Small Firm Opportunity: Become the Local Office of a Larger Firm

What do summer temperatures and the law firm merger market have in common?

They are both HOT!

Merger and acquisition activity has continued to gain steam this year, and Big Law absorptions of smaller practices are no small part of this trend.

In fact, 59% of mergers in the first quarter of 2023 involved firms with between five and twenty lawyers. 

So, what’s going on? 

For solo or small practices focused on growth, becoming the local office of a larger firm can be a very viable endgame.

It’s not just about geographic expansion — although, as I’ll explain, that is a big factor.

This move can benefit both large and small firms alike, from deepening your practice’s capabilities to economies of scale, not to mention allowing you to put more of your focus back where it belongs on the practice of law!

Let’s dive a little deeper. 

Why would large firms want to acquire smaller ones?

Imagine a big Chicago law firm expanding its presence into the New York Area. 

They can send someone to New York, rent an office and hang a proverbial shingle on the door – but that is a long slow process. Entering a market can take years of effort and cost millions of dollars. 

Even spending the money does not guarantee a positive outcome. 

So a lot of larger firms prefer to tap into existing expertise. Small, well-run practices with well-established client relationships can be a goldmine for a large firm. They avoid the uncertainty of expansion and build on the brand the small firm has already created. 

It’s much easier to rebrand and transition an established firm into a larger one and far simpler than building an office from the ground up. They just have to change a sign and get aligned, not put everything together from scratch. 

This is often a win-win strategy for the smaller firms, too.

There’s a simple reason this can be great for solos or small firms as well: It allows you to grow your firm without having to add the management challenge of adding many people. 

Successful small firms get to the point where firm leadership must step out of law and into management, which is often not why they started the firm. 

They often feel bogged down by management issues or face growth opportunities with limited resources. They end up referring business they could do in-house, were they fully staffed, and missing out on larger scale opportunities that they can’t tackle independently. 

Joining a large firm means gaining access to more resources and colleagues without the management hassle. 

So, if it pains you to constantly have to refer business out to other firms, always missing out on great opportunities, or you’re tired of endless admin work because you just don’t have the resources and staffing, becoming the local office of a larger firm may work for you. 

You’ll also reap the benefits of economies of scale.

Being the “New York office” under a more prominent banner can allow you to increase the amount of business you can handle and the efficiency with which you can handle it — all while proportionally lowering costs.

This can magnify across billing, marketing, technology, associates, assistants, and paralegals; all of which will help run your business without costing the arm and leg they would have if you tried to scale up alone.

And, perhaps the most meaningful advantage of all for tired partners working long hours to cover all the bases without enough support, you’ll gain the ability to go back to focusing on practicing law, not hunting for printer paper.

Growing your book of business is the best way to make more money. However, often increasing your client base requires more resources, practice areas, and locations. Being the local office of a larger firm is a great way to address these needs. 

A merger with a larger firm doesn’t mean you’ll always have someone looking over your shoulder. 

Joining a larger firm means you will have to adapt to the systems and practices of the larger firm. 

But, it doesn’t mean that you will be subject to micro-management. Some small firm partners have bad memories of micromanagement as associates. Still, when you join a successful smaller it won’t always be smaller practice, you don’t face the same level of control as an associate. 

Think of it instead as macro management: the firm provides all the systems so you don’t have to. 

Here’s the key: Your practice needs to appeal to those larger firms. 

Remember, successful acquisitions are deliberate and strategic. If you want to catch the eye of a large firm, there has to be something in it for them, something that makes your practice worth absorbing.

It’s not just about the quality of your services. You need to bring something unique to the table, something that can help the larger firm achieve specific goals. 

You may fill a geographic niche or a specialty niche. If you have a high-end boutique practice or a niche specialization in a sought-after market, your practice could be a highly attractive candidate for acquisition. 

So, where to begin?

To start, you can identify firms that may need your expertise or your geography.

You can also ensure your billing rates align with any potential acquiring firm so that your clients won’t experience any unpleasant surprises when the new signage goes up.

Lastly, if you’re unsure how to approach courting a larger firm, a good first step is to talk to a recruiter. Recruiters know who is looking for what and can utilize their network of relationships and knowledge of the landscape to help get you in touch with the right people.

If you think becoming the local office of a larger firm could be the right exit strategy for you, I can help. Let’s schedule a call.