Yesterday was a brief look at the Howrey blame game; today some insights into what makes a firm a firm. Tomorrow, why the Howrey brand may have been too good. At the close of the WSJ Law Blog interview with Howrey CEO Robert Ruyak, was this simple and rather sad bit of information: A law-firm merger "never was an option," he said. Assuming this is true, it's not that no other firm was interested in Howrey once its problems became public. It's that no one wanted it, lock, stock and barrel, from the start. It's tempting here to call Howrey a unique case; that it doesn't mean anything in the bigger picture. A discrete large firm with very unique problems. I'm not so sure. I think Howrey is instructive, and that Mr. Ruyak's comments, as self-serving as they may appear on the surface, do in fact shine a light on some of the undercurrents facing large law firms. Here's one for starters. Howrey shows some of the challenges that a large law firm faces in being one firm. That is, a single entity bound by a clear mission and a strengthened by a cohesive partnership. It's almost like some large law firms are really a shared-services venture, more of a marketing and administrative alliance. This is what I think Mr. Ruyak was getting at when he talked about "free agency," namely partners who could leave the firm quickly. It is also why I think we are safe in drawing another preliminary conclusion: The era of large law firm mergers is over. What bank will finance these things? Key assets (partners with clients) leave every night through the elevators. More healthy firms (whatever that means these days) can always cherry-pick the high-revenue partners with growing practices and margins. It's almost as if the larger a law firm gets today, the more it regresses to the mean. And the other assets, the clients, are increasingly armed (with information) and dangerous (looking for better service at lower prices). If key partners can be free agents, then the clients can be free radicals. Because of this new reality, I see a pure domestic "merger of equals" of two AmLaw 200 firms as exceedingly unlikely. The only caveat is that there may be a few more larger U.S. firms align with UK or other internationally-based firms. But only a few more, and only for a short time. Beyond that, it will be lightning raids on key partners and discrete practice groups. As we saw with Howrey and Heller Ehrman, once it starts, it can reach critical mass quickly. And Howrey was one of the few large law firms with a clear brand. It might have hurt, paradoxically. More on that tomorrow.
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