When the story about the potential cross-border merger of Hogan & Hartson and Lovells reached the business press a week ago, it surprised me as to the size and timing of such a combination. Bruce MacEwen had already explained why it could make sense.
This week, The Lawyer reported that the merger has been approved by management. It’s certainly not on a rocket docket: partnership approvals would come in December and the merger would be completed in May, 2010.
If Hogan-Lovells happens, it’s a sign that two strong firms want to move forward aggressively when other firms are retrenching. In the meantime, I can think of a least 3 reasons why I don’t think this is a signal of a bottoming of the legal market or the start of law firm merger-mania:
1. Clients are still trying to cut back, on the number of firms used, and the costs paid to each. There is a lag between law firm work in progress and client demand. Most firms will continue to experience downward pressure.
2. The cross-border work is appealing and often high-margin. But there’s a finite amount and much of it is linked to the global economy. There’s already probably excess capacity for this work for the next 12-18 months, unless two firms match up really well in terms of clients, offices, and areas of strong expertise.
3. Some firms looking for merger partners are doing it out of weakness: to shore up practice areas, fill in for key partner departures, or reverse falling realization rates. Why would a stronger firm want to take on a weak sister when you could cherry pick their best people?
So good luck to Hogan and Lovells. Six months is a long time; the rest of the industry will likely be watching.