And another one gone, and another one gone
Another one bites the dust
— Queen, 1980.
At midnight on Dec. 31, the sign on the front door at Locke Lord will come down, and the corporate law firm’s 130-year history as a Dallas-based institution will come to an end as the result of a merger with Troutman Pepper.
Over the last dozen years, more than 30 business law firms headquartered in Dallas, Houston, Austin and San Antonio have merged with or been swallowed up by larger, more profitable corporate law firms seeking to enter the thriving Texas business market or expand specific practice areas.
Legal industry analysts predict that more Texas legacy firms — small, medium and large — will be takeover targets within the next 18 months.
“The legal profession is seeing a significant consolidation of law firms in order to meet the needs of business clients,” said Yvette Ostolaza, a Dallas lawyer who is chair of the management committee for Sidley Austin, a global law firm founded in Chicago with more than 2,000 lawyers. “Texas, with its great economy and deep pool of talented lawyers, is a place where law firms could expand. There is a strong likelihood that more outside law firms will move into Texas and a strong likelihood of more law firm mergers.”
Since 2012, seven of the 25 largest Texas-based corporate law firms have merged out of existence. Combined, those seven firms employed 1,600 lawyers in Texas who generated $1.5 billion in revenue in 2023, according to the Texas Lawbook 50, a data research project that has examined revenues, headcounts and profits for law firms that operate in Texas for the past decade.
“Texas is such a great business market and so much money is flowing into Texas, and law firms follow the money,” said legal industry consultant Kent Zimmermann with Zeughauser Group. “The competitive landscape among law firms in Texas has been turned on its head.”
“There are definitely more law firm mergers on the way,” Zimmermann said. “Some law firms will merge out of necessity for survival, and some will merge because they are opportunistic.”
Tom Melsheimer, who launched the Dallas offices of Chicago-founded Winston & Strawn in 2017, said the mergers are the result of a combination of factors.
“Some of the Texas firms were mismanaged, and some were just not big enough or profitable enough to hire or retain the right talent needed to represent important corporate clients,” said Melsheimer, who has studied legal market trends in Texas for three decades. “It is all about talent attraction, which leads to client attraction.”
Melsheimer and others agree that it is sad to see Texas corporate firms with such deep and rich histories disappear.
For example:
- Fulbright & Jaworski, a Houston firm founded in 1902, combined with London-based Norton Rose in 2013;
- Cox Smith, a 75-year-old San Antonio firm, merged with Detroit-based Dykema in 2015;
- Gardere, a Dallas firm that launched in 1909, merged with Foley & Lardner of Chicago in 2018;
- Strasburger & Price opened in Dallas in 1939 and merged with Detroit-headquartered Clark Hill in 2018;
- Andrews Kurth, a Houston firm founded in 1902, merged in 2018 with Virginia-based Hunton & Williams; and
- Thompson & Knight, a Dallas firm with Texas roots dating back to 1914, merged with Holland & Knight in 2021.
“It is difficult for regional law firms to compete on compensation, scale and reach with national and global law firms,” said law firm consultant Jeff Grossman. “Regional law firms struggle to have the financial currency to acquire and retain their best talent. Most firms that have merged face these challenges.”
Locke Lord’s Merger
The latest large Texas law firm merger involves Locke Lord, which announced earlier this year that it is combining with Troutman Pepper, a 180-year-old firm founded in Atlanta.
Maurice Locke was a mathematics professor at Valparaiso University who started practicing law in Dallas in 1891 in a firm that would eventually become Locke Purnell Rain Harrell. In 1914, Chicago lawyer John Lord started a firm with Harold Ickes that would later be named Lord Bissell. In 1921, Frank Liddell became a partner at a Houston firm that eventually became Liddell Sapp.
In 1999, the two firms merged to become Locke Liddell — at the time the largest corporate law firm merger in U.S. history. The firm was headquartered in Dallas. Harriet Miers, a Dallas partner, became the first woman to be the managing partner of a large law firm in Texas in 1996.
