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A guide to law firm mergers

updated on 18 July 2023

The reasons that firms decide to merge are as varied as the firms themselves, but there are usually some key drivers – namely, the desire to expand, geographically or in terms of expertise, or to stay afloat. For the lawyers who find that the firm they joined is no longer the firm at which they work, there are normally a raft of opportunities and maybe especially so for trainees.

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Mergers can be an extremely effective way for firms to expand and reduce costs. Therefore, you’re never too far away from a story about a law firm merger – either contemplated, being negotiated or completed.

Despite merger activity remaining below pre-pandemic levels, deals are picking up pace with law firm mergers reportedly rising by a quarter in the past year, from 99 in 2021 to 122 in 2022, according to accountancy firm Hazlewoods. With law firm mergers in the UK at 174 in 2018, there’s still some way to go before the figures fully recover; however, it appears as though “[e]xpansion minded law firms are feeling more confident about acquisitions of firms with very specific expertise or those firms that have been struggling with their profitability”, says Ian Johnson, an associate partner at Hazlewoods.

As merger activity continues to bounce back across the legal profession, from international firms entering new markets to regional practices consolidating their positions, it’s important to consider the reasons these mergers happen.

What are some of the factors that lead firms to merge?

There’s usually no one single reason that causes firms to merge – rather, it’ll be a unique set of conditions and aims that combine to draw them together. Nebulous? Perhaps! But here are some of the most common reasons why a merger might be considered:

  • Increased geographical reach – a firm wants to have a presence in more countries or regions, and the firm it intends to join with has offices in its desired locations.
  • Increased sector presence – a firm wants to diversify the practice areas it covers or the industry sectors it has expertise in.
  • Client driven forces – a firm is responding to requests from its clients to provide services in locations or practice areas that it doesn’t already cover.
  • Financial pressures – a firm needs to join forces with another to mitigate against a precarious financial position.
  • Improved market position – a firm wants to solidify its position and will strengthen its position by joining with another.

We spoke to a partner at Charles Russell Speechlys LLP, who joined the firm as an associate in 2010. They found themselves becoming part of a newly-expanded firm when Speechly Bircham joined with Charles Russell in 2014. There were a number of compelling reasons behind the move, including “a desire to create the market-leading firm providing business law and private wealth advice internationally”. They add: “That combined with the fact that the firms were similar in terms of their business ideals – albeit with different key strengths – meant that the integration would see two firms merge into one stronger and more diverse law firm.”

As the partner notes, the most successful law firm mergers are those that combine two firms that have a shared vision and culture. So over and above the practical details and logistics of a law firm union – including, but not limited to, office location, IT integration, salary integration, and redundancies – the firms need to ensure that they’re on the same page in terms of some less quantifiable elements. Those factors might include their respective approach to:

  • non-billable time;
  • diversity and inclusion;
  • pro bono work; and
  • the importance of communication between the partnership and other staff.

If the two firms take very different approaches to the above, it could be that the union is doomed. The partner notes that over and above the “usual teething issues regarding different IT systems and office space”, the challenges of integration for Charles Russell and Speechly Bircham were smoothed out because “the two firms had a similar work culture and ethos, which made it easier for the individuals to become part of one large team”.

What about when talks fail?

Merger failure isn’t unusual – look at Hogan Lovells and Shearman & Sterling, for example. It’s often the case that failure to merge can sometimes simply be the result of the pre-merger investigation and due diligence, and a realisation that the firms aren’t actually a good match – you could call it the very definition of an amicable split. Other reasons might lead to relations becoming more acrimonious, including an inability to agree on key elements of the deal. We can only imagine that there’s sometimes a non-negotiable problem of senior figures vying for position, or even so serious a personality clash that the deal can’t survive.

After Hogan Lovells and Shearman & Sterling abandoned merger talks, the firms released a statement explaining that they’d “mutually agreed that a combination at this time isn’t in the best interest of either firm”.

In the Financial Times, Tony Williams, principal at Jomati Consultants and former managing partner at magic circle law firm Clifford Chance, said that these large mergers between law firms “are very difficult to achieve in what is a people business”, before adding that the lawyers “often over-emphasise the benefits of the status quo and are resistant to change so any opportunity needs to be exceptionally compelling to achieve traction”.

What are the specific benefits for clients?

Provided the merger has been implemented carefully, there are clear benefits for clients – in fact, the merger will often be driven by the needs of those very same clients who want their lawyers to be able to advise on the legal rights and obligations in other jurisdictions or cross-sector. To shore up that ability, and to hold onto their clients, firms may have identified that the best option is to combine with another firm in those areas (be they geographic or practice).

