Questions Members of Boards of Professional Service Firms Should Ask About M&As.


Professional services firm strategy consultant Jeff Coburn asks some tough and appropriate questions of those firms doing the acquiring and those firms being acquired.


His research data about the legal world is both interesting and probably generalizable to other professional service firms.




WHEN CONTEMPLATING M&As: the case of mid size law firms.


By Jeff Coburn


For many US law firms, the past decade has witnessed a period of unprecedented growth and prosperity. For other firms, the past decade has been a period of unprecedented anxiety. Within the American legal industry, the gap has never been wider between short-term success and long-term uncertainty. As law firm leaders look to the future, a growing number are concerned about what they see:


a gradually eroding market share

a widening gap between top-tier firms and the rest

a growing concentration of influence and affluence among the largest firms

greater difficulty recruiting and retaining top lawyers

a harder time attracting good clients and premium work

insufficient resources for marketing and practice development


Data on law firm performance suggests that size is becoming a significant factor in the profession. According to the NLJ 250, larger firms are getting larger at the expense of their smaller counterparts. In 2000, for example, firms with more than 500 lawyers grew 14 percent, while firms in the 250-plus attorney category grew 9.4 percent. Those with fewer than 200 lawyers grew only 2.5 percent.


There is also evidence that, with some notable exceptions, larger firms tend to be more profitable than smaller ones. Using the AmLaw 200 of the highest-grossing firms, there is a 50 percent difference in average per-partner profitability between firms in the first decile ($731,000 per partner) and those in the fifth decile ($490,000). Further analysis suggests that, as a rule, albeit with notable exceptions, average per-partner profitability tends to drop the further down you go on the AmLaw 200 or the NLJ 250.


A growing number of law firms are concerned that their lack of size, depth, and geographic reach may restrict them from competing at the higher end of the market. In addition, the challenge facing smaller and midsized firms – and many larger firms as well – is how to break out from the world of undifferentiated law firms and become something unique or at least distinctive. Overcoming “commoditization” is one of the most formidable challenges facing most law firms, but especially for the so-called "full service" midsize firms.


Against this backdrop, as law firm leaders look out five or 10 years, many are wondering whether their platform is both the “right size” and the “right shape,” not only to survive, but to thrive in the hyper-competitive legal market of the future. At their retreats and in their management committee meetings, these firms are asking themselves some important questions:


Are we competing at the right level in our market? How can we move to a higher tier?

Are we getting “invited to the right parties?” When we are invited, are we winning?

What do our clients expect from us? What aspects of their legal needs are we not capable of handling? 

To what extent do we need to strengthen or grow our existing practices – or add new ones? Could we be expanding the geographic reach of some practices if they were larger and deeper?

Is our current “platform” sufficient to ensure the firm's longer-term success? Would becoming larger lead to higher profitability or provide us with a greater ability to invest in such areas as recruiting, marketing, and technology?

In the long-range planning process, the issue of growth is thus becoming increasingly central to the strategy debate. In this respect, the thinking at law firms about the issue of growth has shifted dramatically. Twenty years ago, when I first began conducting law firm retreats, the question of growth usually met with the following response: "It is not our objective to grow. We value our culture and do not want growth to harm it. If we must grow at all, it should be limited to modest, gradual, and controlled growth."


By contrast, today's law firm retreats often center on the lack of growth. Looking around the country, it is difficult to find many top-rated law firms that have not experienced significant growth. As firms watch their competitors growing rapidly, they question the extent to which their own lack of growth is a problem and whether the firm should be taking more proactive measures to jump-start the growth process.

As the US legal industry continues to consolidate, the question - to merge or not to merge? - is increasingly asked at management committee meetings throughout the country. How should we respond to the merger overtures we are getting? How satisfied are we with our present course? Are we large enough, deep enough, and strong enough to stay independent and still achieve our longer-term ambitions?

