Mergers & Acquisitions and Ice Miller and Law Firms and Deals and Law

Merger trend hits Indiana as law firms seek fast growth

December 8, 2008
Indianapolis is finally jumping in a big way into the merger mania that's sweeping the legal profession.

IBJ reported Dec. 2 that Ice Miller, the city's largest law firm, is poised to merge with Greenebaum Doll & McDonald PLLC, a smaller firm based in Louisville.

Two days later, Locke Reynolds LLP, the city's eighth-largest firm, announced it will be absorbed into Frost Brown Todd LLC in Cincinnati, on Jan. 5.

If both deals close as expected, Indianapolis' legal landscape will have been transformed in a matter of months. In May, Sommer Barnard PC, the city's seventh-largest firm, merged into Cincinnati-based Taft Stettinius & Hollister LLP.

Nationally, the number of mergers and acquisitions across the country has been rising for years, as partners look to add more talent and offices to stay competitive.

Such deals spare law firms the exorbitant expense and time it would take to grow rapidly on their own.

"There's a perception in the marketplace that size is one of the primary factors of dominance," said Robert Hicks, managing partner of Taft's local office. "If people assume that you're big and broad, you're dominant."

Until this year, local firms had been relatively silent — the only notable merger involved two city rivals that combined to form locally based Bingham McHale LLP way back in 2001.

Legal experts see big advantages from the deal-making. Law firms benefit from the depth multiple law offices provide, enabling them to better serve clients with more than one location. As more firms establish a regional or national presence, rivals follow suit in order to maintain or grow their business.

In 2000, Atlanta-based Ogletree Deakins Nash Smoak & Stewart PC became the first outside firm to open an Indianapolis office. It since has grown from nine to 30 lawyers. But more important, the firm's local attorneys have the backing of about 400 colleagues in 32 additional cities.

"You need to provide legal services in more than one jurisdiction to be competitive," said Charles Baldwin, managing partner of Ogletree Deakins' local office.

For Locke Reynolds, its 79 attorneys will join forces with Frost Brown's roster of 370 spread among nine locations. Frost Brown is one of the 150 largest law firms in the country. It has Kentucky offices in Louisville, Florence and Lexington. Besides Cincinnati, Ohio locations are in Columbus and Middletown. The firm has an office in Charlestown, W.Va., and Nashville, Tenn., as well. Frost Brown's lone Indiana presence is in New Albany.

Locke's leaders last year crafted a three-pronged approach to serve clients better. They considered merging with a smaller local firm, a firm about the same size, or a larger, regional firm. In the end, the advantages of aligning with a larger practice won out.

"It will allow us to have even greater resources to provide our clients," said Jim Dimos, a Locke Reynolds partner. "I believe that we will be as competitive in this marketplace as any law firm in the country."

Similar forces are driving Ice Miller's merger with Greenebaum Doll. Sources told IBJ the firms are working toward merging Jan. 1, though neither would comment.

It is unclear which firm would absorb the other, or whether the Ice Miller name would remain. Ice Miller has 263 attorneys, compared with Greenebaum Doll's 180.

Though Ice Miller has the most attorneys in Indianapolis, overall it's smaller than both Barnes & Thornburg and Baker & Daniels LLP, each of which boasts more offices outside the city. Barnes & Thornburg has 429 attorneys, while Baker & Daniels has 322.

Ice Miller has 238 of its lawyers downtown. The rest are in Washington, D.C., Chicago and the Chicago suburb of Lisle. In addition to Louisville, Greenebaum Doll has Kentucky offices in Covington, Frankfort and Lexington, and others in Cincinnati and Nashville, Tenn.

Bob Birge, a local law firm consultant, acknowledged the consolidation trend, but thinks the slumping economy may slow activity next year.

"Right now, everybody's skittish," he said. "Firms are laying off; they don't want to take on overhead and new bodies that come with a merger."

The latest merger statistics bear him out. Only 14 law firm mergers were reported in the third quarter, down from 26 the prior quarter. But overall activity remains strong. Fifty-eight deals were struck through the first nine months of this year, compared with 60 for all of 2007, according to Altman Weil Inc. in suburban Philadelphia.

Chicago; Charlotte, N.C.; and Washington, D.C. continue to be hot expansion markets. Conversely, no significant deals have occurred on the West Coast since the end of 2006.

Negotiating law firm mergers can be complex in any economic environment, because they're much different from traditional corporate acquisitions. The name of the new firm can be a major sticking point and can kill a deal, for instance.

People, not a product, bring value to a law firm, said Nicholas Georgakopoulos, a professor at the Indiana University School of Law in Indianapolis who specializes in mergers and acquisitions.

"As a law firm, your partners can walk out on you," he said. "So it's much more sensitive and volatile than business mergers."

Experts caution that the cultures of merging firms should mesh, as well. If not, Hicks at Taft warned, "it could be a disaster."

He should know. His former Sommer Barnard firm dumped attorney Nels Ackerson and his name from the firm's moniker in 2004 after a two-year relationship.
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