On the heels of Troutman Sanders and Pepper Hamilton's merger vote last week, several Atlanta law firm leaders and legal recruiters said the deal shows a coherent strategy in combining geographic footprints that may expand the combined firm's market share.

"This is one of a handful of mergers I've seen in the last couple of years that makes sense to me," a partner in leadership at a large Atlanta firm observed. "What's intriguing is this doubles their geographic footprint—and with very little office overlap."

The combined firm will have 23 offices. Of Troutman's 14 offices, concentrated in the Southeast, and Pepper's 12 offices, concentrated in the Northeast, only three overlap: in New York, Washington, D.C., and Orange County, California.

Both firms' partnerships voted last week to approve the merger, which will take effect April 1, creating Troutman Pepper Hamilton Sanders.

The merger will form a roughly 1,100 lawyer firm, with about 650 lawyers from Troutman and 450 from Pepper. The two firms are projecting combined post-merger revenue of more than $900 million, based on their 2019 performance, Pepper's chair, Tom Gallagher, told The American Lawyer last week. That would vault Troutman Pepper into the Am Law 50 of the nation's top-grossing firms.

Several Atlanta law firm leaders and recruiters said one of the merger's noteworthy aspects is that it combines firms with complementary geographic footprints and practices, which could create benefits beyond just increasing the merged firm's size.

"I think Troutman sees an opportunity to capture some market share via geographic expansion, and Pepper sees an opportunity to be on a bigger platform that affords more opportunities," said Michael Hollingsworth, Atlanta managing partner of Nelson Mullins Riley & Scarborough, which embarked on its own expansion push with a big Florida merger in 2018 and new offices in the Northeast and California.

The Troutman-Pepper merger will allow the combined firm to expand into markets where it is not historically strong, Hollingsworth said. "That is worth a lot in the deal."

"The most important thing is that the geographic areas where Troutman is strong are different from the geographic areas where Pepper is strong," Hollingsworth added. "If you are trying to be a national firm, that makes sense."

Whitney Worthington, who heads the Atlanta legal team for recruiting firm Lucas Group, said the feedback that she's heard from Troutman and Pepper attorneys "was across the board very positive," adding that the lawyers expected the deal to create more opportunities for themselves and their clients.

She and her colleagues at Lucas Group, which is based in Atlanta with offices nationally, have been monitoring the potential Troutman-Pepper tie-up since news broke in November that the firms were in talks.

Troutman Pepper will have a footprint in eight of the 10 largest U.S. legal markets: Atlanta, Philadelphia, New York, Washington, D.C., Southern California and Silicon Valley—plus Chicago from Troutman and Boston from Pepper.

Atlanta legal recruiter Raj Nichani, president of RMN Agency, agreed that Troutman "gains offices and practice areas where it has holes."

Troutman is known for its energy, financial services, insurance and real estate practices, among others, while Pepper has strong health sciences and private equity practices.

"They line up pretty well together," Nichani added. "It strengthens Troutman's critical mass and will likely push the combined firm into the Am Law 50. That makes them more competitive in the national marketplace."

Atlanta Market

With the merger, Troutman, now the third-largest Atlanta-based firm in revenue, will leapfrog over Alston & Bird to become Atlanta's second-largest firm behind King & Spalding. Alston reported $812.3 million in revenue and 820 lawyers firmwide in 2018.

With 1,100 lawyers, Troutman Pepper's head count would rival that of King & Spalding, which had 1,080 lawyers at the end of 2018. But even with $900 million in revenue, Troutman Pepper would trail King & Spalding's 2018 revenue of $1.26 billion.

When the merger takes effect, Troutman's Atlanta headquarters, with 217 lawyers, will be the largest office for Troutman Pepper, followed by Pepper's Philadelphia headquarters with 207 lawyers, according to Dec. 31 figures from the firms.

Troutman's managing partner, Stephen Lewis, will become the chairman and CEO of the combined firm, while Pepper's chairman, Gallagher, will become vice chairman. Pepper's managing partner, Tom Cole, will become Troutman Pepper's firmwide managing partner.

Troutman Pepper's next-largest offices will be New York (with a combined 150 lawyers), Troutman's Richmond, Virginia, office (125 lawyers) and then a combined Washington, D.C., office (112 lawyers).

Pepper lawyers may have Atlanta contacts that the merger will allow them to convert into work and vice versa for Troutman, recruiters and law firm partners said. Still, it remains to be seen if the addition of the 450 Pepper lawyers and their clients will increase work for Troutman's Atlanta lawyers.

"The only difference for the Atlanta lawyers is they gain access to more offices, partners and practice areas that they didn't have before," Nichani said.

Pepper and Troutman spokespersons declined further immediate comment on the merger.

Integration

The two firms' ability to integrate their teams, along with compatible finances and culture, will be important for the merger's success, the Atlanta observers said.

"You don't know what's going to happen until you start integrating the two firms together," said one Atlanta law firm leader, adding the merger's ultimate success will depend on how well the two firms can mesh their lawyers and practices.

"We're still in a people business," he added. "You've got to trust your partners and they have to trust you. That takes time and repeated interactions."

The merger could be good for both firms, the Atlanta partner said, if it "allows the Troutman Pepper lawyers to go where their clients are and creates efficiencies of scale."

As for financials, Troutman and Pepper's revenue per lawyer—an important metric for financial compatibility in a merger—were quite close in 2018: $809,000 for Troutman and $789,000 for Pepper. Their profits per equity partner figures were a bit further apart, with Troutman at $1.074 million and Pepper Hamilton at $830,000.

The two firms' cultures are likely a match, said Worthington, the Lucas Group recruiter. She noted that Troutman and Pepper are among the oldest and largest firms in Atlanta and Philadelphia, respectively, with deep regional roots.

"Both are larger firms, but with a smaller-firm feel, where lawyers have close relationships and are well-integrated across practices and groups," Worthington said.

"It's a merger of two very well-respected firms with sophisticated clients and practice areas,' she added. "The puzzle fits together nicely."

Any large-scale law firm merger can result in some partner fallout. Some partners leave because of client conflicts or decide the combined firm is not for them. But Worthington said she doesn't expect to see many partner defections from the combination, because of the apparent cultural and financial fit, along with complementary office locations and practice areas.

Nichani, the recruiter at RMN Agency, said merger fallout will depend to some degree on which Troutman and Pepper partners end up as equity or nonequity partners at the combined firm. "Once that all shakes out, you end up with one huge firm that works," he said.