- The Washington Times - Sunday, April 2, 2006

Washington’s major law firms are getting caught up in a frenzy of consolidations that is likely to drive legal fees higher.

Last month, the firm Swidler Berlin was bought by the Boston firm Bingham McCutchen, giving the combined enterprise nearly 1,000 lawyers.

Law firms say their clients can get better service after mergers, but acknowledge that legal fees often increase.

“The combined firm will be an even bigger force in Washington,” said Barry Direnfeld, managing partner of Swidler Berlin, referring to the acquisition by Bingham McCutchen.

The professional services consulting firm Hildebrandt International counted 49 major law-firm mergers in the United States last year, up from 47 in 2004 and 35 in 2003.

The law-firm mergers follow trends of corporate mergers, which are on a fast pace for 2006, Wall Street analysts say.

“Corporate mergers create larger, more geographically diverse clients needing larger, more geographically diverse law firms,” said Ward Bower, principal in Altman Weil Inc., a Newtown Square, Pa., legal consulting firm.

Consolidations among law firms raised the average size of small firms from 30 lawyers in 2004 to 67 in 2005, Hildebrandt International said.

The largest merger last year was the combination of London-based DLA Piper Rudnick with San Diego’s Gray Cary Ware & Freidenrich, creating a trans-Atlantic firm of about 3,000 lawyers. The second biggest was the merger of Los Angeles firm Pillsbury Winthrop with Shaw Pittman, which operates with about 900 lawyers.

In Washington during 2005, Venable LLP acquired the New York firm of Heard & O’Toole, Shaw Pittman merged with Pillsbury Winthrop, and Burns Doane Swecker & Mathis merged with Pittsburgh’s Buchanan Ingersoll.

Similar to the way companies grow by introducing new products, law firms grow by adding practice areas and expanding their geographical reach.

“Mergers are a way to continue to grow revenues, profit and reach for firms,” said Ralph P. Albrecht, a Venable partner.

The Swidler Berlin merger was the sixth for Bingham McCutchen since 1997.

For their corporate clients, big firms can offer specialized lawyers serving niche markets within tax, patent or securities law. They often charge as much as $400 per hour.

“The quality of legal representation available from merged firms should, in theory, be superior to that available from the separate entities pre-merger,” said James P. Schaller, president of the 50-lawyer Washington law firm Jackson & Campbell, which has not been involved in any mergers for more than 20 years.

However, individuals or small companies that need representation on routine legal issues could end up paying for the rapid growth of law firms.

“The bad effect is that mergers mean ever larger firms, and large firms usually mean high billing rates,” Mr. Schaller said. “The consequence of mergers is, therefore, to reduce the number of smaller, less expensive firms available to serve individuals and entities of modest means.”

The big law firms say they are merely trying to cover their expenses.

“They have higher overhead and more resources to throw at a case, and clients will be required to pay for those resources,” said Doug Ross, principal in the 50-lawyer Washington law firm Odin, Feldman & Pittleman, which has not been involved in any mergers.

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