To better frame the issue in the context of actual law firm experience, we examined a handful of midsize firms that, for whatever reasons, decided to abandon their name, their culture, and their independence to join forces with a larger firm. Why did they do this?  What factors drove them to consider the merger option? What did they see as the potential benefits – and downside risks? In retrospect, how has it turned out? And what “lessons learned” would these firms offer to other independent, midsize firms that might be considering their longer-term options?

Mays & Valentine, Richmond, VA


In October 2000, Mays & Valentine, a 135-attorney general practice firm in Richmond, merged with Troutman Sanders, an Atlanta-based firm with 350 lawyers. We spoke with Robert Seabolt, former Managing Partner of Mays & Valentine and now head of Troutman’s Richmond office and administrative partner for the merged firm.


“Mays & Valentine had been a force in the Virginia legal community for 75 years,” explained Seabolt. “Throughout the 70s and 80s, the Virginia legal market was dominated by three major firms, with Mays & Valentine being the smallest of the three. During these two decades, while we doubled in size, the other two firms grew even faster.

“Despite improving our performance every year on an absolute basis, we began to feel we were losing ground on a relative basis. This manifested itself in several different ways. We weren’t seeing the best resumes from law schools. We weren’t getting the best clients. We weren’t being invited to propose on the best legal work. We felt we were slipping relative to our top-tier competitors, and we didn’t feel good about it.

“As this pattern continued into the 1990s, we became concerned that, if we didn’t do something, we would be relegated to a second tier in the market and, over the long run, we could wither away and disappear altogether.

“Our vision was not merely to survive. Our sights were much higher. We wanted to get back into the first tier. We wanted to operate at the highest level, attracting the best clients and the best attorneys.

“Guided by this vision, we undertook a variety of measures during the 1990s to improve the firm’s profitability – including controlling our cost structure, increasing billable hour productivity, and making partner compensation more production-oriented. While these steps had the effect of increasing partner profitability by 40-50 percent over a six-year period, they still weren’t enough to reposition us competitively.

“By the late 90s, the leadership felt that it had run out of tricks. We felt the firm needed to explore other, more ambitious growth options, including some that the partners might find threatening, such as being merged into a larger firm. Whatever we ended up doing, there were two essential requirements. One was the need to preserve and enhance the quality of our practice. The other was staying together. We were determined not to be broken apart or cherry picked to death.”

According to Seabolt, the partnership was of two minds about how to grow. For one group, the principal concern was preserving the firm’s autonomy. These lawyers wanted to grow by means of a series of small acquisitions in Virginia and neighboring states. The other group, believing a “bite-sized” acquisitions strategy would either be too difficult or not sufficient, advocated a larger combination, whether a merger-of-equals or combination with a larger firm.

As Seabolt says, “The big concern among the opponents of a merger with a larger firm was loss of autonomy. They didn’t want to give up control of a firm that had been around for 75 years and that enjoyed a distinguished tradition and reputation. Fortunately, the previous year, we had conducted a survey of our partners covering a variety of strategic issues, including their feelings about a merger with a larger firm.

“The survey revealed something interesting: that the majority of partners would be willing to relinquish absolute control – but only if it could be demonstrated that the merger partner shared our strategic vision, practice values, and partnership culture. If these points of congruence could be demonstrated, the partners would vote for a merger, including one that would necessitate giving up the Mays & Valentine name.” 

In late 1999, the firm hired an outside consultant, Don Akins of Hildebrandt, and began its search for a merger partner. “In all, we interviewed five firms,” says Seabolt. “Troutman was the first – and the last – firm we talked with. There were a number of important similarities between the two firms. Our visions were similar. We were trying to transform ourselves from a Virginia firm into more of a regional firm, while Troutman was trying to reposition itself from a Georgia and Washington DC firm into more of a Southeastern regional firm with one or more strong international offices.

“Our cultures were also similar, and partners on both sides liked each other immediately. We also shared a number of practices and clients, including two large regional banks, both of which blessed the idea of our merger early on. With Don Akins’ able assistance, the merger discussions and due diligence were completed within six months and, in October 2000, the merger was approved unanimously by both firms.

