What Law Firm Mergers Might Look Like in the 'New Normal'

Armstrong Watson was delighted to host a webinar on the above topic recently including our Guests Andrew Roberts (Chairman, Association of Law Firm Merger Advisers) and Mark Briegal (M&A lawyer, Bennet Briegal).

You can watch the full recording here. 

Key themes from the webinar

1. Are mergers happening right now?

The panel ultimately took the view that they were. However, there was clearly an initial slow down/pause as many firms had to deal with the immediate impact of lockdowns, home working etc. As everyone (law firms included) calibrated to a new normal, the M&A activity went back to (approximately) two thirds of previous levels with the remainder paused rather than scrapped.

2. Does that mean they are all distressed sales?

There was broad agreement amongst our panellists that there is likely to be an increase in distressed sales, but that it had not happened yet. It was also noted that various deferred consideration modals have been used for some time, but they will likely become increasingly common.

3. So is it a buyers market post Covid?

Our speakers noted that buyers will probably be a bit more cautious and more likely to use deferred considerations but that does not necessarily translate to a buyers market.There are still very good firms that will look to consolidate, and there will still be private equity and listed firms driving from the top end.

4. But surely not a sellers market?

As Andrew Roberts noted, it is important to decide if you are “prey or predator” but that it is ok to be either and there will be perfectly valid strategic reasons to seek another larger firm to acquire yours. That said, if you do want to build scale and have complimentary services now is the time to get in before there is a “rush” of sellers making it more difficult for buyers to see that distinction.

5. So does all this mean there will be more consolidation in the market?

Mark Briegal summed up this area of the discussion neatly – it “depends”. The panel acknowledged that consolidation in the legal market is due, and that perhaps Covid will be the catalyst for that. However the recession of 2008 caused nearly as many boutique firms to open as it did larger firms to fail – so there is a possibility we will see the same again.

In talking about what firms should do now there was consideration of how to make your firm either attractive to potential acquirers/merger partners or prepare yourself for potential approaches. It’s clear that whichever side of that coin you find yourself on, firms can be taking steps now to prepare for some movement in the M&A market over the next 6-18 months.

Armstrong Watson provides a range of strategic business support to law firms including a bespoke service solely focussed on law firm M&A. Click here to find out more

Read our views of the impact of Covid-19 on law firms here