Smaller firms 'risk being swamped' by merger deals

Although mergers seem more appealing than ever in a time of economic uncertainty, law firms should be aware of the real danger of becoming sidelined by their merger partners, a top European lawyer warned last week.

Speaking at the International Bar Association-sponsored global management and marketing forum in London, Allard Metzelaar, managing partner of Benelux firm Stibbe, warned that smaller firms which merged with larger firms risked being regarded as invisible by their larger partner and made into a branch office.

'Mergers are particularly appealing for smaller firms as they provide an economy of scale,' he said.

'A firm with 1,000 lawyers can spread the cost of their overheads better than a firm with 100.'

He added that firms in smaller jurisdictions merging with an English-speaking firm would gain access to a wider range of work and improve the firm's client credentials.

Stibbe is in a formal alliance with City giant Herbert Smith.

However, he warned that the disadvantages often outweighed the advantages.

'Smaller firms run the risk of being seen as small and insignificant by their larger, English-speaking partners,' he said.

'Many people see merger as the only means of growth, but often it can cause uncertainty and the erosion of your existing practice.'

Danilo Dipietro, head of the law firm group at Citigroup Bank in New York, agreed.

'Although on one level the desire to merge has never been stronger -- mergers allow you to handle larger and more complex deals and to retain a talented workforce -- it is not the fix-all solution for every firm.'

He predicted that small, highly specialised boutique firms would prosper as clients continued to value the individual service they received.

Victoria MacCallum