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No matter how you slice it, the COVID-19 pandemic has ruined the legal industry's voracious appetite for mergers and combinations.

Only seven law firm mergers and combinations were announced in the second quarter of 2020, according to a new report from Altman Weil. The last time the number has been that low in any given quarter was in 2010, when law firms were still feeling the effects of the Great Recession. In Q3 2010, Altman Weil tracked only five mergers.

Altman Weil's findings are in line with Tuesday's report from Fairfax Associates, which found that the pandemic will dramatically impact the number of mergers that are completed in the second half of the year. There's a correlation between their findings—the announcements Altman Weil tracks are reflected later in the completed deals Fairfax Associates tallies up.

It's only been within the last couple of weeks that Thomas Clay, a principal of Altman Weil, has been getting calls from law firms who are asking about potentially restarting their merger discussions and negotiations.

"It isn't as if they've removed it from their strategy. They've put it on hold," Clay said.

Similar to the Fairfax report, the deals Altman Weil tracked in Q2 2020 either involved large firms acquiring smaller ones—Littler Mendelson brought on a 20-lawyer firm in Warsaw, Poland, and Cozen O'Connor absorbed a 9-lawyer firm in Philadelphia—or small firms merging with other small ones.

It is significantly less risky and cheaper for a large firm to acquire a small firm than it is for two large firms to merge, Clay said. That's because the only thing that's up for negotiation in those acquisitions is compensation—a 10-lawyer firm isn't going to significantly change the strategy of the 700-lawyer firm absorbing it, he added.

"To the big firm, there's no real disruption to its business model. You plug in another group of lawyers and you keep going," Clay said.

Large firm mergers are risky and expensive, but a deal could happen if law firms become acclimated to the pandemic, Clay said. However, he noted that if such a deal were reached, it's unclear how the two firms will integrate if Big Law is still social distancing due to the novel coronavirus. For one, Clay said it's hard to get a sense of a firm's culture through videoconferencing calls.

In 2019, Altman Weil counted 20 merger announcements in the second quarter, with another 38 and 30 deals being announced in the third and fourth quarters, respectively. Clay said he doesn't believe the industry will approach those numbers at all.

One deal that's likely to show up in Altman Weil and Fairfax Associates' data for the third quarter is Much Shelist's combination with Zfaty Burns, a small business litigation firm based in Newport Beach, California. This deal has been in the works for years, according to Glenn Taxman, who heads Much's Orange County office.

"We knew COVID-19 would make the timing more challenging because both firms were relocating to new office space and tasks like orientations and trainings had to be handled remotely, but both firms believed the smart business decision was to stay on track," Taxman said in a statement.

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