Under the threat of fierce competition, law firms are merging and expanding into territories beyond their home base. In the first half of 2015, 48 law firms announced mergers and acquisitions in the United States, the highest recorded number in nine years, according to Altman Weil, a legal management consultancy.
While acquisitions of firms with less than 20 attorneys are likely to ramp up in the coming years across the country, acquisition activity is not as brisk in NH, says Tom Clay of Altman Weil. To increase market share, Clay says large firms tend to pass over the NH market for the more vigorous pockets of the coastline, such as Portland, Boston, Providence and New York.
Nonetheless, Mary Tenn, president of the NH Bar Association, sees an upswing in cross-border participation among the association’s individual members. Ten years ago, about a quarter of the Bar Association’s 4,260 active members resided in Massachusetts. At last count, that number spiked to more than a third of its 5,360 members. That’s a big jump for a state that until 1985 required residency for practicing attorneys.
New Hampshire firms such as Devine Millimet & Branch, Sheehan Phinney Bass + Green PA and McLane Middleton are reaching into Massachusetts. And while the reverse isn’t a trend, there are at least six Maine and Vermont-based practices among the 25 largest law firms operating in NH.
Regional law firms are commonplace compared to the legal landscape of more than a decade ago. In 2001, only one of the top 25 law firms in NH, Pierce Atwood, was headquartered outside the Granite State. Today, almost one-third of the largest law practices in NH are based in neighboring states.
Saturated Markets
There’s only so much business a firm can handle in a single state like NH before running into conflicts of interests among the business clients it represents, says Peter Giuliani with Smock Sterling, a management consultancy for law firms. Cathy Schmidt, CEO of McLane Middleton, explains it this way: Unlike a bank, a law firm can’t take on an infinite number of business clients because it litigates only one side of a dispute. “Law firms are not allowed to be adverse,” she says. “To grow, you need to expand into a new geography.” When firms cap their potential in one region, explains Guliani, they hitch up with others beyond their home state to widen their platforms and attract new business.
Devine Millimet President Jon Sparkman says the NH legal industry faced market saturation about 10 years ago. Earlier this year, Devine Millimet acquired Nelson Kinder & Mosseau. With the hiring of 13 attorneys from that firm, Devine Millimet is now the second-largest legal firm in NH. The recent acquisition accelerated the firm’s market potential by strengthening its medical malpractice, construction litigation and intellectual property expertise. Devine Millimet also established a toehold in New England’s metropolitan epicenter, with three attorneys from the former Nelson Kinder & Mosseau who were already operating from Boston’s financial district.
“The geographical footprint [in Boston] opens the door for us to work in a different market,” says Sparkman. “Boston business clients that we haven’t previously represented may want our legal services but aren’t willing to pay the big city fees.” At Devine Millimet, attorneys bill from $175 to $450 per hour. “You can’t get a paralegal in Boston for $175,” Sparkman says.
Clay says a NH firm can command higher fees in the Boston market and still be among the most affordable options in Boston because of the overall lower overhead it pays by being based in NH.
Sheehan Phinney Bass + Green initially grew its footprint within NH with offices in Manchester, Concord and Hanover. In 2003, the practice hung a shingle on State Street in Boston. The Boston office evolved organically and today houses a dozen attorneys. “Boston’s billing rates are among the highest in the nation,” says Clay, while noting that lawyering is not a price war: The NH-based firm must offer the competence the client requires.
Recruiting a specific expertise is a little easier with an office in Boston, says David McGrath, president and managing director of Sheehan Phinney. It allows the firm to hire attorneys who may otherwise not want to commute to NH.
McLane Middleton, with close to 100 attorneys, practices out of offices in Manchester, Concord and Portsmouth. The state’s largest firm considered acquiring a Massachusetts firm but didn’t find a cultural fit. Against the backdrop of a surging recession, the firm in 2008 added a branch in Woburn, Mass., with one attorney who specialized in real estate. The economic timing “may have seemed counterintuitive,” suggests Schmidt, but it also enabled the firm to ink a favorable lease on a Class A office space with free parking and high visibility from the Route 128 corridor. The move proved fortuitous, as the Massachusetts arm now accommodates 25 associates and shareholders.
