In recent years, law firm mergers have been on the uptick and do not seem to be abating.  Big mergers reap a lot of publicity because the firms joining together often have household names. But as Catherine Ho reports, not all the law firm mergers involve the behemoths that grab the headlines. Ms. Ho’s Law Firm Mergers Continue to Target Small Firms describes how many of the firms participating in mergers have less than 15 lawyers.

No doubt the smaller firms combining with larger firms frequently are being absorbed rather than surviving or entering into the combination as equals. In the case of law firm merger in which a smaller law firm is absorbed, any number of reasons can drive the decision to abandon independence. But given the aging of law firm leaders from the boomer generation as recently reported by Matt Greenslade, merger in which smaller law firms are absorbed may present an alternative to a more traditional law firm succession plan. Mergers driven by the need to provide for succession make sense for a number of reasons.

For the firm being acquired, merger can resolve many succession-planning issues. Without providing an exclusive list, a firm facing succession addresses some of its issues by agreeing to merge, including:

Leadership Dilemma. For some small firms, a future generation of leaders just never developed. Law firm leadership at those firms face the uninviting prospect of turning the reins over to unqualified or uninspiring junior partners. A merger can solve that problem.

Post-merger Continuity. Existing leadership may be concerned that a non-merger succession plan won’t go well and their firm gradually may wither away. Combining with a larger firm with solid leadership may reduce that risk and promise continuity. And that continuity may mean, at least in the mind of the boomer leaders, the law firm they started lives on.

Post-merger Opportunity. Despite a possible lack of confidence in the leadership readiness of the smaller firm’s lawyers, boomer leadership may believe that a new and larger firm will provide better opportunities for their people for whom fondness remains. Leadership riding into the sunset knowing that they have provided opportunity to their people may feel more content.

Good-bye Worry. It is an overstatement to say that a merger removes worry for the former leaders of the absorbed firm. But a well-negotiated merger certainly can provide some sense of security to law firm leaders that have fought the good fight for so long without an end in sight.

Benefits. The merger agreement may include benefits to the absorbed law firm’s people, including former leadership, that are better than or more secure than benefits currently extant at the smaller law firm. It is inescapable that a law firm that closes due to a lack of succession planning will not continue to provide its people with benefits.

Although a smaller firm’s leadership may be motivated to merge in order to solve some of its succession issues, it is not as if the acquiring law firm does not benefit. The existence of firms with succession issues presents to the larger firm a market opportunity it may not otherwise have. In addition to gaining access to a desired market, the needs of the smaller firm to resolve its succession promptly may improve the economics of the deal and gains for the larger firm market intelligence that may exceed any that could be obtained by hiring a lateral or two to a de novo office.

These considerations already have been enough to propel some firms into merger-would they be enough for your firm?


This article won the BigLaw Pick of the Week award for the week of July 27, 2014.  The editors of BigLaw, a free weekly email newsletter for those who work in midsize and large law firms, give this award to one article every week that they feel is a must-read for this audience.