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ALM’s research offers a new approach to evaluating law firm mergers.
ALM’s analysis of large law firm mergers since 2000 reveals that a majority of mergers have resulted in firms that struggle to both grow and manage costs effectively. ALM’s research offers a new approach to evaluating law firm mergers. This approach puts more emphasis on vetting the complexity of the proposed merger and on understanding the likely costs that will result from the merger’s execution. This approach will help firms evaluate the potential benefits of a proposed merger against the likely costs. In doing so, this research aims to help firms increase the success rate of future law firm mergers.
The methodology used for this report consisted of a combination of sources, including one-on-one interviews with managing partners and other leaders at major law firms, analysis of ALM Intelligence’s proprietary data, the authors’ practical knowledge of the legal industry, and a review of the body of research conducted by others on the topic of law firm mergers.
The primary data source used for the analysis portions of this report was ALM Intelligence’s Law Firm Mergers, Acquisitions, and Closures database, which contains information on over one-thousand law firm combinations since 1994. Data on law firm financials was sourced from ALM Intelligence’s Am Law 200 database, which contains information on law firm financial performance since 1984.
Definition of Key Terms:
Large Law Firm Mergers: a majority of the quantitative analysis of this paper focuses on “Large Law Firm Mergers”, defined as combinations of two Am Law firms. These mergers are ideal for analysis due to the fact that the two pre-merger firms as well as the post-merger firm all had publicly released their financial and headcount information to ALM Intelligence.
Law Firm Peers: to facilitate benchmarking, the financial performance of merged firms was compared against a peer group for some analyses. Peer firms were identified as firms with similar revenue per lawyer and profit per equity partner.
Benchmarking Time Frame: the performance of merged firms was analyzed over a five year period. This time frame was chosen to ensure merged firms performance could be gauged during and after merger integration.