“This merger has proven to be a home run both culturally and strategically. The atmosphere throughout the firm has been characterized by goodwill and good personal relationships. This is a credit to the leadership of Troutman Sanders, starting at the top with Chairman Carl Sanders and Managing Partner Bob Webb. Thanks to them, the Troutman partners have welcomed the Virginia members with open arms since Day One. 

From a business standpoint, the combination has created numerous opportunities. Seabolt cites the following examples:

Mays & Valentine used to handle commercial real estate work in Virginia for a Fortune 100 retailing company, while Troutman had never done any work for this client. Since the merger, the combined firm has done over $2 million of real estate work for this client throughout the Southeast.

Mays & Valentine used to do sporadic regulatory work for a Virginia-based regional electric utility. After the merger, and bolstered by Troutman Sanders’ strong utilities practice, the volume of work for this client has increased, says Seabolt, “from the low six figures to the multiple millions.”

As a combined entity, the work being done for two regional Southeast bank clients has grown considerably.

“Since the merger”, says Seabolt, “I have served as the firm’s official ‘merger archivist,’ tracking all evidence I can gather of the merger’s impact. Three years into the merger, I have documented at least 50 separate initiatives of cross-selling and collaboration that have cumulatively resulted in at least $5 million in incremental billings for the merged firm.

“The merger has resulted in financial rewards for the Virginia partners as well as for Troutman Sanders as a whole. Each year since the merger, the Virginia partners as a group have experienced near double-digit growth in both revenue-per-lawyer and partner profitability as their business originations and personal production have increased, all within the toughest economy in the last 20 years. Nobody thinks that Mays & Valentine could have achieved these results as an independent firm.

“The merger has also been a boon to our recruiting in Virginia. In fact, the ‘buzz’ from the pending merger produced a spate of lateral resumes even before the deal was competed. Our official headcount in Richmond was 135 the day the merger was announced; today, it stands at 175. As we speak, I am in discussions with ten laterals from small or midsize Virginia law firms who are interested in Troutman Sanders because of our larger, regional platform. Currently I spend about 60 percent of my time dealing with laterals.

“Without question, this merger has put us into a new competitive orbit. It has redefined our future. It has transformed the practices of many partners and, as far as I can see, it has hurt no one.”


Sherburne Powers & Needham, Boston, MA


In 1998, Sherburne, Powers & Needham (“SPN”), a 78-year-old Boston firm with 75 attorneys, merged with Holland & Knight. We spoke with J.D. Smeallie, a long-time member of SPN’s Executive Committee.

Founded in 1919, Sherburne, Powers was a midsize general practice firm with a long and illustrious history in the Boston legal community. “In 1998, we were coming off one of our best financial years ever, but we had some concerns about the longer-term future,” said Smeallie.


“As a midsize firm, we were increasingly uncomfortable with where that placed us in the Boston legal market. We asked ourselves, ‘How do we ratchet ourselves up to the next level? As we looked out a number of years, we began to see some disturbing trends. One was that we were having increasing difficulty attracting the best lawyers, whether new law school graduates or experienced laterals. Another was that our size was a drawback in winning big clients and big engagements. ‘We liked you people a lot, but we have decided to go with a larger firm’ was something we were hearing too often. 

That year, the firm held a partnership retreat to examine its strategic future. Out of that meeting emerged three basic options: (i) narrowing the firm’s focus and becoming more of a boutique; (ii) continuing modest growth through lateral recruiting; and (iii) merging with another firm.


“As we explored our options, we discovered that some partners were interested in the ‘boutique’ option, since we already had two highly regarded practices in construction and housing syndication. But there was also discussion of the attractiveness of a larger platform to reduce the reliance on a relatively small number of rainmakers, practices, and clients.


“The third option was not something we had ever explored before, and we certainly didn’t feel any need to merge,” explains Smeallie. “But the previous year we had had a visit by the then-Managing Partner of Holland & Knight, Bill McBride, and everyone was very impressed by him and the opportunities he presented. That visit gave us another alternative to consider.


