According to the legal press, the law firm market should see a movement of consolidation in the United Kingdom in the coming months. This movement is more particularly aimed at British firms located between the top 100 and 200 firms, which are bearing the full brunt of competition from American firms and the Big Four in their national market.

Will the French market experience a similar movement?

Any mergers between British firms that have an office in Paris will of course have repercussions on the French market. But as far as independent French firms are concerned, the market has in fact experienced a fragmentation in recent years, with the creation of an impressive number of more or less specialized boutiques. As for the turnover of the French top 100, these firms have continued to do well  lately, despite the pandemic. Historically, and with only a few exceptions, mergers between independent French firms have been very limited. Most of the discussions initiated never came to fruition, and the market has seen a significant number of firm creations and splits. The culture of French lawyers remains very individualistic, and France seems set to remain a country of VSEs and SMEs.

Certain factors could nevertheless justify putting the question of mergers on the agenda of the management of the firms in the coming months.

There is an argument that the market may have reached too great a degree of fragmentation.  Today, some small organisations are too fragile to absorb shocks – for example, economic and health crises, internal crises and departures – at the same time as investing and developing their activity. Even if clients have continued to buy services from the smallest firms, the pandemic has weakened a certain number of them.  Size can be a serious asset in terms of credibility in a very fragmented market.  

Rather than the specialized boutiques, it is the multi-service firms which are too small to maintain their visibility in the market which could be tempted to contemplate a merger to reach a critical size, strengthen their expertise and acquire more resources. This temptation might also be reinforced in those firms needing to ensure the succession of partners who are between 55 and 65 years old, to ensure leadership and client relationships are renewed and refreshed.  What’s more, larger structures have in the past shown better resistance to the vagaries of the economic situation thanks to their diversified portfolio of skills and a better distribution of risks.

Some firms are currently experiencing a better economic situation than before the start of the health crisis, but in many ways this is the right time to carefully study the opportunity for a merger. Though it is always difficult to achieve a successful integration, it is better to attempt a merger when the firm is doing well than when it is too entangled in other difficulties to be able to devote itself fully to the success of the proposed combination.

These all present good reasons to put the subject of merger and the opportunity for external growth on the agenda of partners now.  Accordingly, there is some potential in the present climate that consolidation among smaller French firms will intensify.