Law firms are still interested in merging and combining with other firms, but the activity that makes those mergers happen—the exploratory talks, the face-to-face meetings, the negotiations—appears to have ground to a halt due to the ongoing COVID-19 pandemic.

Altman Weil principal Tom Clay estimated that, in a given two-week period, he'll field 20 different calls from law firm partners who are interested in doing a merger. In the past two weeks, he's only had two phone calls. Lisa Smith, a principal at Fairfax Associates, has seen her own drop-off in law firm merger activity in the wake of the coronavirus.

"Managing partners have had to drop everything and look at how they're going to deal with this," Clay said. "It's a full stop."

Despite this slowdown in activity, legal consultants said law firm leaders are still interested in merging or acquiring other firms. Some of them are waiting to know the full extent of the economic fallout of the pandemic—which is unknown at this point.

Law firms that are committed to doing a deal are still interested in executing it, said Zeughauser Group consultant Kent Zimmermann. It's the firms that were on the fence or not that far into merger talks that are pumping the brakes, he added.

"For firms that aren't that far along, I think some are taking a wait-and-see approach, and others are assessing what this downturn is likely to do to their firm's performance," Zimmermann said, who noted he was still advising law firms on mergers this week.

Big Law has transitioned to having its thousands of lawyers and professional staff work remotely in an effort to stop the virus from spreading and infecting others, and that has put a dampener on activities that require face-to-face contact. That includes mergers.

"From what we've seen, most of the discussions that were happening have had to be put on hold. A lot of it does rely on face-to-face meetings," Smith said. "For good reason, firms are very much focused on business continuity and operating their firms successfully. The ability to have the bandwidth to look at merger discussions as well as manage a business effectively just isn't there."

Clay was a little more colorful: "It's hard to drain the swamp when you're up to your ass in alligators. That's what this is."

But Zimmermann noted that some of the merger work can be done remotely.

Already one merger appears to have been affected—Troutman Sanders and Pepper Hamilton announced Tuesday that, as a result of the international outbreak of the coronavirus, they were postponing their merger by three months, from April 1 to July 1.

Clay noted that the first six months of a merged firm's tenure determines whether the merger will work or not. Troutman Sanders and Pepper Hamilton can't merge and then not have their combined teams meet in person until weeks or months later, he added.

"They don't want to miss the boat and not do all the things you want to do, which is get people together," Clay said.

The pandemic has slowed the U.S. economy down, with multiple states ordering the closure of every restaurant and bar, and the U.S. government considering an economic stimulus package worth over $1 trillion. Slate and Politico this week reported that multiple states have seen sharp rises in unemployment applications.

The legal industry's fortunes typically mirror the larger economy, but the effects come later. Fairfax Associates, which tracks when law mergers are completed, didn't see a drop in mergers in 2008 and 2009, when the Great Recession was in full swing.

That's because those merger discussions occurred in the months and years beforehand. The dip in law firm mergers didn't become apparent to Fairfax until 2010, Smith said. Under the same logic, any potential effects the COVID-19 pandemic has on law firm mergers won't show up until 2021, she added.

So far, 17 law firm mergers have been announced in 2020, according to Altman Weil's MergerLine. But that activity has slowed since the end of February—the only law firm combination announced in March was the tie-up of two small New York firms.

It's still too early to assess the full economic damage being wrought by the pandemic, although certain practice groups—like bankruptcy, restructuring and litigation—might see a boost, these consultants said. Remote-work capabilities are allowing firms to have their employees work from home, so they're still billing hours, Smith noted.

"Unlike businesses that are heavily people-based, a lot of law firm work can continue," she said.

Zimmermann noted that the pending economic recession could give firms the cover they need to jettison certain underperforming partners, practice groups and offices.

"Firms have an opportunity to take stock and use the cover they've been given to make their firms more resilient, and take stock choices on what to prioritize going forward—and what options should be on the table to get there," Zimmermann said.

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