Merging to defend

Cost cutting has led to a sharp rise in mergers of law firms in the last year, according to new research.

Last year, 220 law firm mergers took place, compared with 168 in the previous year—a jump of 31%. However, a survey of 50 law firms by independent finance provider Syscap suggests defensive rather than expansive reasons are driving the trend. The survey was carried out among firms ranging from sole practitioners to large City practices.

More than half said reducing support-staff costs was a major motivation to merge, while more than two-thirds said cutting costs by sharing IT and marketing spend would be a major factor. More than a third said reducing the debt burden of one of the law firms involved would be a major reason.

However, nearly two-thirds of law firms said offering a wider range of services to clients was another reason to merge.

Philip White, CEO of Syscap, says: “This far through the recession we were a little surprised that so many respondents still feel that there are easy efficiencies to be found through trimming staff.

“Smaller law firms are also pursuing mergers so that they can diversify their revenues away from a particular business sector—at the moment that seems to be more of a priority than moving into a faster-growing sector or country.”