Financial instability may mean mergers are the best option for small law firms

Combining can be costly, though, so it’s a tricky balancing act

To merge or not to merge, that is the question. It seems like lately, a lot of law firms have been leaning toward merging: The end of 2011 and the beginning of 2012 were filled with announcements of major mergers between the likes of Bryan Cave and Holme Roberts and McKenna Long and Luce Forward. The Wall Street Journal reported on Friday that this merging surge is unlikely to abate in the coming months.

The reason behind this, according to the WSJ, is that clients have gained the financial upper hand since the recession began, and law firms can no longer just raise billing rates when profits are low. For many small law firms, this may mean the choice between merging or going out of business.

However, mergers can be very costly, what with the hassle around integrating the new employees, offices and computer systems, and the potential departure of unhappy partners, who take clients with them when they leave.

It may be for these reasons that in Canada, firms are responding to the economic uncertainty by largely putting mergers on hold, reports The Globe and Mail. Perhaps it boils down to a choice between controlling costs and waiting it out, or putting it all on the line for a risky move to save your firm.

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