Three law firms, three mergers: Measuring success after 15 months
Houston-based Andrews Kurth would have celebrated its 117th anniversary this year. Gardere would have turned 110 and Strasburger & Price would have been 70.
The three old-line Texas corporate law firms combined employed nearly 1,000 attorneys at their peak earlier this decade and generated more than $600 million in revenue.
They were staples of the Dallas, Houston and Austin business communities and represented some of the largest companies in the state.
As the past-tense verbs indicate, the three no longer exist as independent law firms. Each merged with a larger national law firm in April 2018. Fifteen months later, leaders at all three say their marriages have gone better than they expected.
“By nearly all measurements, all three law firms are better off today post their mergers than they were before the mergers,” legal industry consultant Kent Zimmermann said.
Andrews Kurth, Gardere and Strasburger counted banks, insurance providers, oil and gas companies and commercial real estate owners and developers as clients. For decades, lawyers joined these firms right out of law school and never left.
Then, it all changed.
Tort reform hurt litigation, especially insurance defense work. Large, deep-pocketed national law firms invaded Texas and raided the ranks of these and other firms, stealing the finest lawyers who had the best clients and generated the most revenue.
Initially, all three firms were determined to remain independent. Each rejected multiple proposals to merge. Even so, revenue declines continued.
“All three of these firms faced uncertain futures,” Zimmermann said. “They could remain independent and watch their positions in the marketplace continue to deteriorate, or they could do a merger.”
Firm leaders agree.
“These were huge and difficult decisions we were making that impacted the lives of hundreds of people and our clients,” said Holly O’Neil, former managing partner at Gardere who negotiated the merger with Milwaukee-headquartered Foley & Lardner.
In April 2018, the stars aligned. Within days of each other, the trio of firms did what they once swore they would never do: They merged with larger out-of-state legal operations.
“True, we rejected many offers over many years to merge,” said former Strasburger Managing Partner Dan Butcher, who helped engineer the deal with Detroit-based Clark Hill. “Making the decision to merge was certainly one of the toughest and most important in the firm’s great history.”
Today, leaders at Foley Gardere, Hunton Andrews Kurth and Clark Hill Strasburger say their year-old combinations have succeded and that their firms are representing more new clients, billing more hours and making more money they did before the mergers.
“We had a great year,” said Hunton AK’s Deputy Managing Partner Robin Russell, who offices in Houston. “We exceeded our profit budget by 4 percent. We integrated faster than anyone anticipated. We’ve added new clients and expanded relationships with existing clients.”
O’Neil and Butcher echo Russell’s position.
“It has been a whirlwind – can’t believe it has already been more than a year,” O’Neil said. “We are already reaping the fruits of our labor regarding revenues, generating new business and attracting lateral hires. It’s been an exhilarating year.”
Foley Gardere reported that lawyers at the firm worked on 125 new matters that billed 15,000 hours and generated more than $10 million during the first 12 months of the combined firms – all of which is directly attributed to the merger.
“We had all the synergies on paper, but you never know until you take action,” O’Neil said. “Legacy Gardere has definitely benefited from the strong organizational structure and larger platform that Foley had in place.”
Andrews Kurth, which has a strong M&A and capital markets practices in Houston and Dallas, represented 207 businesses involved in mergers and acquisitions between 2011 and 2017 that had a combined value of more than $200 billion, according to Mergermarket, a global research firm.
But the firm witnessed declining revenues between 2015 and 2018 and engaged in merger talks with Virginia-based Hunton & Williams, which already had more than 80 lawyers in Texas.
The combined Hunton Andrews Kurth now has 213 lawyers in Texas and more than 850 attorneys worldwide. Total revenue in 2018 hit $748 million – about $183 million of which was generated from the firm’s Texas offices.
Russell, who specializes in corporate restructurings and finance, said that lawyers from legacy AK and legacy Hunton have worked together on more than 700 matters for clients since the merger. For example, lawyers from legacy Andrews Kurth and Hunton worked together in representing private equity firm Stonepeak Infrastructure Partners in its $3.6 billion acquisition of Oryx Midstream this past spring.
“Our capabilities to serve our clients have definitely been enhanced by the merger,” Russell said. “We have a footprint that has been expanded geographically and in terms of expertise. “We have had so much energy and momentum this past year. The challenge is to keep that up and to capture all the opportunities offered by the merger.”
Strasburger was a firm adamantly opposed to merging with an outside law firm for more than a decade.
Butcher said firm leaders changed their minds during the past few years as more regional law firms started entering the Texas market.
“The regional firms have similar rates, and that made us rethink our feeling that we should look to expand outside of Texas,” Butcher said.
Clark Hill, he said, was the best fit for Strasburger.
“Both legacy Strasburger and legacy Clark Hill have seen an increase in revenue directly as a result of the combination,” Butcher said in an interview in May. “Just today, I had a long-time client ask if we could help them with a Pennsylvania tax issue. Before the merger, we could not have handled it. Now, we can.”
As a result, revenue per lawyer is up nearly 10 percent and the firm is seeing increased interest from lawyers at competing operations.