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Law Firm Mergers and the Economic Outlook for 2019
As law firms endeavor to survive in an increasingly competitive world, one strategy picking up steam is the law firm merger. 2018 was a banner year for mergers as firms moved at a rapid pace to complete more acquisitions than in years prior. Some advisers point to the challenges that small law firms are currently facing amid all of the changes in traditional ways of practicing law, such as automation of many legal services and downward fee pressure as reasons for the uptick in M&A activity. Artificial intelligence, for example, is making an impact in law firms as this new technology is reducing the need for hundreds, or in some cases, thousands of hours that would otherwise be spent by young attorneys performing document review tasks.
Clients simply would prefer that this new technology perform such repetitive tasks as opposed to a team of attorneys doing things the old fashioned, and of course, more costly way. In this article, we recap law firm merger activity in 2018 and consider the economic outlook for law firm mergers for 2019.
2018 In Review
Law firms completed a record 106 mergers during 2018, according to Altman Weil, Inc. The 106 mergers represented an increase of five mergers from the previous year, and 33 mergers above the average of 73 transactions that have taken place over the prior ten year period. Some law firms merged to get a foothold into a new geographic area. Of the 106 mergers, 57 involved law firms acquiring practices located outside of their home state. Fourteen of such transactions consisted of acquisitions of firms situated outside of the United States. New York City, home to one the world's most high profile financial services sector was the geographic market most targeted in 2018 with eight firms from the Big Apple being acquired last year.
Most of the firms acquired had between six to 20 partners. The largest merger of 2018 was the combination of Bryan Cave LLP and UK-based Berwin Leighton Paisner, resulting in a combined law firm of over 1,600 attorneys. The two firms sought to obtain a competitive advantage in the global marketplace through the combination of each other's resources, which resulted in an expanded presence and set of service offerings around the globe.
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