Boutiques in bloom: Why big law needs small firms - and small firms need big vision

Law firm merger activity has risen 21% this year, according to Legal IO, driven in large part by larger firms seeking to acquire or combine with specialty-practice "boutique" law firms.

In March, Taft Stettinius & Hollister, an AmLaw100 firm, acquired the 18-lawyer West Palm Beach litigation boutique, Mrachek Law, to strengthen its Southeast litigation practice. In June, Crowell & Moring merged with Faber Daeufer & Itrato, a Boston-based boutique firm specializing in life sciences venture finance, mergers and acquisitions. And Fennemore Craig  this year added two boutique firms, Denver-based construction boutique Galvanize Law and Phoenix employment practice BurnsBarton.

While it is usually clear why larger firms want to add the sector- and geography-specific expertise of boutique firms, determining which combination offers the best alignment and long-term opportunity is a key consideration for the boutique.

That's a question we recently explored in great depth, as the staff of the former Hartog Baer, a trusts and estates boutique practice based in Orinda, Calif., after careful evaluation of options, joined forces in August with Nutter, McClennen & Fish, a Boston-based national firm. This combination created one of the largest bicoastal, full-service trusts and estates legal practices, complemented by a fiduciary and probate litigation practice.

These are fascinating times for trusts and estates lawyers. Demand for services, especially the most complex and sophisticated planning, is soaring. Even so, law schools are increasingly moving away from teaching trusts and estates law, and the "NextGen" bar exam used in many states has dropped the subject as a requirement. Most Big Law firms don't want to invest in training young attorneys for what they generally see as a high-touch practice -- not the kind of big-margin corporate work their business models and partner compensation demand.

And yet:

• A historic intergenerational transfer of wealth that's been underway is rapidly accelerating, as the oldest Baby Boomers are now hitting their mid-80s and more of their wills and estate plans are maturing.

• Private wealth legal services are becoming an increasingly multi-state, cross-country market sector, because of how far affluent, younger Americans move from their hometowns to seek educational, professional and lifestyle opportunities.

• A wave of estate plans drafted after the 2012 tax law that effectively repealed the estate tax for tens of thousands of heirs are now facing, and often failing, the light-of-day test. Litigation, both among heirs and against their parents' surviving spouses and significant others, can easily rival corporate litigation in complexity, intensity and duration.

These trends were factors when the founders of Hartog Baer recognized that after 40-plus years of creating succession plans for others, it was time to address the future of the firm and its team..

Among the options considered were a combination with another boutique trusts and estates firm in the Bay Area or elsewhere in California, where the state's high concentration of ultra-wealthy clients represents a significant portion of the firm's practice. Agreeing to an acquisition by one of the few AmLaw 100 or 200 firms committed to T&E law could have been another option, or winding down the firm while supporting attorneys in pursuing opportunities at other California trusts and estates boutiques.

Here are three questions any boutique firm should consider before a merger or affiliation with a larger firm -- and how we addressed them.

1. What core values define your boutique, and which larger firm best understands and shares them?

When approaching succession planning, firms should establish crystal-clear requirements. Maintaining the high caliber of the team's practice and client service is essential. They should also ensure that the next generation of attorneys can join a firm offering long, rewarding careers that encourage retention and professional growth.

Firms should seek partners with extensive courtroom experience who understand the value and importance of fiduciary litigation, alongside estate planning and post-mortem administration expertise. Nothing demonstrates the importance of being a conscientious, savvy and diligent advisor more than experiencing the crucible of trusts and estates litigation.

2. How much does it matter that your new firm has "deep roots?"

When evaluating potential partnerships, firms should consider the depth of perspective and history a partner brings. A long-established firm can offer continuity, stability and institutional knowledge that benefits clients across generations. Aligning with a firm that has advised families or clients over multiple decades can provide added assurance that strategic support and counsel will be consistent and reliable.

3. How committed is your new firm to training your next generation of talent?

A commitment to providing rigorous, in-depth training for associates -- specifically for nurturing homegrown, career-long talent for the firm is a distinguishing factor in the legal industry and particularly appealing to attorneys.

Alignment on values, culture and investment in the next generation can make a larger firm an ideal home for a boutique team.

The strategic value of such a reaffiliation is clear. As demand for experienced private wealth lawyers grows and client needs become more complex, firms that do not prioritize trusts and estates work, or fail to invest in training and client service, may miss opportunities to serve these clients fully and leverage additional practice areas. Even when firms have different histories or operate in different regions, a shared vision and culture can empower them to guide clients effectively through complex and evolving circumstances.