By Andrew Maloney for The American Lawyer
Large law firm combinations have continued at a slower pace, but a slew of small, midsize and regional firms are kicking off 2022 with growth, expansion or merger deals.
Meanwhile, a handful of pending combinations could be a harbinger of the industry’s commitment to getting large deals done in spite of the latest COVID-19 surge.
Several midsize or regional firms have now announced expansion plans heading into the new year. Jones, Skelton & Hochuli, a Phoenix-based firm of more than 80 trial and appellate lawyers, said this week that it is expanding into Salt Lake City, after opening in Albuquerque last year. The firm’s new Salt Lake City office includes four litigators focused on civil litigation and insurance defense.
The midsize firm, which also opened a virtual office last year, joins a handful of big firms that have made a move to Utah’s capital over the last year or so.
Epstein Becker & Green, which last year opened in Columbus, Ohio, with a 12-lawyer pickup in health care and labor and employment disputes, has also added a health care construction law group from Waller Lansden Dortch & Davis to its Nashville office that includes three partners and an associate.
The new year also brought more midsize firm combinations. Best Best & Krieger and Karnopp Petersen made their merger effective. With the merger, which was initially announced on Oct. 6, 25 attorneys and staff are now part of the 250-attorney BB&K, operating in the firm’s first office in Oregon. Meanwhile, central Pennsylvania firm Barley Snyder added 14 attorneys from business firm Leisawitz Heller, which brings practices in transactional law, estate planning and litigation. The combination went into effect Jan. 1.
Several other combinations among smaller and midsize firms are also in the pipeline for 2022. Mergers scheduled to be completed this year, according to a report this week from Fairfax Associates, include ones between Atlanta firms Smith Gambrell & Russell (241 lawyers) and Rogers & Hardin (25 lawyers); Maine-based Verrill Dana (124 lawyers) with Boston-based Rackemann, Sawyer & Brewster (24 lawyers); and Chicago firms Croke Fairchild Morgan & Beres (38 lawyers) and Hamilton, Thies & Lorch (seven lawyers).
One of the largest expected deals this year is between Washington-based Arent Fox and Chicago-headquartered Schiff Hardin. They have signed a formal agreement to merge, effective March 1, forming ArentFox Schiff.
Overall, law firm mergers have been “well below” average over the last two years, the report stated. Fairfax tallied 40 combinations completed in 2020 and 41 last year, describing the number as “steady” but noticeably below the historical average of 55 over the previous decade.
Lisa Smith, a law firm consultant and principal at Fairfax, said in an interview Tuesday that optimism remains that the omicron-fueled surge in COVID-19 cases in the U.S. will peak quickly. The surge will affect merger activity, but Smith expects more law firm deals in 2022.
“A year ago we were pretty optimistic that 2021 would see a rebound, so I’m a little reluctant to predict at this point. But I think that we’ll see more combinations in 2022,” Smith said. “I’m not sure we’ll get up to the historical average—the levels in the period of time pre-pandemic—this year, just because I think we’re going to see some of those logistical challenges. So it’ll be a little slow as a result, but I think it’ll be a little higher than we saw in 2020 and 2021.”
She added that some firm merger talks have gone on since before the pandemic and are still continuing. But often they lose momentum when they drag out that long.
“There certainly are some extended discussions and some that precede the pandemic at this point. Now, the challenge with that is the longer discussions go on, the less energy behind them, and the less likely they’ll happen,” Smith said.
The Fairfax report noted that there was only one “large” combination in 2021—defined as a merger in which both firms had more than 100 lawyers—the one between Miami-based Holland & Knight (1,212 lawyers) and Dallas-based Thompson & Knight (278 lawyers).
The report lists combinations between Dinsmore & Shohl (656 lawyers) and Indianapolis-based Wooden McLaughlin (47 lawyers), as well as Crowell & Moring’s (584 lawyers) combination with Chicago-based Brinks Gilson & Lione, as notable midsize moves of 2021. It also stated that about 68% of combinations in 2020 were “small” ones, involving at least one firm with 20 or fewer lawyers. That number was 63% in 2021.
Despite the dip in combinations associated with the COVID-19 pandemic, Fairfax concluded that firms are still dedicated to growth.
“While law firms continue to face logistical challenges associated with developing merger relationships and pushing towards more serious discussions in the current environment, many firms remain committed to growth and expansion and are continuing to explore merger options,” the report stated. “Increasingly, merger processes and discussions are moving to a virtual or partially-virtual format, which may aid a return to more typical historic merger activity levels in 2022-2023.”
A survey late last year found that exactly one-half of law firm business professionals believed their firms would likely expand into new territory in the near future, with most of those respondents pointing to the Southeast (59%), Midwest (52%) and the West (50%) as fertile territory. That number was 34% in 2020. The survey group consisted of 55 firms with at least 50 or more lawyers.