What is a merger?
A merger is commonly understood as the combination of two organisations. In the legal sector, the term also encompasses acquisitions of smaller firms by larger ones, the transfer of business units to new owners and the rescue of teams, departments or offices through absorption into another firm. Mergers are not undertaken for their own sake. They are strategic tools designed to achieve specific business goals.
Why do law firms merge?
Law firm mergers have existed for generations and became particularly prominent during the 2008 recession, when firms used them to stabilise income. Today, mergers are frequent across the industry. Firms merge for several reasons: to replace lost partners or clients, expand geographically, diversify practice areas, meet client demand, reduce costs or strengthen market position. A merger must be guided by a clear plan. Without defined objectives, firms risk instability and failure.
Case study: Coudert Brothers
Coudert Brothers, founded in New York in 1853, was one of the first US firms to establish a global presence. By 2004, it had more than 400 lawyers and ranked among the top 100 US firms. However, by 2005 profits had fallen sharply. Partners began leaving, and the London office closed after failing to meet the minimum partner requirement for bank loans. The firm dissolved in August 2005.
Coudert’s downfall illustrates the dangers of overexpansion without a coherent business plan. Former partners also cited a lack of unified culture. Similar issues contributed to the collapse of Myerson & Casey (Finley Kumble) in 1988, whose bankruptcy proceedings lasted more than twenty years.
What makes a successful merger?
Before merging, firms must consider culture, financial compatibility and client strategy. Some focus too heavily on operational issues such as billing or technology while neglecting client‑facing priorities such as account management, conflict management, practice development and pro bono commitments.
Culture is critical. Firms must align on communication practices, working styles and interpersonal dynamics. Serious personality conflicts can undermine integration. Successful mergers typically involve firms that share a common vision and culture. The merger of Charles Russell and Speechlys is one example, where shared values facilitated smooth integration.
When mergers fail
Not all mergers progress beyond initial discussions. Due diligence may reveal incompatibilities. Talks between Berwin Leighton Paisner and Greenberg Traurig ended due to cultural and financial differences. Addleshaw Goddard and Maclay Murray & Spens declined to disclose their reasons, noting that many merger discussions are exploratory and not intended to result in formal combinations.
Clifford Chance: A model of strategic expansion
The merger of Clifford Turner and Coward Chance in 1987 created Clifford Chance, now one of the world’s leading firms. Neither predecessor ranked among London’s top firms, yet their merger became a model for international expansion. Clifford Chance grew rapidly across Europe and Asia, became the first non‑US firm to practise US law in 1992 and continued expanding through mergers in 1999.
Despite suffering a 33.4% drop in profits during the 2008 financial crisis, the firm adapted by restructuring and later expanded into Australia, Morocco and South Korea. Its ability to combine global reach with local practice has been central to its success.
Recent mergers
Recent UK mergers have focused on securing international prestige and joining global networks. In 2013, SNR Denton, Salans and Fraser Milner Casgrain formed Dentons. Norton Rose merged with Fulbright & Jaworski to create Norton Rose Fulbright. CMS merged with Dundas & Wilson in 2014, then with Nabarro and Olswang in 2017, becoming one of the largest firms in the world.
Other notable combinations include King & Wood Mallesons with SJ Berwin, and Berwin Leighton Paisner with Bryan Cave in 2018, forming Bryan Cave Leighton Paisner.
Many international alliances operate as Swiss Vereins, allowing firms to share a global brand while maintaining separate profit pools and local management. This model has contributed to the global success of DLA Piper and Baker McKenzie.
Financial pressures in the legal industry
For decades, firms expanded rapidly by recruiting lawyers, creating an economic bubble. Salaries rose sharply, often outpacing experience. Freshfields increased newly qualified salaries to £100,000 in 2019, prompting competitors to follow suit. This wage inflation strained revenue growth and partner profits.
Financial pressures intensified with the Legal Services Act 2007, which allowed non‑lawyers to own law firms, and subsequent government reforms. Many firms struggled long before Covid‑19 due to weak management and lack of strategic direction.
The current position of law firms
Before Covid‑19, the Solicitors Regulation Authority identified 1,200 firms at risk. Small firms dominate the market, yet many face bankruptcy. Surveys in April 2020 suggested that more than 5,000 firms could collapse by autumn. Even large firms face financial strain.
Government support delayed immediate collapse, but liabilities must be repaid by March 2021. Firms may need to recapitalise, merge or close. Consolidation is expected to rise, with 57% of top‑ten firms and 36% of firms ranked 11–25 predicting mergers within the next year.
Covid‑19 impacts
Covid‑19 affected firms unevenly. Many acted quickly to reduce expenses. Magic Circle firms delayed partner profits. Dentons and Norton Rose Fulbright reduced hours. Others used the government’s job retention scheme. Many firms introduced pay cuts, postponed promotions and delayed capital spending.
Mergers and acquisitions are expected to increase over the next decade. For trainees, mergers can offer benefits such as more secondment opportunities, varied work and broader client exposure. However, increased competition for post‑qualification roles may be a drawback.
Are mergers necessary?
Mergers are not always essential. The legal profession is undergoing significant change driven by technology, competitive tendering and new generations of lawyers. Technology may revolutionise legal service delivery. Firms must invest in IT, adapt websites to client needs and embrace remote working, which has proven effective during the pandemic.
Niche practice areas offer another strategy. Specialising can help firms dominate specific markets, attract clients and operate flexibly. Niche firms can set prices based on production rather than time, offering cost‑effective expertise.
Conclusion
Mergers are strategic tools designed to achieve defined goals. In the wake of Covid‑19, mergers may become unavoidable for some firms. However, firms must act now rather than wait for the crisis to end. They must consider technological investment, niche specialisation and evolving client needs. If executed properly, mergers can enhance client satisfaction and strengthen long‑term stability. If not, they risk harming clients and destabilising firms.
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