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General Counsel and In House Counsel Law Firm Financials Law Firm Management Law Firm Profitability Mergers and Acquisitions

Do Mergers Increase Profitability?

The Numbers Say Yes, But Not for the Reasons Many May Think

Conventional wisdom has it that mergers enhance profitability through increased revenues and reduced costs. However, the numbers contradict this view: post-merger revenues are lower relative to competitor firms than are the sum of the predecessor firms’ revenues, and costs per lawyer increase markedly.

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The evidence is unambiguous: mergers increase profitability. The merged entities resulting from intra-Am Law 200 combinations climb an average of 23 places in the profit-per-equity-partner (PPP) rankings from the five-years before to the five years after the merger. Average compensation for all partners rises by a comparable amount — 18 places over the same time period.

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