M&A activity remains strong in legal

July 11, 2017

M&A activity continues to remain strong for law firms, which means for those of us in legal professionals’ recruitment, keeping track of an ever-changing legal market landscape has increasingly become more important. 2016 marked the 4th consecutive year with 80 or more US law firm mergers and acquisitions, and we’ve already seen 54 in the first half of 2017. While across the pond, there were 18 reported mergers involving UK 100 Law firms in 2016 and 12 so far in 2017 (according to numbers reported by Altman Weil and Jomati Consultants). The perception by many is that most mergers involve the combination of large, goliath firms, but in fact, more than three-quarters of reported US deals between 2007-2016 involved the acquisition of a small law firm of 2-20 lawyers (for more information, see Altman Weil’s report, 10 Years of Law Firm Mergers & Acquisitions: 2007-2016).

In the late 1990’s and early 2000’s, Canada saw the rise of national firms –BLG, Fasken, Miller Thomson and FMC (as is was then known) to name a few. In 2011, Norton Rose entered the Canadian market by merging with Ogilvy Renault, creating one of the largest law firms in the world (at the time). Clyde & Co made its Canadian debut the same year, merging with Nicholl Paskell-Mede, a Toronto and Montreal based firm of 40 professionals. Since 2013, we’ve seen international mergers with Dentons, DLA Piper and Gowling WLG, and in 2016 Axiom combined with Cognition LLP to form Axiom Cognition.

Clearly, mergers don’t seem to be going anywhere.

As a legal recruitment consultant firm, we want to understand the factors that continue to drive this trend among law firms.

Expansion by clients

Most Managing Partners of firms that have experienced a merger would say ‘to service our clients effectively, we need to be present wherever our clients are doing business’. As the emerging markets are become increasingly attractive to clients, so too is the idea of having a law firm office in those markets. Firms that have resisted a merger, ‘The Independents’ have adopted, to quote a Toronto Managing Partner, the ‘Suitcase Strategy’ – the firm’s lawyers will jump on a plane to be wherever their clients need them to be.

Expansion by US law firms into the UK

The US law firms’ expansion into the UK perpetuated amongst UK law firms a strategy of growth by merger locally and internationally into Australia, Europe, South America, and Canada.

Expansion by in-house legal departments

The aggressive expansion of in-house legal departments has caused shrinkage in domestic work and forced law firms to consider growth locally and into other Canadian provinces.

Looking ahead

Continued consolidation of law firms in Canada is inevitable. Small and mid-market firms are facing succession issues as they never have before and a merger acquisition or combination may be the only viable solution.

With nearly 20 years experience in the legal recruiting services industry, I can safely say, now, the question is not whether your firm has been courted, as for most, the answer is yes – the critical question is if it hasn’t, why not, and does your firm have an effective strategy to compete in today’s marketplace?

Dal Bhathal, Managing Partner