According to Smeallie, Holland & Knight was appealing as a merger partner for a variety of reasons, including their breadth with nearly 100 different practice specialties, their extensive office network, their ‘one-firm’ concept in the way they accounted for profits, their strong pro bono commitment, and their unique culture. “One thing that especially appealed to us was something they called the ‘no jerks’ rule – no matter how big a practice someone had, they would not last at the firm if they were a jerk,” explains Smeallie. The more we discussed it, the greater the interest became in the merger option. As the retreat drew to a close on Sunday, we voted unanimously to explore a merger with Holland & Knight.”


“Most of the benefits we anticipated from doing the merger have been realized,” Smeallie adds. “Both profits-per-partner and revenue-per-lawyer have increased each year since the merger. As a result, partner incomes have increased, in some cases more than 50 percent. Before the merger, our profits would tend to fluctuate from year to year, and now they are more stable. Most importantly, the merger has enabled us to attract better clients and to better service our existing clients. We’re now able to handle numerous matters in other states or in specialty areas that previously we would have referred out to other firms.


“One of the biggest plusses from the merger has been recruiting. When we go to law schools, we represent a branded name. And we’ve had much greater success attracting laterals because of our stronger financial situation and the cache from being part of a large, nationally-known firm.


“Another benefit from merging has been a big improvement in our administrative support. Before, marketing efforts were largely driven by individual lawyers. Now, the firm provides us with state-of-the-art marketing and technology support. It amazes me how quickly we can produce first-class marketing materials, for example.”


Specific examples mentioned by Smeallie of the benefits from the merger include:

Prior to the merger, SPN handled regional copyright and licensing enforcement for one of the nation’s largest software companies. The merger enabled them to extend this work to other parts of the country, tripling the volume of revenue from this client.

As a result of the merger, a long-standing relationship with a national transportation client has grown from handling their work in Boston to handling their work in Florida and in other markets as well.

Holland & Knight was recently retained for a piece of high-visibility national litigation on behalf of a major university. “I doubt that Sherburne would have been hired to handle something like that,” Smeallie suggests.

According to Smeallie, “Most of the concerns expressed by partners about the merger have dissipated. One of the biggest objections was that we would lose our autonomy and have little or no say in the larger firm’s governance. That turned out not to be the case. As one of the firm’s four or five largest offices, we immediately felt that we had stature within the firm.”

Two attorneys from our office were elected to the firmwide Director’s Committee and, in 2001, Tom Swaim, the former SPN managing partner, was elected to serve a term as Chairman of that governing body. Today, the Boston office houses two Directors along with the firmwide chairs of several important Holland & Knight practice groups.


The other big concern expressed by some partners was the loss of the Sherburne, Powers name. “This was a big issue,” Smeallie acknowledges. “We enjoyed a reputation as an old-line New England firm, and some of our partners were concerned about relinquishing our name – especially our Trusts and Estates practice.


“In the end, we worked out an arrangement to continue to use the SPN name for the first year, to use a combined SPN-Holland & Knight name the second year, and to use only the Holland & Knight name after that. But as soon as we began operating as a merged entity, we discovered how awkward it was to have two different names, so we took the initiative to switch to Holland & Knight before the second year was up.


“I am now a believer that ‘bigger is better. “We now benefit from the scope, depth, and breadth of resources that didn’t exist when we were Sherburne, Powers & Needham. We’re much more in the game than we were before, being invited to bid on major transactional or litigation work in different parts of the country. All in all, it’s been a great success. Today, the few partners who opposed the merger are now among its principal proponents.”

Shanley & Fisher, Florham Park, New Jersey


In November 1999, Shanley & Fisher, a 110-attorney New Jersey-based general practice firm, merged with Drinker, Biddle & Reath in Philadelphia. We spoke with Jim Altieri, a former member of the Shanley Board of Directors.


