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Scale, Scope, and Law Firm Mergers

Summary:
A merger between two large Philadelphia law firms led Sam Wood at the Philadelphia Inquirer to investigate why. It seems there have been quite a few law firm mergers recently. It does not look like firms are trying to eke out efficiencies through scale economies. “There are really no economies of scale,” said Tom Clay, a legal-industry consultant at Altman Weil. “Bigger firms are more expensive to run. The only way they save money is through a smaller real estate footprint. Anyone who tells you different is either ignorant or lying to you.”  But there may be scope economies. Firms want to expand their geographical scope. They want to offer clients more specialized practices and increase profits. Practices in other geographical places are complementary to existing practices. And

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A merger between two large Philadelphia law firms led Sam Wood at the Philadelphia Inquirer to investigate why. It seems there have been quite a few law firm mergers recently.
Scale, Scope, and Law Firm Mergers
It does not look like firms are trying to eke out efficiencies through scale economies.
“There are really no economies of scale,” said Tom Clay, a legal-industry consultant at Altman Weil. “Bigger firms are more expensive to run. The only way they save money is through a smaller real estate footprint. Anyone who tells you different is either ignorant or lying to you.”

 But there may be scope economies.
Firms want to expand their geographical scope. They want to offer clients more specialized practices and increase profits.

Practices in other geographical places are complementary to existing practices. And offering specialized practices (increased scope) is only viable if you have enough scale to justify them.

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