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Whether by way of ambition or pressure, Pennsylvania firms were active in the legal merger market last year. And that enthusiasm is likely to continue this year, industry watchers said.

Of the 106 law firm mergers announced in 2018, according to law firm consultancy Altman Weil, 17 involved at least one Pennsylvania firm. (That includes one deal by Offit Kurman, which was founded in Maryland but has its largest office in Philadelphia.)

“We are seeing firms of all sizes clarifying their position on merger, even if that position is 'not now, not ever,'” Altman Weil principal Eric Seeger said. “Firms are aware that the merger market is stirred up, and most everybody is fielding inquiries.”

A lot of the Pennsylvania combinations involved a small firm being acquired, Seeger noted.

Philadelphia legal recruiter Robert Nourian, of Coleman Nourian, said continued strength in the economy has driven more dealmaking.

“It took a while for some of the effects of the recession to fade, and firms were gun-shy,” he said. But “when you have more confidence that work will continue to grow and your clients' needs will continue to grow, you're willing to seek to continue to do things that are among investment lines and strategic.”

Partnership demographics are a factor as well, Nourian said. With more baby boomer partners at small firms nearing retirement age, they're looking for viable succession plans.

Recruiter Frank D'Amore, of Philadelphia-area Attorney Career Catalysts, has noticed the same.

“Particularly with smaller firms, there are a lot of them where the founders are still there,” he said. “With the baby boomers moving into retirement … the number of them is pretty high. That also can be a trigger for consolidation.”

D'Amore added that leaders of smaller firms—those with about 75 lawyers or less—had some reticence in the past about pursuing mergers, but are opening up to the possibility now.

“While they're still cautious now, they feel their size, which they used to feel was an advantage, has become an impediment,” D'Amore said. General counsel are often looking for firms that can provide service across the country, he said, and some large firms have found ways to shrink the price disparity with their smaller competitors.

More Mergers on the Way

Seeger, D'Amore and Nourian all said they expect the flurry of law firm combinations to continue this year in Pennsylvania and industrywide.

Already this year, two small firms in Hanover, Pennsylvania, were acquired by larger Central Pennsylvania firms. Two-lawyer Shultis Law became part of Chambersburg-based Salzmann Hughes, and two-lawyer Guthrie, Nonemaker, Yingst & Hart combined with Lancaster-based Barley Snyder.

“We will continue to see firms of all sizes making small acquisitions to bolster existing practice areas or add new capabilities,” Seeger said, as well as mergers driven by smaller firms aiming to expand their practice offerings.

There may be an increase in law firms dissolving too, Nourian said, for those small and midsize firms that seek mergers by necessity and are unsuccessful in completing a combination.

“With the caveat that certain geopolitical things or market things could pull back in sentiment … I think we'll see a continuation and marginal acceleration of movement we saw in 2018,” he said.

If the economy turns, Seeger said, a decrease in merger activity is likely, especially among large law firms. But at the same time, he said, “it could exacerbate the pain some smaller firms are feeling and cause them to take more of an interest in some combination.”

Still, if the market tightens, those firms that have recently added small offices by acquisition may feel the need to consolidate its smaller locations, he said.