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One of Brian’s Favorite Quotes

The Papacy is not other than the ghost of the deceased Roman empire, sitting crowned upon the grave thereof.”
— Thomas Hobbes
 Leviathan

Size Matters

By Jennifer Smith
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LBers may have noticed a surge of mergers in recent months, as the marriage bug bites law firms here and abroad.

The phenomenon is on a definite upswing, with 60 mergers last year and more expected as we roll into 2012. Today WSJ took a deeper look at the trend, which is increasingly popular as clients go global and resist annual rate increases — a traditional driver of profit growth:

“It’s now a buyer’s market, not a seller’s market for the first time in 20 years,” says Bill Brennan, a principal with Altman Weil.

Prominent combinations in the U.S. include the October 2011 coupling that produced Edwards Wildman Palmer and Arnold Porter’s acquisition of San Francisco-based Howard Rice Nemerovski Canady Falk Rabkin, which we chronicled here.

Legal observers expect to see more cross-border combos as well. Recent months saw a novel Pacific Rim alliance between a Chinese practice and an Australian firm, which will combine as King Wood Mallesons. We wrote about that union, to be consummated in March, here.

But mergers aren’t all champagne and gold bars. Tieups involve significant risk, including the shock that your partner’s finances may not have been all they were cracked up to be.

A few years back, Altman Weil consultant Mr. Brennan attended merger-integration talks between two firms that had reached a deal.

“To the surprise of the other party, the acquired party had a huge unfunded partner-retirement obligation that they had assumed would be picked up by the buyer,” he says, estimating that the obligation was 5% to 10% percent of the acquired firm’s annual revenue. When Altman Weil advises on mergers it makes sure such revelations occur beforehand, he says.

Partners who don’t care for the new balance of power can decamp, taking business with them. For a truly example of a marriage gone bad, there’s the death of Thelen following what one associate interviewed by LB called “a bad merger” with Brown Raysman.


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