December 12, 2011

Legal Affairs

William Painter maybe the busiest man in Mississippi. The managing partner of the Jackson office of the law firm Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., he is also the Tennessee-based firms lead strategic planner. In the latter capacity, Painter has logged some serious hours recently.

“I’m hammered,” Painter said.

In 2011, Baker Donelson has effected three mergers with more imminent. The firm’s flurry of activity mirrors a trend seen nationwide this year.

Over the first nine months of this year, firm combinations are up nearly 80 percent over last year. According to the Altman Weil MergerLine, there were 14 law firm mergers and acquisitions during the third quarter nationwide, bringing the total number of transactions so far in 2011 to 43.

Altman Weil Inc. principal Ward Bower said in a statement, “It looks like the law firm merger market is back. This is the fourth strong quarter in a row we’ve seen, and we’re aware of a lot of activity in the pipeline.”

So, what is the catalyst behind this law firm “merger-mania?” A number of theories are out there including pent-up demand/improving economy and a trend toward regionalism.

“In my opinion the driving force behind law firm mergers is the goal of better serving the clients of one or both of the firms,” said Jim Rosenblatt, dean of the Mississippi College School of Law. “The motivation could be to provide geographical coverage in an area where the client has business operations. Sometimes clients will insist that a law firm develop a presence in a certain geographical area to provide service in proximity to the clients’ operations. While litigation can be handled by traveling out from a central office, clients will often want their transactional advice available in person and closer to home. As companies become more national or international in the scope of their operations, the law firms that provide legal support and advice need to ‘match up.’

“Another reason for merger would be to allow a law firm to add to its capabilities. A merger could provide a law firm with expertise in a certain practice area that allows that firm to provide a complete array of legal services to the client without having to ‘refer out’ the client for legal advice. A small boutique firm that provides a narrow range of service such as tax, public financing, governmental relations or intellectual property could be sought after for a merger by a larger firm without that expertise in order to provide that type of service to its clients.”

Painter said Baker Donelson’s recent spate of mergers was indeed driven by the need to be closer to clients with more resources available.

Last month, Baker Donelson executed a merger with the Orlando, Fla., law firm Litchford & Christopher Professional Association. The transaction represented the firm’s first location in the Sunshine State.

Less than a month before, Baker Donelson completed the merger with Houston, Texas-based Spain Chambers, yet another new market.

And, last April it added its second office in Alabama at Montgomery.

Baker Donelson has not been the only major player in Mississippi to make news on the merger front. In one of the biggest stories of the year, Watkins Ludlam Winter & Stennis of Jackson merged with the New Orleans law firm of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, LLP. That deal was finalized just last month.

Phelps Dunbar, LLP, has also been active. Based in New Orleans, the firm has offices in Jackson, Tupelo and Jackson, and last month announced its expansion into North Carolina, opening an office in Raleigh.

“Phelps has a long history of being a regional solution to clients in the Gulf South,” said Michael Hunt, managing partner of Phelps Dunbar, which now has 10 offices scattered across the South. “Our expansion into North Carolina further strengthens our ability to provide comprehensive services throughout the broader region.”

The merger pace is not expected to slack in 2012. Certainly Baker Donelson is not done.

Painter said the firm was eyeing another merger in Houston. That deal could be announced as early as next week. He also said the firm was looking at further expansion into Orlando.

“I’ll bet there are a number of small to mid-size Jackson area firms that receive calls from larger national or regional firms regarding their interest in merging,” Rosenblatt said. “It is not that bigger is necessarily better, but it is about how a law firm plans strategically to serve its clients more effectively or how it plans to attract new clients.

“However, there is still a place for the small firm. If the firm’s clients are local and the relationship is longstanding and strong, a firm may well choose to stay at its current size and retain the culture and character that has served it and the client well over time.”

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