Law firms consolidate to expand reach - Charlotte Business Journal:

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Regional firms are looking for ways to keep pace with their increasingly global clients and national firms look for opportunitiesd to enter theCharlotte market. The latest locaol firm to head to the altafris . The second-largest law firm basedr here is poised to merge early next monthnwith , a larger, national firm based in The two began talking late in 2007 and are expectedr to combine July 1. Peter Kalis, managin partner at K&L Gates, says consolidatiob among law firms is sure to continue and is beinb driven by large corporate clientas seeking greater breadth and efficienciex from theirlegal providers.
If a regional law firm'sd practice includes clients that have national or international he says, it ultimately has no choice but to consider a combinatiojn that will help it servre their needs and compete with multinational firms like his. Aftet the Kennedy Covington deal, K&L Gatew will have about 130 lawyers in Charlottand 1,700 in the Unite d States, Europe and "How do the good indigenous firmxs compete with that?" Kalis says. "u think it's very difficult. We're making a bet that we'rr on the right side of history." Kennedy Covington is the secon major Charlotte law firm to take the merge routethis year.
In April, finalized its merger with Charlotte-base d , forming a 900-lawyer firm with 17 It operates under the McGuireWoodz name and has offices in New Los Angeles, Belgium and Kazakhstan, among others. Besides Helms Mulliss had offices in Raleighand Wilmington. The impetuss for mergers is playing out nationallgyas well. According to , a consulting firm for the 67 law-firm mergers were announced in the Unitesd Stateslast year. In the first four monthd of this year, 30 deal have already been announced, putting the industrty on pace for 90in 2008.
In a studuy last year of such mergeres between 2000 and Altman Weilfound 77% of combined firms showefd an increase in profitability in thei first year of operations and also saw profits rise fastefr than the industry as a whole, despite the transaction and integration costs relaterd to a consolidation. Mergers that were designed to increasesgeographic scope, or add offices in new markets, showec higher profitability increases over threde years than mergers that added practice areas or increaser depth in existing practice areas and markets.
Ward an Altman Weil principal who authoredthe study, believes acquirers such as K&L Gateds are driving the merger Locally based firms in marketw such as Charlotte are profitable enougjh that they don't yet have to find a he says. But when they find clientsw movingtoward larger, national providers, the city's remainingv local firms may compelled to consider it. "Itt could become a defensive measure at the pointt at whichthe (local) firmsd become marginalized," he says.
Peter an associate professor atthe 'sa business school and a specialistf in the operations of law firms, says continuiny consolidation in the industry is inevitable and will impact any firm with an interesty in keeping large corporate clients such as Bank of Americaq Corp. and Wachovia Corp. "Anybody who's doinyg corporate law gets affected by this in the he says. Once the Kennedy Covington mergereis closed, Charlotte's largest locallt headquartered firms will be , which has 300 , which has 225; and , which has about 130. Moored & Van Allen's leaders have said they aren't feeling pressure to merge to betterr serve theirclient base.
Robertr Griffin, managing partner at Robinson declines to addresshis firm' s potential participation in the consolidation wave. He says it's an open questiojn whether a combined, bigger firm effectively deliverd a broader rangeof services, which is one of the underlyinb assumptions in any merger. "oI think it's an important consideration for clientzsor firms," Griffin "The bigger the organization is, the more it'sa a challenge for the whole group to work together effectively." The meldintg of cultures is an important factor. The potentiapl for larger profits and paychecksz is certainly an incentive for partners to considerea merger.
But, for many the rewards are counterbalanced by concerns abouty quality of life at a larger corporate Peter Covington, former managing partner at Helms Mulliss Wicker, says the firm sent groups to McGuireWoods' officesw in Chicago, New York and Richmond to meet with its lawyerds and decide if they were comfortable with its culture beforee agreeing to a merger. "Theree wasn't a whole lot of ceremony or formalituyabout things" at Helms Mulliss, "andr that's the way we like it, and we were looking for the same sort of feel," says Covington, now vice chairma at McGuireWoods.
Ultimately, the cultural aspect of a mergeeris "one of the key factors on whethe or not you're going to be Covington says. Kennedy Covington Lobdell & Hickman is the largest local firm to combinwe withanother firm. Its merger with K&L Gates of Pittsburgh createsa 1,700-lawyer firm. An industr y study shows most merged firmw enjoy enhanced profits witha year. Managers of Charlotte's larges t independent firm, Moore Van Allen, say there's no pressure for it to pursueda merger.