If you believe Hildebrandt,
there were 47 law firm mergers of significance last year. (The
editorial insertion "of significance" is my own, because while Hildebrandt
says they limit their sample to law firms of five or more attorneys,
the private nature of the profession forces me to believe many mergers
went unreported or unnoticed.) That represents a 34% increase
over Hildebrandt’s 2003 merger count, and it’s safe to say the received
wisdom, with which I concur in this case, is that the merger trend
is nowhere near exhaustion.
My own belief is that the AmLaw 100 are "pulling away" from the
second 100 (the AmLaw 101-200, that is) just as the AmLaw 50 are
pulling away from the AmLaw second 50 (##51-100). That begs
the question, "What is happening to the firms that cannot or choose
not to get big?" In particular, and not to be oblique
about it, are the firms that are not getting big strategic failures?
The short answer, as both lawyers and economists are wont to say,
is "It depends." (Economist joke time-out: "If
you laid all the economists in the world end-to-end, they wouldn’t
reach a conclusion.") It depends on whether our hypothetical
AmLaw Second 100 firm wants to compete in the big leagues. If
they do, but they lack the financial firepower or unusual practice
expertise to buy and build their way in, then their strategic intent
is at odds with their tactical capability and they are, by that measure,
a "failure."
But what if they have no such intent? What if they are content,
nay determined, to assiduously tend their own garden with no aspirations
or delusions of a global manifest destiny? Then the question
becomes, "Is this a sustainable positioning?" More
specifically, what are they offering that clients cannot or prefer
not to obtain from one of the Global 25 or from a boutique? Fundamentally,
there are only two possible answers: (1) an unusual practice
expertise (say, entertainment, sports, or lobbying) or (2) unequalled
regional depth. Without one of those distinctive characteristics,
being mid-sized is awkward indeed, with no compelling value proposition
for your clients, a limited and finite capital base to
build from, and a relatively dull tale to tell to recruits.
The
National Law Journal cites these problems and others,
but also sees a silver lining: What if you don’t want to
practice in a firm where "partners don’t know each other," and
where none but executive committee members have a meaningful say
in the firm’s plans? Associates, too, can be enticed by
the promise of more responsibility early on, freedom from meat-grinder
billable hour expectations, and perhaps a more eclectic client
mix than that found at Cravath or Milbank.
I hesitate to say it’s all a matter of perspective, but it is: Not
only is it true that not every firm can grow up to become a Latham
or a White & Case, but it should be true that, given
the right temperament and environment, lawyers can take pride and
fulfillment from being part of (say) the best damned firm for public
finance in New England.
