Inside the Twin Cities’ Big Law Firm Mergers
When attorney Steve Ryan broached the possibility of finding a merger partner for the venerable Briggs & Morgan law firm, it was so long ago that Donald Trump and Bernie Sanders had not yet entered the national political scene.
It was November 2014, Ryan recalls. “I gave a presentation to our shareholders, arguing that we needed to take a hard look at what the strategic path forward for our firm was going to be.”
It took Briggs five years to consider its future, choose a merger option, and find Taft, a Midwestern law firm that, like Briggs, was founded in the 1880s. On Jan. 1, 2020, the firms merged, and Ryan is now partner-in-charge of the Minneapolis office of Taft.
As of early 2020, Briggs was among three of the 10 largest law offices in downtown Minneapolis that executed mergers. Gray Plant Mooty, the oldest continuous law firm in Minneapolis, dating back to 1866, combined with a firm whose biggest market is Kansas City. The new firm is called Lathrop GPM.
Faegre Baker Daniels, which already had one of the largest law offices in Minnesota, merged with Drinker Biddle & Reath on Feb. 1. The new firm, called Faegre Drinker, has about 1,300 lawyers, including 603 partners. Minneapolis has the biggest office of the combined firm and houses 135 partners.
The legal sector in the Twin Cities is a visible part of a “great realignment” that is sweeping the nation, Ryan says. Although Briggs, which had about 150 attorneys, was a prominent firm for many decades, its partners concluded that it needed to do a merger so that it could successfully compete for business clients and legal talent in the 21st century.
“We were beginning to see challenges in our ability to deliver for our clients the depth and breadth of product that they were demanding,” Ryan says.
Attorneys at Lindquist & Vennum, another long-standing law firm in downtown Minneapolis, had been experiencing similar circumstances.
“Well before we announced our merger with Ballard, it had become clear to us that the best path forward for the attorneys within Lindquist, and also for our clients, was to become part of a larger national firm,” says Karla Vehrs, managing partner of the Minneapolis office of Ballard Spahr. The Ballard merger is now two years old. Through a much bigger firm, Vehrs says, it’s possible to offer business clients “more depth and expertise in different areas.”
As Minnesota’s public and private companies have grown in size and global reach, leaders of many law firms say they need to evolve and deliver specialized services. Some corporations engage in competitive bidding for legal services. This causes the number of law firms used by a multinational business client to decline as it consolidates legal services for lower hourly fees or fixed rates. A huge corporation might reduce the number of law firms it uses from 30 to 15. It means a law firm must offer full services, from corporate to employment to litigation expertise, to retain a big client.
That’s the scenario that Faegre Baker Daniels was contemplating when it decided to grow much larger through a merger.
“Think about the business community here in the Twin Cities, which has an amazing array of large national and international companies,” says Gina Kastel, who serves on Faegre Drinker’s executive leadership team. “They need legal capability that has depth and breadth and geographic reach.” The two law firms were a good match, she adds, because the four largest practice groups overlapped—corporate, business litigation, product liability, and intellectual property.
In all three of the recently consummated mergers, none of the resulting firms has designated a headquarters.
Gray Plant Mooty attorneys decided to vote on a combination with Lathrop Gage at a company retreat in September. The setting was Grand View Lodge in Nisswa, Minnesota. “We had several partners get up and speak very enthusiastically about what was happening, including some of the senior people that had been here a long time. It was more difficult for them,” says Mike Sullivan, formerly managing officer of Gray Plant Mooty. “They stood up and spoke about how they saw this as a great opportunity.” Despite nostalgia for what Gray Plant had been, attorneys concluded their firm needed to change.
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Now Sullivan is partner in charge of the Minneapolis office of Lathrop GPM. He talks about his hopes for the combined firm seated next to Cameron Garrison, the firm’s managing partner. They are describing their business strategy in a fifth-floor conference room of the IDS Center, which has been the epicenter of law firm mergers. Lathrop GPM, Taft, and Ballard Spahr all have their Minneapolis offices in the IDS tower.
A consultant from California-based Fairfax Associates identified the two firms—Gray Plant Mooty and Lathrop Gage—as potential merger partners. Sullivan and Garrison, who lives in the Kansas City area, had their first phone call in March 2019. The two men thought there might be a good cultural fit, and they were excited about the potential of combining their business litigation and mergers and acquisitions groups. “Gray Plant brings a fantastic health care practice to bear, and they have a world-renowned franchise practice,” Garrison says.
Over six months, Sullivan says, he kept enlarging the circle of firm attorneys who were vetting Lathrop Gage. He wanted widespread buy-in and a comfort level with the deal across his firm. Ultimately, the Gray Plant attorneys approved a combination in a late October vote. “There is no money or stock that is exchanging hands,” Garrison says. “We are all partners in a single partnership together.”
The new firm has about 400 attorneys in 14 offices.
Garrison is piling up his frequent flyer miles. “Thanks to Delta, I get to a lot of places,” he says. “I really work hard to make sure that I am in all of our different offices with great frequency.”
Sullivan notes that the firm’s leadership is distributed around the country. The CFO is based in Minneapolis, while the chief operating officer works out of Chicago. “It’s not good for a law firm to be office-centric,” Sullivan says. “The key is to have a strong firm.”
Ronald Schutz, chair of the executive board of Robins Kaplan, has a deep understanding of law firm business models, because he’s been a combatant in the battle for legal talent in New York and Minneapolis.
