Strength in Numbers: Local Law Firms are Gaining an Edge Through Mergers and Acquisitions
As firms seek to remain competitive, an increasing number are gaining an edge by buying or merging with other law offices.
With more than eight decades of service to Central Ohio under its belt, few area law firms have stronger reputations than Crabbe, Brown & James. Just ask Larry James, who joined the firm in 1981, became a named partner in 2001 and is now managing partner.
“I had a number of options of firms I could’ve gone to,” James says of his choice to join the firm, then known as Crabbe, Brown, Jones, Potts & Schmidt. “But this is the one that really stuck out, and I think it aligned with the person I am and my skill set.”
The legal industry is fiercely competitive, however, and even a law firm with a successful track record and name recognition like Crabbe, Brown & James isn’t immune to the pressures. About two years ago, James says, his 10-attorney firm began exploring the possibility of combining with a larger firm. “To remain competitive is next to impossible with our size,” says James, whose firm on Jan. 1 will become part of Chicago-based Amundsen Davis, which has about 250 attorneys in Illinois, Indiana, Wisconsin and Missouri.
“When lawyers are doing very well, they don’t want to change. They’re fine and happy,” James says. “But when you look to the future and you ask yourself where you’re going to be three to five years from now, you have to take some hard, deep looks.”
Crabbe, Brown & James is far from the only local law firm to undergo such self-scrutiny or to come to the conclusion that it makes sense to join forces. In 2012, Schottenstein Zox & Dunn combined with Ice Miller, and Chester Willcox & Saxbe merged with Taft Stettinius & Hollister. The following year, Isaac Brant Ledman & Teetor joined with Wiles Boyle Burkholder & Bringardner to become Isaac Wiles. Last year saw the merger of Taft with Jaffe Raitt Heuer & Weiss, which is based in Detroit, and a “partnership” between Columbus’ Perez Morris with Giffen & Kaminski in Cleveland.
Don’t look for M&A deals to slow anytime soon. Frederick J. Esposito Jr., chief operating officer of Rivkin Radler, a multistate firm with a presence in New York, New Jersey and Florida, says that mergers and acquisitions are to be expected during times of economic uncertainty. “There were quite a few mergers and acquisitions throughout 2023,” Esposito says. “You have an economy that’s leaning towards a downturn, and in the fourth quarter of this year, there was a lot of reduction of demand.”
For larger firms, acquisitions can be attractive because they diversify practice areas. “A lot of firms are looking to increase their depth,” Esposito says.
For smaller firms that are acquisition targets, it can be a question of survival. The present pattern mirrors the Great Recession, he says. “A lot of the smaller firms had difficulty surviving, so the larger firms would move in and grab these practices.”
In the case of Crabbe, Brown & James, firm leadership noted that, in recent years, while it could attract good, young attorneys, it had difficulty retaining them. “Almost without exception, in two years, other firms were gobbling them up because they pay more,” James says. “[The lawyers] saw a definite future that they didn’t see with us at the time.”
Amundsen Davis was attracted to Crabbe, Brown & James because of its sure financial footing, strong bench of lawyers and potential for growth, says James, who will make the transition to the new firm while remaining an equity partner. All but one of the firm’s 10 attorneys is joining Amundsen Davis, and 80 percent of the staff is staying on, he says. The Columbus office remains in place, but the CBJ name will not. “There was very little disruption, and we got to move forward collectively as a firm,” James adds.
James says he thinks present Crabbe, Brown & James clients will remain with the new firm. “Clients, in many instances, are tied to [their] lawyers,” he says, adding they will be able to take advantage of broadened practice areas. “There are certain disciplines that we didn’t have,” James says. “Now we do.”
Two Ohio firms of relatively comparable size and stature—Columbus’ Bricker & Eckler and Cincinnati’s Graydon—merged in April 2023 to create Bricker Graydon, a new entity that managing partner James Flynn describes as a “merger of equals.”
Prior to combining, both firms had already referred work to the other and held each other in high regard, Flynn says. “This was not a merger that was motivated out of desperation or need,” he says. “This was two groups of people that valued similar things, did business in similar ways, served similar types of clients but largely concentrated in different markets.”
Important Merger Considerations
Firms entertaining a merger should be meticulous in their due diligence, according to attorneys who have been through them. Cultural compatibility between firms is critical. “Culture can be the demise of any acquisition or merger,” Esposito says. “Some of these mergers look terrific on paper, but when you get them all together, there’s no synergy.”
The firms also will need to mesh their workforces and the habits and practices that come with them. “If it’s done correctly, it can be a net positive,” Esposito says.
Importantly, potential ethical conflicts must be carefully analyzed. “Two parties opposed to each other can’t be represented by the same firm,” says Flynn. “Even if there’s not a direct legal conflict, it doesn’t look good to try to be the law firm on both sides of that business equation.”
In the case of Bricker Graydon, the match made sense, and it has played out in an equitable fashion. “Everything that we did with our governance, with our structure, with our leadership, was designed to equally represent both firms,” says Flynn, adding that Bricker & Eckler had about 120 attorneys and Graydon about 80 at the time of the merger. The current headcount stands at just over 200. A few attorneys “self-selected” out of the firm post-merger, Flynn says.
For firms exploring potential mergers or acquisitions, Esposito says the benefits must be tangible. “If you’re bringing on a group, you’re bringing on their expenses … their rate structures for how they’re generating their fees,” he says. “You may go through your own pro formas, and you may find that this does not work for your firm.”
One thing is clear, though: Law firm consolidation is likely to continue.
“If you don’t grow, you’re going to perish,” James says. “There may be a few outliers, depending on where you are, but you’re going to reach an age at some point that it’s going to start to atrophy away.”
Peter Tonguette is a freelance writer.
This story is from the Winter 2024 issue of Columbus CEO.