Talent-driven mergers are becoming a worthy option for law firms across all markets.
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The legal industry has been abuzz with news of major law firm mergers, such as the Q1 2025 unions of Troutman Pepper with Locke Lorde; Womble Bond Dickinson with Lewis Roca Rothgerber Christie; Ballard Spahr with Lane Powell; and Taft Stettinius & Hollister with Sherman & Howard. While mergers between global giants may grab headlines, midmarket and smaller firms are also getting in on the action.
According to Fairfax Associates, nearly all domestic law firm mergers in 2024 involved at least one firm with 100 lawyers or fewer. And 69% of mergers involved at least one firm that employed just five to 20 lawyers. As they compete for a dwindling supply of productive talent and the advent of AI amplifies the need for highly skilled lawyers, law firms of all sizes should consider joining forces with other like-minded firms to meet their talent needs.
Talent Challenges and Inadequate Responses
With law firms facing unprecedented challenges, the need for innovative talent strategies has never been greater. The talent pool is shrinking as baby boomers retire and law school enrollment drops. Meanwhile, firms are struggling to retain both junior and more seasoned lawyers in the face of record attrition levels. As such, law firms will face an uphill battle simply to maintain their existing attorney headcount.
Further, as AI tools burst on the scene, firms will increasingly need to attract and rapidly develop partner-level talent with the legal skill, professional judgment and versatility to navigate a shifting business landscape. AI tools will offer firms new opportunities to provide higher-value services to clients — but only if they have a top-notch bench of highly skilled lawyers.
Traditionally, law firms have relied on two strategies for securing productive talent: organic growth and lateral hiring.
- Organic growth is a strategy based on recruiting and investing in newly minted J.D.s. The expectation is that these lawyers will remain committed to the firm, but sole reliance on this strategy is risky. Rookie lawyers are a largely unproven commodity and attrition rates are continuing to climb across the board, especially for women. While organic growth is still an important piece of the smart growth puzzle, it is incapable of providing the dynamic growth many law firms are seeking.
- Lateral hiring — also known by the less-flattering moniker “poaching” — is a speculative strategy used to recruit talent with proven books of business. It should come as no surprise that it often yields disappointing results: most lateral hiring decisions are based on limited disclosures and minimal due diligence by both sides. And lateral candidates tend to make unrealistic claims about their portable books of business, while acquiring law firms often fail to provide the client introductions, marketing budgets, support staff and ownership opportunities they advertise to lateral candidates.
In the end, nearly half of lateral partners depart within five years. A Thomson Reuters article estimated that the costs from these failed hires can easily reach seven figures.
Talent-Driven Law Firm Mergers Present a Promising Alternative
When law firm lateral hiring and organic growth strategies fail to meet firms’ talent needs, firm leaders should explore talent-driven mergers to secure the team of highly productive lawyers necessary to fulfill both the firms’ and their clients’ expectations.
The most frequently touted benefit of law firm mergers is the possibility of gaining market share (increasing gross revenue) through a broader geographic footprint, increased specialization and enhanced reputation. These may indeed be good reasons for firms to consider a merger, provided there is strong alignment between the combining firms.
But mergers can offer still more promising benefits to midmarket and smaller firms looking to assemble a dynamic mix of highly skilled talent with the strong leadership and ownership potential — attributes that will be crucial in the face of disruptive change.
Through a merger, the combined firm can assemble the human capital required to achieve financial and professional success while blending the best elements of both organizations. And unlike a scattershot poaching approach, a merger can preserve teams that have already developed strong internal ties, bringing durable cultural capital to the combined firm.
Talent-driven mergers can yield a high return on investment by providing the participating firms opportunities they would lack on their own:
Offering broader and higher-value services: By merging, firms can harness a diversified and highly skilled talent pool, thereby strengthening their expertise, expanding their client service offerings and enhancing their reputation in the marketplace for talent.
Meeting clients’ needs more cost-effectively: When considering a merger, a thorough review of individual performance and practice group profitability is essential. This process helps in making strategic talent decisions, identifying cost-saving opportunities through economies of scale, and ensuring smooth client transitions.
