As Firms Merge, Keeping Talent Is Tough

By Erin Coe

Law360, New York (August 11, 2008) -- Nearly 90 law firms grew their ranks and expanded their footprints through mergers in the first half of this year, but bigger does not always mean better for the lawyers of newly combined firms.

Law firm mergers can be a major boost for attorneys by enhancing their practice areas and enabling them to reach out to a wider variety of clients. But mergers can also lead to a loss of firm culture, client conflicts and a change in compensation that may set off a stampede for the door.

Law firm mergers picked up sharply this year, with 26 in the second quarter of 2008, following 18 in the first quarter of the year and 16 in the fourth quarter of 2007, according to consulting firm Altman Weil Inc.

Making sure lawyers are on board with a combination has become a critical concern for firms.

The key for mergers to work is matching up similar law firm cultures, said Michael J. Anderson, a principal with legal consulting firm Edge International.

“If cultures are diametrically opposed, the firms are not going to work well together. A firm that has an eat-what-you-kill compensation system based on performance numbers will have a real problem merging with a firm that has a much more subjective compensation system,” Anderson said.

When firms announce plans to join together, lawyers also worry about losing independence, facing increased bureaucracy and being forced to give up some of their major clients.

“If my firm is merging and I have to give up my best client because of a conflict with the other firm’s big client, I’m not going to be happy,” Anderson said.

After months of working toward a possible combination, Miami-based Akerman Senterfitt and Philadelphia-based WolfBlock LLP announced earlier this month that they have hit a snag over a client conflict.

The merger would unite Akerman’s team of 500 lawyers with WolfBlock’s 317 lawyers, but a client conflict is serious enough to cause a deal to crater, according to Joel A. Rose, a law firm consultant and founder of Joel A. Rose & Associates Inc.

“The firms can either see whether the clients will waive the conflict" so that the deal can go through "or the attorney or attorneys representing one of the clients may decide to leave and go to another law firm,” Rose said.

Anderson said mergers can also result in status changes for some attorneys, but that does not happen often.

Attorney Roger H. Stein said when lawyers are facing a firm merger, they should ask the same question they should always be asking themselves: Do I enjoy what I’m doing and whom I’m doing it with?

Stein and his intellectual property team at Chicago-based Schwartz Cooper considered that question in July when their firm decided to merge with Dykema, which has 400 lawyers. Stein and five intellectual property attorneys chose instead to join Ungaretti & Harris LLP, a firm that is roughly 100 lawyers strong.

“I personally like a mid-sized firm. It’s quicker to respond to clients and market conditions. I’ve heard big firms are able to handle more things, but I’ve never been in a situation where the firm I’m with can’t handle a situation,” Stein said.

Stein, who will head up Ungaretti’s IP practice, said he was won over by Ungaretti’s entrepreneurialism and individuality because those qualities would benefit his group’s clients, which are mainly companies with revenues between $50 million and $500 million.

“Ungaretti has less bureaucracy than many firms and its lawyers are willing to work with one another,” he said.

Managing partners of law firms that have recently merged or are in the process of merging said their firms have carefully considered how the combinations will affect their attorneys.

David Gische, managing partner of Ross Dixon & Bell LLP, said the 100-lawyer firm deflected a number of overtures before agreeing to a merger with Troutman Sanders LLP that will create a firm of 750 lawyers in 15 offices.

“We’ve prided ourselves on our collegiality, our democratic process and the way we treat our staff. We wouldn’t have gone anywhere if the people we were joining weren’t compatible with how we thought a law firm ought to work,” Gische said.

Gische said his firm was encouraged to partner with Troutman after speaking with lawyers from law firms that Troutman has since acquired, including Virginia-based firm Mays & Valentine in 2000 and a group of New York lawyers from Jenkens & Gilchrist in 2005.

All Ross partners will keep their status in the merged firm. And while Gische said he hopes all of the attorneys at Ross end up at Troutman, he welcomes competition from other firms.

“We do not want anyone in our firm that is here because they do not have other opportunities. Our firm values having associates and partners who have other opportunities because it means they are here because they want to be here,” Gische said.

David A. Fenley, co-chairman of Missouri-based Husch Blackwell Sanders LLP, said his firm engaged in serious talks before undertaking two mergers in the last few months.

An April merger between Husch & Eppenberger LLC and Blackwell Sanders formed the litigation and business firm with about 630 attorneys. In July, the firm also picked up Chicago-based IP firm Welsh & Katz Ltd., which has 45 lawyers.

“Our firm was interested in enhancing each attorney’s practice and providing more opportunities for a growing practice, but we wanted to combine without upsetting the practice groups a great deal. It’s a balancing act,” Fenley said.

While all of the Welsh attorneys have come over so far, Fenley said three or four partners decided not to join the previous merger due to business concerns regarding their clients.

“You have to make sure that the firms are culturally similar and that the firms come up with a business case that partners will embrace in order to combine. The date firms sign papers is just the first step. We are still in the process of integrating,” Fenley said.

He added that because the integration process takes a few years, signs that a merger is successful may not be immediately apparent.

Communication is critical, and experts said the more steps firms take to keep lawyers informed about the merger, the more comfortable lawyers will feel about the combination.

“A firm should communicate offensively by selling lawyers on the idea that the merger will bring in new, interesting and challenging work and more money. It should also communicate defensively by allaying their fears that there will be a loss of culture, independence or compensation,” Anderson said.