While law firm mergers look to benefit all parties involved including clients, the gain isn’t always recognised. Factors that firms must take into account when in merger talks include culture, pricing, profitability and systems, as laid out in a Lexology article by Jonathan Bray Ltd.

By failing to spend time on all elements, mergers can have a backwards impact on clients. If systems aren’t integrated effectively, for example, clients may feel dissatisfied and eventually look elsewhere for their legal services needs to be met.

The feeling seems to be that provided the proposed changes and the new reality are communicated effectively to the client, much of the sense of upheaval and disruption can be minimised. As with so much in life, communication is key!

What are the benefits for trainees?

There are many advantages for trainees; both those already at the merging firms and those who’ve been recruited but are yet to join. Some of those advantages include access to:

  • more opportunities to travel or be seconded to new offices;
  • different types of work and new clients;
  • enhanced learning and development opportunities; and
  • different seat options.

The partner we spoke to at Charles Russell Speechlys points out the following reasons that a merger can be good for trainees: “Most obviously, they’ll get to work with an expanded pool of clients and colleagues, including a wider range of partners with specialist areas, all of which allows for the development of knowledge and understanding in key areas. However, trainees may also find themselves with an increased number of peers – this could increase competition for places on qualification and for promotion post-qualification. Equally, it’ll depend on the extent to which individual practice areas merge or remain largely the same post-merger.”

One thing that might worry potential trainees is what happens when a firm announces it’s due to merge after you’ve been offered a training contract but before you start at the firm. Evidence suggests that most firms will try to honour pre-existing offers, but you may find yourself joining a firm that’s different in shape and size from the one that you signed up for. Firms will be thinking about how to manage the transition in as smooth a way as possible, but there’s likely to be an understandable feeling of upheaval and disjointedness. As ever, though, the way you handle the unexpected is up to you – roll with the new set of circumstances and focus on the potential benefits, and you’re likely to feel better about the new proposition. Resist the reality and put up obstacles, and things are likely to go less well.

For the Charles Russell Speechlys partner, being part of a merger as a junior lawyer brought about many professional benefits: “I had the opportunity to be promoted to the partnership in the first year following the merger and, as a result of the promotion, gained a better understanding of how the firm operates from a business perspective. I also had the opportunity to work with new colleagues in different practice areas across all the offices and the potential to add value to the firm’s existing clients.”

Examples of recent mergers

One of the biggest mergers in recent years is a great example of all the issues that are at play when firms join forces – the three-way combination of CMS, Nabarro and Olswang became official in 2017. Trading under the name CMS, the firm became the sixth biggest by revenue in the UK and sixth biggest by headcount in the world.

More recently and marking the first fusion between a London-based magic circle firm and US counterpart since the merging of Clifford Chance and Rogers & Wells in 2000, Allen & Overy LLP is set to merge with New York-based Shearman & Sterling LLP to become Allen Overy Shearman Sterling. The planned merger, which is still awaiting approval from both firms’ partners, will establish a legal practice with a combined revenue of around $3.4 billion, making it one of the largest global law firms in terms of fee income.

The merged firm will comprise 4,000 lawyers working in 49 offices across the world. It represents another effort from Allen & Overy to conquer the US market, particularly New York, after its unsuccessful attempt to merge with O’Melveny four years ago. The announcement also comes after Shearman & Sterling revealed it was letting staff go in the US, with partners also leaving following the abandonment of merger talks with Hogan Lovells earlier this year. It’s hoped the merger with the magic circle firm “will dramatically accelerate” its ability to meet clients’ needs “in an increasingly complex environment”, according to Adam Hakki, a senior partner at Shearman & Sterling. Watch this space!

Meanwhile, at the end of March 2023, Birketts LLP, a UK Top 50 law firm, completed its merger with Batchelors Solicitors, increasing the firm’s headcount to more than 1,000 people. Birketts’ acquisition of Batchelors Solicitors strengthened the firm’s London team and extended its reach further into the South East. Alongside the merger, the firm opened a new office in Sevenoaks, taking its office headcount to six.

In January, Mishcon de Reya LLP and Taylor Vinters LLP merged, with more than 200 staff said to have joined Mishcon, including 145 fee-earners and 60 business operations and legal staff. The merger, which was first announced in September 2021, has been described as an “exciting move” that’ll see the firm “become one of the largest law firms serving the ecosystem of the innovation economy”, with the aim to be “recognised as the leading law firm for innovators across technology, media and life sciences”.

So, as you can see from the above examples, the reasons that law firms merge vary. However, for the merger to be a success all parties involved must be on the same page. If a firm you’re applying to has recently merged or is in talks to, it’s vital that you spend some time researching the plans and the reasons behind the talks. Make sure you understand the relationship between the firms involved and how the merger will impact the newly formed firm’s clients, employees, reach and/or expertise.