Blurring Boundaries
In the 80s and 90s, the major clients for legal services were local banks, utilities and insurance companies. But as these institutions achieved economies of scale with a higher number of transactions at lower costs, they regionalized or nationalized. Business law firms had to do the same or risk dampening their future profits.
Kevin Fitzgerald, the chair of the board at Nixon Peabody, a firm with more than 700 attorneys practicing at 16 offices across the country and internationally, addresses the challenge of small shops in NH: providing technological sophistication and expertise on a breadth of subjects in multiple jurisdictions. Nixon Peabody established a base in NH in the 90s when five of the state’s largest banks went into FDIC receivership. Clients wanted immediate access to counsel, and most local firms didn’t have the infrastructure to offer email and other electronic resources. “We were one of the few firms at that time that required our lawyers to carry a Blackberry,” says Fitzgerald.
Nixon Peabody now has more than 20 attorneys in its Elm Street office in Manchester. To continually build its roster, the practice serves both NH-based clients that conduct national transactions, as well as national corporations that do business in NH. Fitzgerald says other large firms in the state follow a similar strategy. “Virtually everyone with a URL has a business presence somewhere other than the geographic confines of the Granite State,” he says.
Technology is shifting paradigms for almost all businesses, and the legal industry is no exception. The prolific use of smart phones and tablets puts even more pressure on law firms to provide counsel anytime and anywhere. But the advances also give attorneys like Greg Eaton, director and president of Primmer Piper Eggleston & Cramer, more flexibility to work near where they live.
Eaton practices out of Littleton but works remotely at other offices. Formerly known as Primmer & Piper, the practice merged with Eggleston & Cramer in Burlington, Vt. in 2006. In 2012 it launched a Manchester campus by hiring many of the lawyers from the dissolved Wiggin & Nourie practice. In addition to another hub in Portsmouth, the firm hosts two locales in Vermont, one in Maine, and one in Washington, D.C. Eaton says they have no plans to expand into Massachusetts. With the number of lawyers eclipsing the demand for legal services, Eaton says in addition to providing quality work, attorneys need to respond quickly to clients, and that usually means answering emails at all hours. The competition is huge, he adds, compelling firms to strengthen client relationships.
Building Brands
When a NH-based company needed help with legal matters for a construction project in Mexico, its counsel, Sheehan Phinney referred the client to an affiliate of Lex Mundi, a global network of vetted firms. Law networks like Lex Mundi facilitate collaboration among member law firms, opening doorways for smaller firms to compete on an international scale. Cook, Little, Rosenblatt & Manson is a member of TAGLaw; Orr & Reno, of Meritas; Wad-leigh, Starr & Peters, of ALFA International.
Memberships are invitation-only. “Getting accepted into a network is like getting a seal of approval from a bunch of peers,” says Guliani. “It’s a branding opportunity.”
McGrath explains that member firms interact regionally, nationally and internationally at various member events, including educational seminars. “In this way, we are often working with firms and lawyers we know and trust.”
A firm can expect to work within a network for five to seven years before seeing a pay-off, says Guliani. Membership is a strategic move, not a quick fix to get short-term business referrals. But the rewards are multifold, he says, allowing attorneys to leverage each other’s resources and provide expertise that was once only the province of mega-firms. “The boundaries and borders that defined places and practices in the past have largely been erased,” adds McGrath.
To build a practice, attorneys must get involved in the community, whether they contribute to local nonprofits or provide pro bono work to those in need, says Greg Eaton of Primmer Piper Eggleston & Cramer. “It’s important to know your neighborhood,” he adds, explaining each branch of Primmer Piper is involved with its surrounding community.