Optimizing leadership continuity and ownership transition plans: Merger negotiations present valuable opportunities for the combined firm to address sensitive topics, including governance structure, leadership style, partner compensation, attorney underperformance and succession planning. Through this process, leaders can align financial, professional and generational interests to safeguard the combined firm’s future success.
Revitalizing the firm’s entrepreneurial spirit: The merged firm can gain fresh momentum by assembling a dynamic team of aligned talent that can unlock new and exciting business opportunities. In addition to improving the combined firm’s profitability, a merger can help cultivate a magnetic workplace culture that attracts and retains top talent and nimbly adapts to shifting economic, professional and technological trends.
Certainly, these benefits cannot be realized without significant investments by the firms, and there are obvious potential pitfalls. However, midsize and smaller firm mergers can create substantial benefits for the combined firm without all the complexities attendant to mergers of larger firms.
Key Aspects of Successful Law Firm Mergers: Due Diligence
While mergers hold significant potential for law firms of all sizes, they are also inherently risky, and should only be consummated upon finding a highly promising match. The due diligence process should involve several phases, during which parties should remain patient and fully willing to walk away.
Phase One – Finances and Culture
The initial step in considering a merger is the search for a strong potential match. This should be a deliberate process with an emphasis on financial compatibility and cultural fit. Financial compatibility considerations include historic and projected billing rates and gross revenue, key financial performance indicators and partner compensation models. The multifaceted aspects of cultural compatibility encompass firm values, leadership styles and vision, and other key workplace considerations such as hybrid vs. in-person work models.
Phase Two — Operations, Clients and Talent
If the initial compatibility assessment is favorable, the next due diligence phase involves a deep dive — subject to a mutual nondisclosure agreement — into both firms’ business operations, client base and talent capabilities. A data-driven process will force both firms to assess all potential risks related to or arising from professional and business conflicts of interest, long-term liabilities (e.g., personal guarantees for office leases and bank lines of credit) and contingent liabilities (e.g., third-party professional errors and omissions claims or employer liability claims).
Phase Three — Consensus-Building
When all systems are go, it’s time to build a consensus in support of the merger. To do so, leaders should ensure every voice is heard and concerns are taken seriously, from the mail room to senior leadership. Firm leaders should clearly explain to employees how the merger supports the firm’s goals and how peoples’ roles and compensation may be affected. The new firm’s governance structure and leadership team should incorporate members from both firms. This clearly demonstrates to all employees that their personal and professional interests are well represented. At the same time, existing firm policies and practices that are inconsistent with the combined firm’s new vision should be jettisoned in favor of refreshed approaches that position the new firm for sustained financial and professional success.
Phase Four — Continuing Investment in a Smooth Integration
The work is not over once the merger agreements have been inked; in some ways, it’s just getting started. The smooth integration of the combined firm’s human capital and business operations will be the key to the firm’s long-term success. To ensure the merger is achieving its stated goals, firm leaders should closely track metrics for success, including billing and collection realization rates, talent utilization, new client attraction, client and talent retention, and operational cost savings through economies of scale. A commitment to further thoughtful investments in post-closing integration will be needed indefinitely to ensure the development and retention of newly acquired talent and clients. Also, a generous budget should be allocated to culture-building opportunities such as purposeful professional and social gatherings of talent and clients.
The Far-Reaching Rewards of Talent-Driven Mergers
Joining forces with other like-minded firms can build a strong bench of highly skilled, productive lawyers capable of providing the high-value legal services needed to serve clients as talent challenges and AI tools transform the business of law. Future-focused law firms — whether national firms or home-grown Main Street practices — should consider embracing talent-driven mergers as part of their smart growth initiatives.
More Smart Growth Ideas from Gene Commander
- Leveraging Agile Career Strategies to Retain Women Lawyers
- Law Firm Talent Development: Rebooting Career Advancement Strategies
- AI in Law Firms: The AI Revolution in the Business of Law
- Smart Growth Strategies for Law Firms: Essential Investments in an Evolving Industry
- Strategic Slowness: A New Mantra for Law Firm Leaders
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