Why most law firm mergers actually work

With the industry in the grip of a new wave of merger activity, what does the data actually tell us about Big Law combinations?

"Most merger transactions in law firms are successful," says Robert Millard, industry strategy specialist and founder of Cambridge Strategy Group, who has spent years advising on and studying major combinations across Big Law. "Around three quarters of them were successful according to those metrics."

What the data actually shows

Millard was speaking on the latest episode of The Non-Billable Podcast, discussing the findings of his PhD research into 73 large law firm mergers over the past two decades. When he started the project, he was surprised by how little rigorous analysis existed. "When I came to do my literature review, I just couldn’t find anything," he says. "There was no serious way of measuring whether mergers actually worked, so I had to build one."

Unable to rely on traditional metrics like stock market performance - "irrelevant to professional services firms" - he developed his own framework based on real (post-inflation) revenue growth, profitability and directory rankings in the two years following a merger. Measured that way, the familiar claim that "most mergers fail" doesn’t stand up.

Millard says that one of the best predictors of merger success was strategy: "The more multi-dimensional the merger strategy, the more likely it was to succeed. It wasn’t just doubling down on existing strengths. It was also about going into new areas, taking on new clients, and moving into new markets."

Bargaining position was also a key factor. In around three-quarters of the deals he studied, Millard says the target firm was under some form of pressure, often in "genteel decline" in the three years before the merger. That can make integration easier but it also raises the risk that key clients or talent have already drifted away.

Transatlantic mergers

Millard points to Hogan Lovells as "the most successful transatlantic combination to date," while adding that newer tie-ups, like A&O’s with Shearman, still need time to prove themselves.

For transatlantic deals, New York, he adds, remains the prize. "I see little point in merging with a firm outside New York unless it’s a step towards getting into New York," he says, describing it as "a very difficult nut to crack."

When it comes to law firm strategy more broadly, Millard is sceptical of traditional five-year strategies and the industry’s fixation on league tables. "Stop thinking the past is going to return," he says. "That nostalgia for a world without AI, with more compliant clients, is gone."

Listen to the full conversation with Robert Millard on The Non-Billable Podcast.