Merger Mania? Not For Many of D.C.’s Biggest Law Firms

McCormick Group Managing Principal Steve Nelson is quoted in the National Law Journal about DC’s biggest firms and their unwillingness to merge.

By Katelyn Polantz | November 30, 2015

A handful of law firm leaders with Washington roots have dug deeper this year, claiming that no matter how frequently mergers creep across the industry, their law firms won’t join other firms.

Here’s one: Steptoe & Johnson LLP. “We don’t have a strategy to merge. We have a strategy to enhance our performance. It’s ultimately about what the marketplace asks for and wants,” Philip Malet, Steptoe’s vice chairman, said this month. “We and I think many of the firms in town appreciate our independence.”

In addition, firm leaders from Covington & Burling, Arent Fox and Wiley Rein openly opposed pursuing a merger strategy this fall. Couple them with the few large Washington firms that have a merger’s completion in their recent history — namely Hogan Lovells; Wilmer Cutler Pickering Hale and Dorr; Squire Patton Boggs; Morgan, Lewis & Bockius; and Dentons’ acquisition of McKenna Long & Aldridge — all but a few of this city’s largest firms have kept quiet their feelings on mergers.

“What’s the firm’s strategy? If you’re comfortable in your own skin and don’t need to be twice the size, then why merge?” Malet said.

Cristina Carvalho, Arent Fox’s next managing partner, and Covington & Burling chairman Timothy Hester, emphasized confidence in their firms’ brands when they demurred on the question of possible mergers in separate recent interviews with the NLJ.

“We’re not focused on a merger strategy,” Hester said in October, after he was elected by the partnership to a third leadership term. “That’s not something that’s in our plans, and not something we’re looking for at all. Our focus is on continuing to improve independently.”

Carvalho alluded to the tricky nature of mergers: “It is very difficult to find candidates that are attractive to us. We think we need to be very strategic with growth,” she said in early November, when the firm announced her ­promotion.

Matthew Clark, Arent Fox’s outgoing managing partner, said the firm is often a target for acquisition. “No one has been compelling,” he said. “The question will come up. We’ll take it on quite deliberatively. Every time we’ve launched this discussion, we like being one firm.”

Wiley Rein managing partner Peter Shields, who executed the acquisition of lobbying and consulting firm McBee Strategic last year, said his firm’s “single-office culture” and history of raising attorneys from the beginnings of their legal careers made it opposed to merger opportunities.

“We are pursued regularly by other firms that want to merge,” Shields said in an email this month. “While we are flattered, we have no desire or intention to do so. We want to maintain that culture and identity, and therefore growing through a merger is not part of our strategic plan.”

TALKS NONETHELESS GO ON

These firms are in the minority. Legal consultants often emphasize the frequency and ubiquity that law firm leaders talk to one another about potential tie-ups.

Every year since 2010, the number of U.S. law firm mergers and acquisitions have outpaced the previous year. The first ninth months of 2015 brought 68 mergers and acquisitions, compared with 63 during the same period in 2014, according to Altman Weil Inc.’s Merger­Line tracker. So far this quarter, the consulting group counted 13 mergers, just six shy of last year’s fourth quarter.

So why do the D.C. firms say they’re out of the game?

“Considering a merger these days appears to be a sign of weakness,” said Steve Nelson, a McCormick Group Inc. consultant and headhunter based in Northern Virginia.

In the current merger environment, firms can be grouped into the hunters and the hunted. “In the past there have been many mergers that were two strong firms coming together. That seems to be the exception rather than the rule.”

Moreover, a merger, even one done by a healthy firm, can destabilize a partnership in a moment when the legal economy appears to be improving, Nelson added.

“The one thing that’s still attractive to firms is the global merger, with a real global powerhouse,” he said