“At the time of the merger, we were not experiencing anything particularly negative,” Altieri explained. “We were doing ok, but not great. For almost a decade we hovered around 110-120 lawyers, down from a high of around 140 some years earlier. For us, growth was an issue. For better or for worse, size is one of the markers of success in the legal profession and, in this regard, we saw the competition outstripping us.


“More importantly, we were concerned that our competitors were also outstripping us in profitability. This led us to ask two related questions: (1) How best to grow? and (2) How best to grow profitably?

“The strategic assessment process really began in 1998, when we hired a consultant to take a look at our profitability. The result was eye-opening. When we peeled the onion back, we were faced with some tough questions about our longer-term future. As part of the analysis, our consultant convinced us that, as a rule, larger firms tended to be more profitable than midsize firms like ours.

 “Adding to our concern were two other trends: (i) the growing encroachment of firms coming into New Jersey from New York and Philadelphia, and (ii) the law firm consolidation trend that was in full bloom in 1998. If consolidation was really a train leaving the station, we wanted to make sure we were on it.

“We were also facing increased competition in the recruiting wars. At 115 lawyers, we were limited to people who hailed from New Jersey and who wanted to practice there. We found ourselves in an increasingly difficult position to attract ‘the best and the brightest.’

“Based on all of this, we decided to embark on a strategic growth program, one that we would pursue along two parallel tracks: (i) growing organically, through new hires and laterals; and (ii) combining with another law firm. Everyone agreed that doing nothing was not an option.”

For the merger strategy, the firm looked at a number of potential New Jersey partners but soon concluded that none would satisfy its needs. As Altieri puts it, “Many of the New Jersey firms had the same basic profile as Shanley, and suffered from the same types of growth and profitability issues that we were experiencing. This led us to conclude that a New York City or Philadelphia firm would be preferable, and that our financial situation would make it easier to do a deal with a Philadelphia firm.”

According to Altieri, the Drinker opportunity was initiated by several Shanley partners who had either worked with or knew about the firm. In February 1999, a small group of Shanley partners traveled to Philadelphia to meet with Drinker and to present the idea of joining forces. Drinker responded positively.

“The two firms shared a number of common practices and clients,” says Altieri, “especially in the insurance and pharmaceutical industries, and fortuitously, no major conflicts surfaced. Nine months later the merger was completed.”

According to Altieri, one of the more emotional issues throughout the merger discussions was the loss of the Shanley & Fisher name. “This was a practical issue as well as an emotional one since the Shanley name was so well known throughout New Jersey. According to our merger agreement, we would continue to use the Shanley name for a three year period, but only in the New Jersey market. After three years, we would sit down again to discuss the issue. At the end of the three-year period, it was the New Jersey contingent that advocated dropping the Shanley name and adopting the Drinker name for the sake of both uniformity and simplicity.

“On balance, we felt it was more important for us to hold ourselves out as a single, integrated firm than to cling to our old name. Although a few partners were strongly opposed, it has become much less of an issue with the passage of time, and we have managed in other important ways to preserve Bern Shanley’s legacy.

“The merger has worked extremely well – much better than we had expected,” says Altieri. Among the examples he cites:

The scale and geographic reach afforded by the merger has enabled the firm to represent some of Shanley’s large real estate development and leasing clients in a broader geographic area.

The availability of resources in additional practice areas, along with Drinker’s strong transactional practice, has significantly strengthened the New Jersey corporate practice to the point where it is now one of the largest and strongest corporate firms in the state. “In corporate, we now have a much better story to tell,” he says.

The combination of Drinker’s and Shanley’s insurance coverage and life sciences practices has created one of the strongest practices in the country in both of those areas.

The strength of the New Jersey private equity practice has increased apace.

A major New Jersey-based mutual fund client was added to Drinker’s nationally known 40-Act Practice.

According to Altieri, the combination enabled the two firms to achieve another common goal: attracting an established intellectual property practice, when, the following year, a 25-attorney Philadelphia IP boutique was added to the mix. The firm was also able to acquire litigation boutiques in both San Francisco and Los Angeles, thereby enabling it to do products liability work for a number of major pharmaceutical clients on a national basis. “I doubt that either firm could have effected these transactions on its own,” says Altieri.

