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Law360 (August 18, 2020, 11:55 AM EDT ) Law firm mergers practically screeched to a halt this spring with the onset of the coronavirus pandemic, but megafirm Dentons' announcement last week that it had inked a major combination using virtual means could signal that law firm deals will soon pick up steam again.
Global law firm Dentons said last week it had inked a deal to combine with Salt Lake City-based Durham Jones & Pinegar, in the largest firm tie-up since the COVID-19 pandemic began. (AP Photo/Rick Bowmer)
Many at the time said that the inability of firm leaders and partners to meet in person for merger talks due to social distancing and limited travel was a major obstacle to getting deals done.
Then, on Aug. 11, Dentons announced it had inked the largest law firm combination since the pandemic hit the U.S., combining with 100-attorney Durham Jones & Pinegar. Dentons CEO Joe Andrew commented soon after the announcement that the firm had conducted a good deal of the merger talks virtually via videoconferencing technology.
That tie-up could be a sign that more law firms will follow suit as they continue to develop a newfound comfort with conducting business and communicating virtually amid the pandemic.
In fact, multiple law firm merger consultants say they are aware of a number of firms that are currently engaged in talks and are on track to ink combinations by early next year.
"There are a lot of discussions happening, including several I'm involved in, that are underway and happening on platforms like Zoom," said law firm merger consultant Kent Zimmermann of the Zeughauser Group. "I think firms are adapting and continuing to do what they need to do to grow and meet their goals."
The typical law firm combination takes around nine months to complete, Zimmermann said, which means that some firms that began merger talks before the pandemic began got their leaders together to meet in person in December or January to begin getting to know each other and then were able to use videoconferencing technology, phone calls and, more recently, some limited in-person meetings to continue advancing the ball forward.
Additionally, some talks that have launched since the pandemic began will continue to inch along using virtual technology assistance until it is again easier to meet in person, with the firms likely finalizing a deal once that happens, he said.
"Because firms know it takes a long time [to make a merger happen], they're often not interested in waiting until this is over to have discussions, whether they're a continuation or the beginning of discussions," Zimmermann said.
Speaking to Law360 shortly after the deal with Durham Jones & Pinegar was announced, Dentons' Andrew said that it was a challenge to get his partnership entirely on board with virtual combination discussions.
"Some [partners] were reluctant," he said.
But Andrew told them: We assure our clients that we can handle their deals and other legal matters in this current environment, can't we do the same for ourselves?
Once the firm moved forward with the plan to conduct the talks mostly virtually, it ended up being like making lemonade out of lemons, Andrew said, and the firm discovered that it was able to include more partners in the discussions because of the flexibility of a virtual approach.
While other law firms may take inspiration from Dentons' deal, it's important to note that the combinations that it engages in involve a verein, which has a different structure from many law firms and does not fully combine finances, pay systems and other factors in the same way as nonvereins, merger consultants noted.
"Dentons' business model is a little different from a true merger," said Thomas Clay, a principal at Altman Weil Inc.
But others are still sitting up and paying attention to how the verein has moved forward with its growth strategy even amid a pandemic, Clay said.
"As far as regular combinations go, I have seen a number of firms come back to their strategy desk and say, 'Let's come back to the table to look at a deal we put on hold,'" he said. "I think firms are feeling a lot more comfortable about 2021, while being a little cautious about the remainder of this year."
According to law firm merger consultant John Smock, it's not that combinations are on the back burner: "They're on the bench, waiting to go out." Meaning law firms are continuing to talk and just biding their time until the rest of the year — and factors like the election and economy — shake out, he said.
"Mergers are going on, they're just happening at a slower pace," Smock said. "Probably you'll see a few at the end of this year, effective at the end of this year, that have been talking to each other for a long time."
Michael Blanchard, managing director of the law firm advisory team at Aon, says that while a few may, he does not think hordes of other law firms will flock to follow Dentons' lead in finalizing merger deals during the pandemic.
"Law firms require a more deliberate process to get comfortable with a combination and are very risk-averse by nature," Blanchard said.
However, he has seen that talks are ongoing and have not gone away.
"I definitely think firms are willing and open to beginning talks virtually, but I think consummating a deal virtually by most will be difficult," he said. "I suppose online dating, if you will, can help get firms acquainted with each other, but I suspect virtual weddings won't fly anytime soon."
--Editing by Katherine Rautenberg.
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