Merger Or Acquisition? Will Locke Lord Follow The Morgan Lewis Model?

Ed. note: This is the latest installment in a series of posts Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients.

With the announcement that Locke Lord is acquiring combining with Edwards Wildman, many are wondering after the Morgan Lewis and Bingham story if this one will be more of the same. Edwards Wildman has experienced a fair amount of change over the last year.

The writing was on the wall when the Am Law 200 report came out at the beginning of the year. Edwards Wildman ranked third to last in profit margins — with Squire Sanders and Gordon Rees rounding out the bottom three — and fifth in leverage.

Then the layoffs came. Back in April, the firm cut 42 administrative jobs and dismissed 10 lawyers from their ranks.

There were other signs as well. The firm lost 32 partners between October 2012 and September 2013. Since January 2012, the firm has gained 39 lateral partners, 38 lateral associates, and 20 counsels. However, over the same period, they lost or terminated 128 associates, 128 partners, and 44 counsels for a net loss of 203 attorneys. Was this fat or muscle, or better, yet, like a bone-in ribeye, probably a bit of both?

Back in March, the firm also lost the entirety of its trust and estates practice in Rhode Island, as many of the partners left to form their own boutique.

Edwards Wildman is no stranger to mergers. The firm formed a result of a merger between Boston-born Edwards Angell Palmer & Dodge and Wildman Harrold Allen & Dixon.

Ahead of the merger, Locke Lord seems committed to merging existing offices. They downsized their London office slightly with the impending arrival of potentially 54 attorneys from Edwards Wildman’s London office. Edwards Wildman replaced London head Nicholas Bolter with Walter Reed ahead of the potential merger.

The two firms overlap in three more cities. Edward’s Chicago office — which was acquired in their last merger — has a respectable rank of 61 attorneys, while Locke Lord boasts a sizable office of around 105 attorneys.

In D.C., both firms field modest offices of 16 and 20 lawyers, and should have no trouble coalescing.

Both firms’ New York offices are comparatively small to other Am Law 200 brethren. Locke Lord’s office contains around 43 attorneys, while Edwards Wildman’s is slightly larger at 50.

Internationally, the two firms both have offices in Hong Kong, in addition to their London offices.

The biggest difference between the two firms is their financials. Locke Lord’s PPP, RPL, and CAP are significantly higher than Edwards Wildman’s. For instance, Locke Lord partners, on average, are compensated at a level 65% greater than Edwards Wildman partners. Even though the firms are roughly the same size, Locke Lord is clearly the more efficient firm by a large margin.

When two firms merge on equal terms, their sizes and efficiency should be congruent for it to be considered a true merger. If Locke Lord is content to rapidly grow at the expense of efficiency, then the differences in bill rates and compensation averages could be overcome. One possible scenario is that Locke Lord mimics Morgan Lewis’s strategy and retains only the most profitable attorneys, especially in overlapping cities, thereby stabilizing existing rate structures and profit margins. However, as middle-market firms, a true “merger” would be prudent as well, allowing them to capture a larger share of the middle market.

Earlier: Law Firm Merger Mania: Locke Lord / Edwards Wildman Deal Wins Approval

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