“Financially, the merger has been a major shot in the arm for partners on both sides,” Altieri maintains. “In the three years since the merger was announced, the compensation point value for Shanley partners has nearly doubled from $3,500 to $6,000. It’s been a financial win-win for both sides.”     

Here too, recruiting has been another benefit of the merger, according to Altieri. “Attracting the best legal talent requires a combination of cache and money. Before the merger, we were not competitive in the New Jersey recruiting wars. All of a sudden, after the merger, we were. Because of its size, the merger was a stunning development that made headlines throughout the New Jersey legal community. Our expanded platform, along with our better numbers, has made us much more competitive in attracting both recent law school graduates and laterals.”

Schwartz & Freeman, Chicago, IL


In May, 2001, Schwartz & Freeman, a 55-attorney general practice firm in Chicago, merged with Wisconsin-based Michael, Best & Friedrich. We spoke with Lewis Greenblatt, former Managing Partner of Schwartz & Freeman and current head of Michael, Best’s Chicago office.


“We began thinking of a merger several years before we actually did it,” said Greenblatt. “The firm was approaching its 60th anniversary, things were going well, our profitability was strong, and we enjoyed our culture as an independent, midsize firm. There was certainly no urgency for doing something like this.

“But, as we looked down the road, we had some concerns about the future. For one thing, we weren’t growing, and that bothered us. We didn’t have as much of a problem attracting quality associates, but associates don’t get you new business. We needed experienced laterals with good books of business. We were finding it increasingly difficult to attract the best laterals because we couldn’t offer them a sufficient platform to expand their business.

“We found ourselves losing too many good candidates to the larger firms. It was hard to sell our platform to a lateral with a $750,000 practice and with aspirations to grow the practice and get compensated accordingly. You can talk all you want about your firm’s wonderful culture, but in the end it’s the growth and income opportunities that carry the day, and we just couldn’t offer these kinds of opportunities.”

According to Greenblatt, the other strategic issue that entered into the firm’s thinking was future leadership and governance. “We wondered where the future leadership was going to come from. We had such a small pool to choose from, especially at the practice group level. If we were part of a larger firm, we could draw our future leadership from a wider pool of partners currently in their 30s and 40s. 

“We had held annual strategic planning retreats for a number of years, and growth and future leadership were always the main topics on the agenda. There was no issue about whether to grow – the only issue was how to grow. Initially, the preferred approach was to recruit individual laterals and practice groups, but given our recent experience we doubted this approach would be successful. In the end, the firm’s leadership felt that we also needed to give serious consideration to a merger approach.”

In early 2000, eight or nine out-of-state firms were contacted and a number of exploratory meetings were held. “We liked the Michael, Best firm from the beginning,” says Greenblatt. “They had a small Chicago office with approximately 20 lawyers. The office was mostly litigation and had a very small business practice, so growing and diversifying the office was a high priority. Because our corporate practice was our strength, we felt we could help the Chicago office achieve its goals.

“The merger process took about a year, with numerous ‘getting to know each other’ gatherings between the two firms at all levels both in Wisconsin and in Chicago. We chose to handle the process internally, with no outside help. In May, 2001, the merger was announced.”

At around the same time, Michael Best negotiated a second, parallel merger for the Chicago office with Laff, Whitesel, & Saret, a 15-lawyer intellectual property boutique that happened to be located in the same building as Schwartz & Freeman. (See the section on Laff, Whitesel below). According to Greenblatt, “this presented us with an integration challenge at two different levels: (i) within the Chicago office, where we had to integrate three different groups of attorneys: 20 from Michael Best, 55 from Swartz & Freeman, and 15 from Laff Whitesel; and (ii) between the Chicago office and the rest of Michael, Best.”

Greenblatt provides some examples of work the Chicago office has done post-merger for which he believes Schwartz & Freeman would not have been considered pre-merger:

Within six months of the merger, the Chicago office was invited to handle two initial public offerings, generating more than $400,000 in fees.

