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Last year broke records for law firm merger announcements and represented a "solid year of growth" for completed mergers, according to two legal industry consultancy firms tracking law firm tie-ups.

Altman Weil, which tracks law firm merger announcements, said Monday that 2019′s 115 combinations broke the record set by the U.S. legal industry in 2018, which saw 106 announcements. Fairfax Associates, meanwhile, said Thursday that firms completed 59 mergers in 2019, which is down from 2018′s 71 completed mergers but above the 10-year historical average.

Both groups said the vast majority of announced and completed mergers in 2019 involved small firms with 20 lawyers or fewer.

"It's an ongoing phenomenon that's been going on for seven years or so, which is acquisitions of mainly smaller organizations by bigger organizations," said Altman Weil principal Tom Clay.

Fairfax analyst Lisa Smith noted that part of the reason why 2019′s numbers are down from 2018 is a matter of timing: "If a couple of those moved into 2019, we would have seen maybe a different picture."

Two of the largest merger announcements from 2019 took effect Wednesday, the first day of the new year: Taft—the result of Cincinnati-based Taft Stettinius & Hollister merging with Minneapolis-based Briggs & Morgan—and Lathrop GPM, the offspring of Kansas City, Missouri-based Lathrop Gage and Minneapolis-based Gray Plant Mooty.

Apart from Taft and Lathrop GPM, 10 more law firm mergers are scheduled to close in the first quarter of 2020, according to Fairfax. This includes Dentons' combinations with Indianapolis-based Bingham Greenebaum Doll and Pittsburgh-based Cohen & Grigsby, as well as the pending marriage of Faegre Baker Daniels in Minneapolis and Drinker Biddle & Reath in Philadelphia.

In terms of completed mergers, Fairfax said the largest deals of 2019 were Foster Garvey, the 180-lawyer firm created by the merger of Foster Pepper with Garvey Schubert Barer; Alabama-based Burr & Forman's merger with McNair Law Firm in South Carolina, an 80-lawyer firm; and Arent Fox's merger with Boston-based Posternak Blankstein & Lund, a 55-lawyer firm.

Outside of the U.S., Dentons in 2019 announced it was combining with 12 other firms; the largest of those combinations was the addition of a 113-lawyer firm in Auckland, New Zealand, Altman Weil said. Half of the 10 international mergers that were completed in 2019 were done with Dentons, according to Fairfax.

"We expect 2020 is still going to be a robust year in terms of consolidation," Smith said. "In fact, we see [consolidation] being more front and center in the conversations at some firms."

Zeughauser Group consultant Kent Zimmermann said law firms are competing hard for talent. Deciding to scale up and merge can give a law firm a deeper bench and greater revenue, which can mitigate and ward off the poaching of top talent by other firms, he added.

"Some of the firms that are under-scale are exposed to poaching that can stretch them too thin to compete," Zimmermann said. "Firms see combinations as a way to increase their bench strength and make the firm resilient in the face of heavy poaching."

But Zimmermann noted that some of 2019′s mergers were "combinations of necessity"—those firms needed to merge if they were going to be strong long-term. He expects the number of those kinds of deals to increase if the economy goes into a recession.

Both an economic recession and greater conflict in the Middle East are possibilities in 2020, and Clay, Smith and Zimmermann all gave mixed assessments on how they could impact the U.S. legal industry's merger activity and interest. Some of those deals might slow down while others would continue or even accelerate, they said.

Zimmermann noted that he's currently involved in five merger deals, and he doesn't see any of them stopping due to a military conflict in the Middle East.

"There might be some pie-in-the-sky discussions that are not very far along that might slow down, but deals that are rooted in solid, strategic thinking that are happening for the right reasons, I think they'll carry on," Zimmermann said.

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