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The planned merger of Philadelphia-based Duane Morris and New York firm Satterlee Stephens is the latest sign of how much large and midsize firms alike see scale as a key strategic asset.

The two firms on Thursday officially announced their plans to finalize a merger by the end of the month.

For Duane Morris, the deal solidifies the firm as "a formidable presence in New York," chairman Matthew Taylor said.

Satterlee Stephens had been approached by many firms about a potential deal over the years, executive committee chair Jim Coster said. But this time, he said, the practice groups and people matched up well, and Duane Morris's geographic footprint was an added bonus.

Law firm consultant Kent Zimmermann of Zeughauser Group said the move makes sense for a firm like Duane Morris, which is looking to build around industry sectors like tech, life sciences and financial services, while increasing profitability.

Zimmermann has worked with Duane Morris on its overall strategy, though he did not advise on the deal—Taylor and Coster said no recruiter or consultant was involved. He called the combination "a standout deal."

"In Satterlee they have a firm that is also strong in those industries and in a higher-rate market in New York," Zimmermann said. "It's not every day you see a firm of Satterlee's quality in a market as competitive in New York."

Duane Morris is by far the larger of the two firms, with a head count of 671 in 2019, based on ALM's NLJ 500 list of largest law firms, compared to 65 at Satterlee.

But Satterlee represents a significant boost to Duane Morris' top line—the New York firm has annual revenue in the $40 million range, the firm leaders said. Based on Duane Morris' 2018 revenue of $491.6 million that's roughly an 8% boost in gross revenue.

By combining with Satterlee, Duane Morris is adding lawyers who have served large financial institutions and corporations in complex commercial litigation. In particular, the firm's partners have advised Moody's, Oppenheimer & Co., JPMorgan Chase, IBM, Exxon, Johnson & Johnson, Bank of Montreal, Investors Bank, Stifel Nicolaus and Co. and Calvin Klein Inc., according to the firm's website and court records.

In New York, the move brings Duane Morris to 160 lawyers from just under 100. While Coster said geographic expansion wasn't a driver in his own firm's decision to merge, Duane Morris' presence in California, Chicago and London will be particularly beneficial for clients.

Speaking generally about law firm combinations, Tom Clay, of law firm consultancy Altman Weil, said midsize firms in New York will continue to merge into larger firms when it becomes clear that their clients are outgrowing the firm. Sometimes, that feedback comes straight from the client, "which is the worst thing," he said.

At the same time, Clay noted, larger firms in various markets have a "voracious appetite" for midsize mergers. "Anytime they can find a good tasty morsel like that they're going to snap it up," he said.

For Philadelphia Big Law firms in particular, Clay said, the recent string of major mergers reflects the challenges continued growth at home. In addition to Duane Morris, Philadelphia-based Drinker Biddle & Reath and Pepper Hamilton each announced major combinations in recent weeks with Am Law 100 firms based elsewhere.

"It's a good market but it's not one of the higher growth markets for business," Clay said.

From the other side, however, firms from Philadelphia remain attractive as merger partners, Zimmermann added. It's still within the top 10 markets for law firm billing rates, and the large firms based here have made progress expanding in other high-rate markets.

"By combining with a Philadelphia firm you get the benefit of their growth in other high-rate markets," Zimmermann said.

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