The Chicago office recently handled two large pieces of litigation totaling $600,000 in fees, on behalf of former Schwartz & Freeman corporate clients. Prior to the merger, Schwartz & Freeman would not have had the capability to take on cases of this magnitude.

Because of the merger, the combined firm has been able to extend Michael, Best’s substantial healthcare practice to include corporate and real estate work for existing healthcare clients. “This additional healthcare corporate work has totaled several million dollars over the past three years,” says Greenblatt.

The Chicago office was retained to assist in the dissolution of a major law firm located in another part of the country. 

The merger has enabled the Chicago office to participate in a China practice that is jointly sponsored by four US law firms, including Michael, Best. “This office will be a major asset for many of our Chicago manufacturing clients going forward,” says Greenblatt.  

“The difference is the depth of resources,” Greenblatt explains. “For whatever reasons, many clients prefer to give their larger matters to larger firms. Today, I can throw five to ten lawyers at a major case, whereas before there were only a few people I could use. It’s a world of difference. We can now compete with the big firms. The doors now open more easily. We have more credibility and greater bench strength to go after bigger clients and larger matters.

“Looking back, this merger has been a great success on many fronts,” says Greenblatt. “Revenue-per-lawyer and profits-per-partner have both increased since the merger. We’ve had a net gain of 15 experienced laterals, most of whom probably would not have joined us with our previous platform. We have better leadership, more services to offer, and better administrative support to back us up. In short, we’re a different firm, and the market has a different perception of us.”

Laff, Whitesel, & Saret, Chicago, IL


In June, 2001, Laff, Whitesel & Saret, a 15-attorney, 27 year-old intellectual property boutique in Chicago, merged with Michael, Best & Friedrich, a general practice firm with offices in Wisconsin and Chicago. We spoke with Larry Saret, Laff, Whitesel’s former Managing Partner.

“Our merger was initially prompted by our lease situation,” Saret explained. “We were located in the same building as Schwartz & Freeman and, over the years, the two firms had gotten to know each other pretty well. Our lease was due to expire in 2001. At the time, it was a seller’s market for commercial real estate in Chicago, and we were seeing nothing interesting – and facing the possibility of a steep rent hike. This prompted us to begin discussing our longer-term future, and to explore a broader range of options, including the idea of joining forces with a general practice firm.

“These discussions about the future surfaced a number of strategic concerns. One was our growth. We were 15 attorneys, down from a high of around 20 a few years earlier. Each year, we were finding it harder and harder to recruit younger IP attorneys, most of whom wanted to join larger firms. Another issue was profitability. In general, our profitability was ok, but it tended to fluctuate quite a bit from one year to the next, and we wondered whether being part of a larger firm might provide us with a more stable income.

“A third issue was governance. Running the firm seemed to take up a lot of our time, and we often spent our weekly two-hour partner meetings discussing silly nuts and bolts issues. Finally, we were concerned that we lacked certain specialties or that we were not as strong in some areas as we would like to be, such as technology and life sciences.

“When we started talking with potential merger candidates, we discovered that the general practice firms were very interested. About this time, we got a call from Michael, Best & Friedrich, which had learned from Schwartz & Freeman that we might be interested in a merger. The more we learned about Michael, Best, and the fact that they were also talking to Schwartz & Freeman about merging, the more interested we became. The opportunities seemed to outweigh the negatives.

“The deal was completed in about three months. What especially appealed to us about Michael, Best was the fact that they already had an established 50-attorney intellectual property practice in Wisconsin. They had an IP practice that dated back to the firm’s founding 100 years earlier. They provided all the practice specialties that we either lacked or needed to bolster. The fact that we would become the firm’s IP practice for Chicago was also appealing.    

“Looking back, this has been a very successful combination. For one thing, we have been able to better serve our existing clients by offering them a broader range of specialties. And our association with the Michael, Best & Friedrich name has put us on the radar screen with a lot of companies, resulting in our getting a number of new clients in Chicago. “Specific successes include getting on the approved list for IP services at several major universities, [which] would never have happened at our former firm. We’re also doing some very interesting work in business methods technology for a national financial services company – work that has benefited significantly from expertise that Michael, Best has developed from working on similar matters for other clients.

