So far, 2015 has been the year of law firm mergers. According to Altman Weil MergerLine, the first six months of 2015 saw the most half-year mergers ever, with 48. One of these mergers was the biggest ever, as global law firm Dentons merged with China’s largest law firm Dacheng to form the largest law firm in the world by attorney head count, with more than 6,500 lawyers in 50 countries.

Even so, law is one of the few industries in which the market is not monopolized by a few top firms. Last year, the 200 highest-grossing law firms in the world earned $115.2 billion, according to data collected by ALM Legal Intelligence, but the global law market is roughly a $600 billion industry. By comparison, the Big Four audit firms Deloitte, PwC, EY, and KPMG audit 99 percent of the companies in the FTSE 100, and 96 percent of the companies in the FTSE 250 Index. As of December 2014, the top four wireless telecommunications carriers in the U.S. controlled approximately 70 percent of the market based on service revenues. The top 25 health insurance companies account for nearly two-thirds of market share.

Restrictive conflict of interest laws, coupled with the notion that law is a national, not international practice, have prevented the legal market from consolidating to the extreme degree of other industries. Furthermore, law firms do not benefit from economies of scale the way firms in other industries do. In fact, bigger firms spend more, not less, on overhead on a per lawyer basis, according to Altman Weil. Law firm strategist Alan Hodgart said that consolidation is happening around types of legal work, rather than across the industry as a whole. For example, only a select few firms can handle the largest M&A deals, but that group cannot get much smaller because eight firms are needed for every major transaction, he said.

When it comes to law firm mergers, bigger is not always better. Altman Weil outlines two questions every law firm should ask itself before considering a merger: first, will the economics of the combined firm be substantially better than the economics of each firm currently? Second, will the firm’s financial indicators improve?

Of the 200 top law firms Altman Weil surveyed in 2005, almost two thirds had merged within the previous two years, and 90 percent of firms indicated that their experience with the merger was “very successful,” or “successful.” So then, law firm mergers are a proven business technique to improve revenues. The challenge is in finding the right fit.

Dentons and Dacheng are still working out the kinks of their merger. Six months after the announcement, Dentons and Dacheng have yet to roll out a joint-name or a combined website. Some of the problems are straightforward: things like translating and standardizing over 4,000 Chinese lawyers’ biographies. Other problems are deeper, stemming from the incorporation of two vastly different legal cultures, which could prove harder than combining teams of engineers, scientists, or doctors. Then there are the radically different rules governing protection of client information and regulations in various industries. It will be interesting to see how the merger turns out, and whether it will positively or negatively affect the recent trend of law firm mergers.

Hyunjae Ham

Hyunjae Ham is a member of the University of Maryland Class of 2015 and a Law Street Media Fellow for the Summer of 2015. Contact Hyunjae at staff@LawStreetMedia.com.

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Both business and law school students across the country will almost undoubtedly learn about mergers and acquisitions inside the classroom. However, some students at the University of Maine are about to get some real world experience with these concepts. Plans to merge the university’s law and business degree programs were leaked last week in a report created by a group of concerned professors.

The details are still tentative. It’s unclear whether the university will simply consolidate the schools under one roof, or go so far as to have teachers and students from both schools combine to form an independent school with one dean. Despite these muddled, yet crucial specifics, Maine’s motivation to bring together these two schools is quite clear. With law school applicants dwindling amid high student debt and the depressingly crowded job market, schools are doing whatever they can to keep their law programs alive; even if that means being unconventional in an industry that prides itself on its traditional nature.

Admittedly, there are areas of overlap between law and business that could definitely be acceptable and beneficial to both. With the globalization trend that has continued to grow in the twenty-first century, it is no surprise that employers strongly desire the most well-rounded student. After all, the more skills and knowledge a student possesses, the more inherently valuable they are. Chief Executive Officer at the Bernstein Shur law firm in Portland, Pat Scully, showed his support for this initiative saying, “It will be easier for students to draw on the best of both offerings.” Working with business-minded faculty would allow future lawyers to gain insight and better relate to clients in ways that law professors simply aren’t accustomed to teaching.

But that is not the part with which the teachers find problems. They are concerned that during this planning process the teachers and students that will actually have to put the plans in motion are being ignored. This worry stems from the fact that the planning is being conducted by a third party, the Parthenon Group. Moving forward, it will definitely prove crucial how involved the educators are in this merger because they are the ones that will either accept it with open arms, or coldly reject and challenge this new system. In essence, however they are treated and react could either create a successful precedent and help remedy the current law school crisis, or just add to the list of ill-fated solutions already offered.

For example, the Charleston School of Law found itself in a similar crisis when it was discovered that their founders took out profits totaling $25 million in 2013. Recently, a presumed angel in the form of a company called the InfiLaw System, stepped in and offered to purchase the school. This would add to the other three for-profit law schools they have acquired. While many argue that InfiLaw is the only option to keep Charleston’s doors open, it seems in many ways the lesser of two evils. InfiLaw, like Charleston, is a for-profit company that builds other for-profit law schools; a characteristic that makes many students and community members wary of supporting the sale. They are are understandably skeptical of the school being handed off to another money-hungry group that will just put them back into the same situation. Other concerns stem from allegations that claim InfiLaw is a “diploma mill” with admission standards lower than normal because they are a profit driven organization.

These two solutions for keeping law school programs alive during this ongoing crisis provide insight on what seems to be a step in the right direction. The University of Maine has found a feasible resolution that actually predicts a positive outcome for students and may even help to set them ahead of the undeniable competition, especially from Ivy Leagues. On the other hand, schools like Charleston seem to be haphazardly throwing their programs into the hands of whomever will leave the school’s remaining founders with the optimal profit. Unfortunately, it seems in both cases the teachers and students are not being awarded the consideration they deserve as the heart of the system itself. This oversight that could prove fatal in both situations.

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Erika Bethmann (@EBethmann) is a New Jersey native and a Washingtonian in the making. She is passionate about travel and international policy, and is expanding her knowledge of the world at George Washington University’s Elliot School of International Affairs. Contact Erika at staff@LawStreetMedia.com.

Featured image courtesy of [Jesse Michael Nix via Flickr]

Erika Bethmann

Erika Bethmann is a New Jersey native and a Washingtonian in the making. She is passionate about travel and international policy, and is expanding her knowledge of the world at George Washington University’s Elliot School of International Affairs. Contact Erika at staff@LawStreetMedia.com.

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