Monday, February 5, 2007

Small: The new big

By Patricia Resende

While giant law firms become behemoths through mergers and acquisitions, and midsize firms become giants, the smallest firms of them all -- so-called boutique firms -- are more interested in staying small.

Boutiques by definition are special. They are small and they have something unique to offer.

While success for all law firms is measured by growth in numbers and billable hours, for boutique firms success is measured by client quality and partner reputation: The greater a firm's reputation grows, the more attractive a target that boutique becomes.

The legal industry as a whole has seen healthy growth in the past few years as a result of a strong business economy.

In 2004, for example, there were 44 completed M&As in the legal industry nationwide in just the first three quarters, according to Hildebrandt International, a consulting firm in Washington, D.C. In 2005, the top 250 law firms in the nation had almost 117,000 employees, a 4.4 percent increase from 2004, according to the the National Law Journal's 29th annual survey of the largest law firms. And the number of mergers continued to grow in 2006, with a total of 58 mergers involving U.S. law firms.

And experts say consolidation in the legal market will continue and even accelerate in 2007. Already 14 mergers are expected in the first quarter of this year, according to Hildebrandt.

So as the larger firms continue to acquire others, will it result in a slow depletion of the small, boutique law firm?

Many in the industry say no, but nearly three-fourths of all acquired firms in 2006 had 20 or fewer lawyers. Nearly one-half had 10 or fewer.

"We get inquiries pretty regularly and are not entertaining them," said Joseph Faber, partner at Faber, Daeufer, and Rosenberg PC, a boutique law firm formed in 2003 that specializes in the life sciences and biotech sector.

Faber, who along with Jim McGarrah, left their legal roles at Millennium Pharmaceuticals Inc. to start their own practice based in Waltham, said being a boutique firm allows the partners to offer more to clients than box seats and sponsored conferences.

Faber says there are two things that are unique about his firm: One is that the firm offers a contract specialist group. Another is that every member of the firm has trained at big firms or has worked in tech-transfer offices, big pharmaceutical companies, biotech firms, and hospitals.

"We are only willing to hire people who have that kind of background, because it allows us to give more business-savvy advice to our clients," Faber said.

Morse Barnes-Brown & Pendleton PC's managing stockholder, Don Parker, says his firm's expertise in technology issues, as well as its ability to be flexible and nimble, sets it apart. Parker, like Faber, says he listens politely when offers are made to acquire the firm.

Formed in 1993 by partners Richard Morse Jr., Peter Barnes-Brown, and Lea Pendleton, the firm specializes in serving the technology sector.

"We have seen a pretty healthy rebound in the last 12 to 24 months, and there has been a steady increase (in business)," Parker said.

Because the Waltham-based firm has done a good job of building a market in the technology space, the firm has been approached by a number of regional and national practices looking to expand their corporate capabilities or technology practice. "We have seen that since the inception of the firm," Parker said.

The M&A inquiries are pretty consistent, he added, and do not correlate with dips or rises in the market.

"In the boom times of the late 1990s, law firms wanted to get into this space, and we were a very attractive option for them because we built a brand in this space," he said.

While many small firms tout a particular expertise, others market their low-cost services and partner attention.

A competitive billing rate is the core of Cambridge-based Lowrie, Lando and Anastasi LLP, according to partner John Anastasi. Coming out of the gate, the company had a trio of employees. Three years after launch, there are 26.

For Lowrie Lando, business has been steady since opening their doors, and last year was the firm's best year. Merging with a larger firm is not part of the partners' plans.

"We had a new paradigm to reduce our own overhead, reduce rates and a fresh start at not billing the clients for incidental things like phone and fax charges," Anastasi said. "We are not Kinko's and do not charge 5 cents per page. We practice law -- that is our company."

Patricia Resende is a freelance writer in N. Attleboro.