“For us, this has been about opportunity. Our plates are full with great clients and interesting work. Financially, it’s worked out very well for all of our partners. The only negatives have involved ‘loss of control’ issues – things we used to do one way and that now we must do another way – but in all cases we’ve been able to work these things out.”

Lessons learned

At the end of each interview, we asked if there were any “lessons learned” or “best practices” that each interviewee would offer to other independent midsize firms that might be considering merger with a larger firm. There were indeed.


Know Thyself: “The best advice I can give is to be clear about your goals as a firm,” says Troutman Sanders’ Bob Seabolt. “Spend time with your partners discussing what is important, and where you would like to be in five, ten, or even twenty years. If absolute control is the main concern of your partnership, your options may be limited. If quality of practice, preservation of culture, and long-term financial rewards are important, you may find, as we did, that those results can best be achieved by combining with a larger, stronger partner.”


Birds of a Kindred Feather: “The key,” says Drinker’s Jim Altieri, “is finding a merger partner that is similar to your firm – what I call ‘a bird of a kindred feather.’ There has to be a commonality of practices, clients, industries, goals, and values.”


Avoid the Name Game: As these case studies show, the issue of preserving the merged firm’s name is more psychological than real. For each of the cases profiled above, preserving the smaller firm’s name began as one of the most important issues during the negotiations. However, once the merger was completed and the firms began operating together, the smaller firms all willingly agreed to drop their name in favor of the larger firm’s. If the rationale for merging is strong, and if the merger partner is the right one, the experience of other mid-sized firms would suggest that, unless it’s a merger-of-equals, the name is not worth arguing over.


Create Options: “Don’t limit yourselves to just one merger candidate,” advises Larry Saret. “In our case, we had already held discussions with several firms when Michael, Best & Friedrich contacted us. Having had those other discussions proved to be very helpful in our Michael, Best negotiations.”


Lead from the Top: As Lew Greenblatt at Michael, Best observes, “The initiative must come from the top, from the firm’s leadership. Most lawyers are instinctively opposed to mergers. If you wait for the partnership to take the initiative, no law firm mergers would ever happen.”


Beware the Staff Impact: “In a merger between firms of unequal size, there is an enormous impact on the staff,” advises Altieri, “especially those at the smaller firm. For the attorneys from the acquired firm, things are pretty much the same following a merger, but for the staff everything’s different – forms, procedures, systems, etc. It can be very traumatic to the staff if it’s not carefully planned and handled properly.”


Integrate, Integrate, Integrate: “The key to a merger is the degree of integration that takes place,” says Holland & Knight’s J.D. Smeallie. “You can’t spend enough time on integration, both during the merger discussions and after. Without integration, the merger has achieved nothing. Nothing has changed.” Adds Altieri, “These transactions take time, especially to get to know each other. Don’t hurry the process – whatever time it takes is worth spending.” According to Seabolt, “It’s especially important to spend time at the practice group level. This is where the real glue gets created.”


To the extent, finally, that mergers represent a strategy for achieving growth, it is important to bear in mind that merging is a means to an end, and not an end in itself. A merger is a means of achieving certain clearly-defined strategic ends, such as reaching critical mass in key practice areas, offering greater depth of specialization, diversifying the firm’s services, or extending the firm into new geographic markets.


Merging just to get larger - “bulking up” - is not in itself a justifiable end and should never be the rationale for seeking a merger. In this regard, the “to merge or not to merge” debate currently taking place at midsize firms is really not about mergers at all. It’s about strategy, and how to achieve greater market share and stronger competitive advantage.


Jeff Coburn is Managing Director of Coburn Consulting, a Boston-based firm that specializes in strategic and growth planning for law firms. Coburn has counseled numerous firms involved in regional and national mergers. Reach him at


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