In 2007, Locke Liddell and Chicago-based Lord Bissell merged to become Locke Lord, which employed more than 1,100 lawyers at its peak.
Troutman Pepper has about 1,050 lawyers in 23 cities and reported $1 billion in revenue in 2023, according to the American Lawyer.
This is not Troutman’s first attempt to merge with a Texas law firm. In 2018, the Atlanta law firm had serious discussions with Dallas-based Winstead, but no deal was ever reached.
Under the merger agreement, the new law firm will be called Troutman Pepper Locke.
Locke Lord leaders did not respond to multiple requests by The Texas Lawbook for an interview.
The firm has struggled to grow and keep up with its competitors in recent years. Texas Lawbook 50 data shows that Locke Lord had 297 lawyers in its Texas offices in 2017 and revenues of $230 million.
In 2023, Locke Lord saw its lawyer headcount in Texas drop to 233 with Texas revenues of $221.6 million. Firmwide, Locke Lord reported 550 lawyers and $497.6 million in revenues, according to Texas Lawbook 50 data.
Zimmermann introduced the two firms to each other and describes the combination as “the most appealing in recent history.”
Locke Lord has offices in Florida, London and Brussels, where Troutman Pepper has none. Troutman Pepper has three offices in California — Orange County, San Diego and San Francisco — and four offices in Pennsylvania where Locke Lord does not.
“Both firms independently had a focus on the same industry sectors,” said Zimmermann, who also advised Gardere on its merger with Foley in 2018. “It’s not every day that there’s a combination this strategically elegant. Advising on the combination early in the discussion it felt like the business case was writing itself. That doesn’t always happen.”
More Firm Mergers Ahead
Zimmerman and other Texas legal industry observers agree that more law firm mergers are in the works.
“I’m surprised that some law firms — Baker Botts, Winstead and a few others — have hung in there and not merged already,” said Craig Budner, a partner at K&L Gates in Dallas.
Budner was a partner at Hughes & Luce in 2007 when the Dallas firm merged with Pittsburgh-founded K&L Gates, which was on its way to becoming a global law firm with 2,000 attorneys.
“Texas clients need firms that have lawyers who can do strategic work in the global financial and regulatory markets, such as New York, London and Washington, D.C.,” Budner said.
Melsheimer agrees, noting that clients of Texas firms need capital markets expertise.
“The Texas firms that have survived and thrived are those who have grown a significant presence on the East Coast,” Melsheimer said. “Akin Gump is the best example of a Dallas firm that realized early that its clients needed legal expertise in New York and Washington, D.C.”
“Everybody knows the firms that are considering mergers or that should be considering mergers,” he said. “Baker Botts fits the profile of a firm that needs to do something. The firm still has a lot of excellent lawyers and should be an attractive merger partner.”
Baker Botts leaders have told The Texas Lawbook in previous interviews that the Houston-based firm has no plans to merge with another firm but that it is always open to opportunities to grow.
The Lawbook reported in 2022 and 2023 that Baker Botts leaders had merger discussions with DLA Piper and Shearman & Sterling.
“There is room for possibly one or two or maybe three regional law firms to thrive in Texas, but which ones — Jackson Walker, Winstead, Haynes and Boone, Baker Botts and a few others,” Grossman said. “There are still a handful of national law firms looking to either enter the Texas market or to significantly expand their footprint and they are looking for potential merger partners.”
Grossman said he believes that smaller regional firms, such as Munck Wilson and Munsch Hardt, “have a real opportunity to survive and thrive.”
“A lot of firms say they are doing fine and don’t need to merge, and some firms say they will never merge,” Zimmerman said. “The problem is, when firms need to merge because they are struggling or losing lawyers who are being poached, it is too late. Their opportunities to merge from a position of strength have evaporated.”