From late 2011 until he became the Robins chair last May, he was the managing partner of the firm’s New York office. During that time, Robins expanded its New York contingent from 10 lawyers to just under 40.
Some large national law firms with a major New York presence charge very high legal fees, and a subset of global businesses are willing to pay them for specialized legal services. “They are not suffering the same types of economic pressures that the firms here that have been the subject of many of these mergers in Minneapolis have suffered,” Schutz says.
Those big, expensive firms are not interested in teaming up with Minneapolis firms, he explains. Instead, he adds, firms in the second and third tiers by size are merging with each other. Briggs & Morgan, Lindquist & Vennum and Gray Plant Mooty fell into that merger category.
“They were trying to be full-service firms and compete across a broad spectrum of practice areas, with only a finite number of lawyers in each practice area,” Schutz says. It means one of these firms might only have 10 or 12 lawyers in a given practice area. “That’s just not big enough to go out and pitch some of the biggest work,” he says, so they merged with other substantial Midwestern law firms to increase their critical mass.
The long-standing Minnesota firms also were watching national players encroach on their traditional legal territory by opening offices in Minneapolis. That development increased competition for business clients and legal talent.
Jones Day, which has more than 2,500 lawyers working on five continents, opened a Minneapolis office in 2016. Schutz notes that Jones Day did not do an acquisition or merger with a local firm. Instead, he says, “Jones Day comes in, sets up shop and then starts cherry-picking from law firms around town.”
Among the other national or global firms with Twin Cities offices are DLA Piper and Norton Rose Fulbright.
When a law firm is making a “lateral hire” from another law firm, Schutz says the firm often wants to hire an attorney who has a “book of business” that he or she can bring to the new firm. (A book of business means the type of revenue that an attorney will generate in a given year based on work for existing clients.) In some cases, he says, firms hire lawyers who don’t have a book of business, but they possess “subject-matter expertise” that the new firm needs to meet client demands.
Veteran attorney Peter Ekberg was one of the founding partners of the Jones Day office in Minneapolis, but in September it was announced that he was joining the corporate practice of DLA Piper. Andrew Luger, U.S. attorney for Minnesota in the Obama administration, is a Jones Day partner. A year before Briggs announced its merger, two of its financial services litigators, Frank Taylor and Julie Firestone, moved to Norton Rose Fulbright.
Eight years ago, Minneapolis-based Faegre & Benson merged with Indianapolis-based Baker & Daniels. The combined firm produced gross revenue of $513 million in 2018, according to data compiled by The American Lawyer.
Despite that scale, Faegre Baker Daniels chose to do another major merger, which took effect in February, combining with Drinker Biddle. The latter had $450 million in revenue in 2018.
“We’re really proud that the industry recognized us as doing a combination of equals that was really successful,” says Kastel, who was chief operating partner of Faegre Baker Daniels. Based on that experience, she says, she’s confident that the Faegre attorneys will be able to blend with Drinker Biddle “to make sure that we are one firm and we are bringing the whole capabilities of that firm to our clients.”
Steven Kennedy, who leads Faegre Drinker’s Minneapolis office, says one reason for the second merger was to respond to the trend of large businesses consolidating their use of outside law firms.
Those businesses expect a broader array of services and access to larger lawyer teams to meet growing legal needs. Another rationale: Working with fewer law firms makes it less cumbersome to manage external counsel and is more cost-effective.
“Clients were very conscious about cost before the recession, but I think they’ve become even more focused on it since,” Kennedy says. Faegre Drinker can provide value to clients, because many of its lawyers will be in the Midwest where legal fees are lower than the expensive New York and Los Angeles markets, he says.
Two other established Minneapolis law firms approved merger deals after the Faegre & Benson merger. Leonard, Street and Deinard, a well-known Minneapolis firm, merged with Stinson Morrison and Hecker from Kansas City in 2014. Then it was Oppenheimer Wolff & Donnelly’s turn in 2016, merging with national firm Fox Rothschild.
Jill Radloff, Stinson’s managing partner of the Minneapolis office, says the 2014 merger has achieved the expanded depth and breadth of services for clients that both firms were seeking. “We merged firms that were in similar markets from rate and cost perspectives, which meant that we did not bring coastal- or international-scale rates to our clients,” Radloff says.
She notes that Stinson went on to do combinations in 2018 with law firms in Dallas and St. Louis. As a result, Stinson’s intellectual property practice doubled. The firm also has hired dozens of lateral partners from other firms.
At Fox Rothschild, the firm has grown to 27 offices that house 950 attorneys. Fox continues to look for growth opportunities through mergers and lateral hires from other law firms, according to Brad Keil, managing partner of the firm’s Minneapolis office, and firm chairman Mike Silow.
While the leaders say Fox wants to enter new markets and add new practice areas, they are unlikely to pursue a “merger of equals.”
Ken Abdo, a high-profile entertainment attorney in the Twin Cities, was affiliated with the Lommen Abdo law firm for more than three decades. He joined the big Fox firm in 2017 and highlighted that association in December when he emailed holiday greetings to business associates, friends, and relatives. “Fox boasts one of the largest Entertainment & Sports Law Departments in the country, with those offices anchored in New York City, Minneapolis, and Los Angeles,” Abdo wrote. “Music law and artist advocacy remain my vocation and passion.”
A smaller local footprint
When Ballard leader Karla Vehrs joined Lindquist & Vennum in 2006, she knew it was a well-regarded regional law firm. When Minneapolis-based Lindquist announced in late 2017 that it would be merging with Ballard Spahr, