. So while firm A doessix projects a month and generates the respective profit, firm B doesfour projects in a month. Both of these firms have the fundamental

Mr. Hines, Managing Partner of Jones Walker commented, MillerHamilton has a strong and long history in the financial servicessector, representing financial institutions across the South. Thisexpansion for Jones Walker into additional states and the additionof capabilities to our banking practice offers a wider range ofservices and locations to our corporate and financial services clientbase. One of Jones Walker's larger clients, InternationalShipholding Corporation, recently relocated to Mobile, and we canservice them more efficiently with a local office.

On the other hand, Mr. Snider, Managing Partner of Miller Hamiltonstated, This combination made sense on many levels. We expandthe practices that we are able to offer to our clients, and theculture between the two firms is a great fit. Together, our firm willbecome one of the largest regional firms in the southern U.S.,offering a full range of legal services. The combination of the two

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http://www.joneswalker.com/news-room-779.htmlhttp://www.joneswalker.com/news-room-779.html


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objective of expansion of business. Thus they decide to merge in thehope of achieving or at least moving towards their objective.

However, does this solve the problem? No. It does not. Themerged firm now has five working lawyers with a capacity of ten

projects. The work capacity of the firms has not increased and thus thebusiness has also not increased. So how is this profitable? Mergers helpin growth and expansion to different regions. But does it truly servethe purpose of expansion of business. Through a merger, a firm canclaim to have attained diversity, but can it claim to have expanded?NO. Or maybe yes by a very small margin.

The basic factors given by law firms to support mergers andacquisitions are the changing world scenario and globalization,diversity in region and scope and reduction in administrativeexpenses. An elaborate discussion follows:

JUSTIFICATION FOR LAW FIRM MERGERS

Law firm mergers can mainly be justified by the following reasons:

1. Changing world scenario and globalization: Sometimes alaw firm simply decides to merge so that its services can cater tothe needs of a new geographical market. A firm has to have aglobal outlook in the modern world. And for that geographicalexpansion is important. However, what they fail to notice isthat with a merger, there is no net increase in territory.

This is precisely the question that I want to ask here. Is thereany profitability out of such a merger for small law firms? The cumulative business of the merged firms still remainsunchanged, or maybe increases very slightly. Only in the case ofmega-firms can the change in territory increase the businesscapacity of the firm.


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2. Cutting down on administrative expenses: One of thepositives of a merger is that the administrative expenses of themerged firm are reduced. For example, previously the individualfirms needed two accounts offices, while the new merged firmneeds only one to cater to its needs. Thus, somehow, the totalcosts from departments not directly related to law may bereduced.

3. Diversity in scope: Another reason put forward by most law-firms while merging is diversity in scope. This, plainly put, is a

tool via which a larger law firm easily justifies itsacquisition/merger with a smaller law firm. They simply say thatthe small firm specializes in a sphere and merging with it willhelp growth of the firm in that arena. Though this may bepartially true, most often the smaller law firms are acquired toget a head-start in the that region.

However, as my analysis shows, for small law firms, the reason behinda merger is totally different. Business growth is the primary andthe greatest goal in their mind. My question thus still stands. Are

mergers the solution to small and medium law firms? I think not!


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MERGER 3: SQUIRE, SANDERS AND DEMSEY LLP. And MIKI ANDYOSHIDA

The mergers of small or medium firms with larger law firms are notrestricted to the European and the US shores. The law firm of Squire,

Sanders and Dempsey LLP has merged recently with the Japaneseboutique firm Miki and Yoshida. In a similar mode of analysis, we shalltry to look at the reasons for the merger given by the former managingpartner of the smaller law firm.

Squire Sanders global reach, which spans Asia, Europe, LatinAmerica and the United States, will benefit our clients in Japan,particularly those merging with companies that have assetsoutside Japan A firm that operates globally can better meet

our clients needs and help handle the increasingly importantIP matters, both at a local and global level., said Miki, formermanaging partner, Miki and Yoshida.


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Source:http://www.ssd.com/squire_sanders_expands_ip_capability_in_japan_through_combination_with_miki_and_yoshida_law_and_patent_office/

From this statement, we can easily understand that the reason for the

merger is growth and expansion on a worldwide level.

MERGER 4: BENESCH FRIEDLANDER & ARONOFF LLP. And DANNPECAR & KLEIMAN PC.

The law firms of Benesch Friedlander Coplan & Aronoff LLP and DannPecar Newman & Kleiman P C announced that they will merge their

practices, effective March 1, 2010.

Source: http://www.beneschlaw.com/benesch-and-dann-pecar-

announce-merger-03-02-2010/

Dann Pecar also is excited about the combination as a way to expandtheir current market and client base.

Apart from these, other similar mergers have been performed over thelast few years, some of them being New Jersey based law firmMcElroy, Deutsch, Mulvaney & Carpenter and Connecticut-basedPepe & Hazard, and San Francisco's Carroll, Burdick &McDonough with Smith & Partners, a European/Asian litigationboutique. An intra- Canadian law firm merger also made headlines,that of Newfoundland's Cox & Palmer with Halifax firm GoldbergThompson.

In looking at our growth plan this combination with Benesch madeperfect sense to us. In addition to similar clients, we have similarvalues and a great cultural fit, said Jeff Abrams, Managing Partner.

Our firm has been strong in recognized practice areas inIndianapolis. We see this as the right time to take it to the next leveland expand our opportunities.
http://www.ssd.com/squire_sanders_expands_ip_capability_in_japan_through_combination_with_miki_and_yoshida_law_and_patent_office/http://www.ssd.com/squire_sanders_expands_ip_capability_in_japan_through_combination_with_miki_and_yoshida_law_and_patent_office/http://www.beneschlaw.com/benesch-and-dann-pecar-announce-merger-03-02-2010/http://www.beneschlaw.com/benesch-and-dann-pecar-announce-merger-03-02-2010/http://www.ssd.com/squire_sanders_expands_ip_capability_in_japan_through_combination_with_miki_and_yoshida_law_and_patent_office/http://www.ssd.com/squire_sanders_expands_ip_capability_in_japan_through_combination_with_miki_and_yoshida_law_and_patent_office/http://www.beneschlaw.com/benesch-and-dann-pecar-announce-merger-03-02-2010/http://www.beneschlaw.com/benesch-and-dann-pecar-announce-merger-03-02-2010/


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world
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mid-level law firms looking to expand- an alternative solution to mergers

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