By Maria Kantzavelos
Law Bulletin staff writer
The pace of merger activity involving U.S. law firms has picked up slightly during the second quarter of 2010, reports from two law firm consulting businesses show.
There were 10 completed mergers involving U.S.-based law firms in April, May and June, compared with four in the first quarter of this year, and nine in the second quarter of 2009, according to Hildebrandt Baker Robbins' MergerWatch report.
Hildebrandt Baker Robbins consultant Lisa R. Smith said merger activity is looking like it's back on track after three quiet quarters.
However, since the third and fourth quarters tend to be slower, Smith predicted that the level of merger activity by year's end will not meet the levels of those in the years before the recession.
"That's still the carry-over effect of people being focused on internal issues and lateral hires," Smith said. "People were risk-averse. They didn't want to take on a merger when you didn't know quite where the economy was going."
But law firms are starting to focus more on strategy and external issues, Smith said.
"I just see that we've returned to where we were a couple of years ago," she said. "I think firms are still cautious, but I think they've kind of moved beyond the cost-cutting that dominated '09."
Hildebrandt Baker Robbins' MergerWatch report, along with another report issued this week by Altman Weil's MergerLine, are reflective of a significant interest in cross-border mergers, law firm consultants said.
The largest completed merger involving at least one U.S. firm in the second quarter of the year was the cross-border merger of equals between Washington, D.C.-based Hogan & Hartson and London's Lovells LLP, according to the Hildebrandt report.
That union has been reported as the second largest merger completed since Hildebrandt began tracking law firm mergers in the late 1990s. The largest was the 2005 merger between London's DLA and Chicago's Piper, Rudnick, Gray, Cary.
"Clearly, the big story is the increase in interest and actual completion of cross-border mergers," Smith said. "We know there's more of those under discussion."
Altman Weil's MergerLine, an online tracking service, shows that there were nine new law firm combinations announced in April, May and June, level with the first quarter of the year, and compared with seven announced mergers in the second quarter of 2009.
Altman Weil counts mergers when they are announced. Hildebrandt counts mergers only when they are consummated.
The largest of the mergers announced in the second quarter of the year was the union of Chicago's Sonnenschein, Nath & Rosenthal LLP with the British firm Denton, Wilde, Sapte LLP. The combination, which is to become effective Sept. 30, will create SNR Denton, a firm with more than 1,400 lawyers and professionals in 18 countries.
Altman Weil principal Ward Bower said the SNR Denton union, along with two other international combinations announced in the second quarter of the year, are reflective of an uptick in interest in international mergers. The consultant said he, too, is aware of a number of other transatlantic deals in the planning stages.
"There is a renewed interest in transatlantic deals after a two-year hiatus," Bower said. "Everybody went into survival mode during the recession and now, coming out of it, some of the firms that survived the recession best also seem to be international firms. If they're not already on the ground in the other country, they've come to a realize that they have to have a more substantial presence."
Bower said he expects the remainder of the year to see continued merger activity - both trans-Atlantic and domestic.
"Coming out of the recession, firms that had put their strategic plans on hold are now more optimistic and are going back to implementing their strategic plans," he said.
And, Bower said, firms that may have wanted to remain independent before the recession may now be taking another look at becoming acquired.
"A lot of firms want to retain their independence and be in control of their own destiny, but once they find out there's some benefit to geographic and practice area diversity - especially in a down market - they frequently change their minds," he said.