As we have seen recently, mergers between law firms are on the increase. There have been over 70 significant law firm mergers in the last five years.
New firms that have pursued this route include SNR Denton, Hogan Lovells and Squire Sanders Hammonds – and those are just a few of the largest examples. This topic was revisited again in 2015 and firms such as Baker Mckenzie, King & Wood Mallesons, Bond Dickinson, Herbert Smith Freehills, Ashurst and Bird & Bird have all been added to the list. Now in 2017, there are no signs of firm merges slowing down, with talks of the firms, CMS, Nabarro and Olswang possibly becoming a 3-way merger!
Key reasons for law firm mergers
Globalisation and a 'worldwide presence'
Larger firms, globally, pursue mergers to become bigger, to compete with firms worldwide and to build a presence in this market. Globalised firms include Allen & Overy and Clifford Chance, to name a few. This is where ‘transatlantic partnerships’ come into play.
Former Clifford Chance managing partner Tony Williams, once explained an interview with the Financial Times that, “Law firms believe they have to have offices in faster growing regions like Asia and Latin America…to build up an international presence”.
Globalisation is a key consideration for law firms in order to meet the demands of clients which have changed in recent years: "Success for most large law firms will increasingly depend on their becoming more business-like, particularly with respect to how they manage their operations, and engage with clients."
Alongside globalisation, law firms are also expanding geographically through domestic mergers. A great example of this is The Shakespeare Putsman’s merger-fed expansion across the Midlands.
Firms my also merge in order to become present in a different country, to expand as a business and better compete with other firms. An example of this is Norton Rose opened offices in South Africa, Australia, and Canada with the aid of three mergers with local firms.
Law firm mergers have been on the increase since the economic downturn and it is no surprise. As businesses themselves, faced with tougher markets and competitive global firms on the rise, it is essential for law firms to be more efficient when it comes to money. A law firm merger enables cost savings to be realised, whilst meeting greater demand and attracting a larger number of clients.
When two become one: What law firm mergers and acquisitions mean for future solicitors
Law firm mergers may seem of remote concern for prospective trainees, but they do matter a lot. When you break it down further, a merger can completely change a firm's culture, geographic focus, strategy, and business structure, for example.
In short, it can mean a firm changes beyond all recognition in short period of time. For example, trainees who applied to the Milton Keynes office of Midlands firm, Howes Percival in 2006, found themselves starting at the MK office of major City firm Denton Wilde Sapte in 2008, and by 2010 they were working for global giant SNR Denton.
To those of you that are after training contracts, it’s very important to keep abreast of a firm’s business strategy and/or plans for the future! It's a growing trend which is likely to only accelerate further.
The most recent firms are CMS, Nabarro and Olswang, who have created a three-way merger. However, CMS have confirmed that they will honour all training contract offers when the three firms merge. All future trainees will not only still have a place at the firm, but, CMS will offer £10,000 to future trainees to defer for six months! What is more, this CMS, Nabarro and Olswang merge will make the UK’s sixth-biggest firm!
There is no doubt this trend is set to last, given the changes to the economy and a movement to globalisation. With more and more public sector cuts, and fiscal belt-tightening in all sectors, firms are looking for long-term solutions to secure their place within the market and mergers are obvious cost saving and cross-selling alternatives.