The Urge to Merge: Big Law Goes Global

Law firms are following their clients overseas, merging to serve a global economy.

The world's largest law firms are merging to form global megafirms.
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LONDON — In mid-2012, the leadership of Anglo-American law firm SNR Denton — then the world's 29th largest, with a cadre of around 1,400 lawyers — met with the leaders of two other firms: Paris-based Salans and Fraser Milner Casgrain of Toronto — to talk about a possible three-way hookup. It didn't take long before the participants realized they were hearing the same thing from their clients — the need to be represented by a firm with global reach — and were equally determined to keep their customers satisfied. They quickly agreed to merge. "It was a seismic moment," recalls Elliott Portnoy, Dentons' global CEO.

Last April, the nuptials were finalized, and the new, bulked-up firm — rechristened Dentons — instantly became the world's seventh-largest firm, with around 2,600 lawyers. While that was a big leap, consider this: SNR Denton was itself less than two years old when it began talks with the French and Canadian firms. It was formed in 2010 by a merger between Britain's Denton Wilde Sapte and Washington's Sonnenschein Nath & Rosenthal.

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So far this year, there have been two other big global tie-ups, as well. London's Norton Rose in June merged with Houston's Fulbright & Jaworski, to create Norton Rose Fulbright, which fields around 3,800 lawyers. And in July, Australian-Chinese firm King & Wood Mallesons merged with London's SJ Berwin, creating a firm with more than 2,700 attorneys, and the first multinational firm headquartered in Asia.

The creation of these new megafirms is part of an urge-to-merge surge in the global legal community that slowly began about a decade ago and picked up speed in 2008, when the economic effects of the Great Recession on both firms and their clients resulted in what Portnoy calls "an ideal time to create a different type of law firm."

And that new type of firm is a monster-sized and continent-straddling entity that employs thousands of briefcase-bearing legal eagles. "The thinking is that size is imperative if you want to be global," explains Tony Williams, a principal at London legal consulting firm Jomati. And global is the only thing to be if a firm wants to retain multinational clients in a globalized world.

In 2012, there were around 15 international mergers announced involving American and British firms — which tend to dominate the field — up from around 12 in 2011. Perhaps more telling is the huge growth in the number of firms with gross revenue of more than $1 billion on American Lawyer's Global 100 list. In fiscal year 2011, the billion-dollar club's rolls totaled 23, up 53 percent from fiscal 2006 when membership stood at 15.

In its overview of the 2012 Global 100, American Lawyer says that the "uptick" in mergers was transforming the list, making it more top heavy. "The upper echelons of the international legal market … are becoming increasingly dominated by a smaller number of larger firms. And the gap is growing."

The watershed moment of the merger mania occurred in 2005, when DLA Piper was formed by the three-way melding of Britain's DLA, Chicago's Piper Rudnick and San Diego's Gray Cary Ware & Freidenrich. "There was a lot of skepticism [about that tie-up]," says Peter Zeughauser, head of legal consultants Zeughauser Group, "but it turned out to be a successful deal that was a signal to other firms: 'We can make it work, too.'"

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And since then, adds John Flood, a law professor at London's University of Westminster, DLA Piper has been on a "rapacious" pace, further bulking up via a string of mergers and alliances. It now has 4,200 lawyers, and its gross revenue hit nearly $2.3 billon in 2011.

Initially, it was mainly British firms that sought mergers outside their borders. The U.K. may be the world's second-largest legal services market, but it's still rather small in the scheme of things. "If a firm wanted to grow, it had no choice but to look abroad," says Williams, who is also the former global managing partner of Clifford Chance, one of Britain's five largest Magic Circle firms.