Mergers Settle Into Post-Recession Rythm

As a part of their regular reporting, Altman Weil has released their culmination of law firm mergers for the second quarter of 2014.  They report that 17 law firm mergers have taken place in the months of April, May and June of 2014.  It is worth noting that one of these is the Squire Sanders – Patton Boggs merger which is still ongoing.

Most all of these mergers occurred as larger firms bought smaller firms.  There was also a concentration in the Western half of the United states of activity.  According to the analysis on Altman Weil’s website, mergers have fallen into a norm since the recession hit.  It appears that two large firm acquisitions followed by a number of smaller acquisitions is now to be expected.

While mergers and acquisitions have many benefits, it is worth noting that they are not without their risks.  This is especially true for the smaller firms being acquired.  A large concern these firms face is securing coverage for work the firm has done before the merger.  This is most commonly done by purchasing a “tail” or “Extended Claim Reporting Period” on their current insurance policy.  This one time expense allows firms to report claims that might be filed against them in the future for work that was done prior to the merger.  This allows a firm to remain protected without having to purchase insurance on an inactive law firm.

The cost of a “tail” can vary and should be considered in any merger or acquisition negotiations.  The premium for this option can range in price form 100% to 250% of the underlying annual premium.  Given the increasing cost of insurance, this amount is material for most firms.

If your firm is contemplating a sale, merger or acquisition, it is important to discuss the insurance implications of such a transaction.  Contact us today to learn more.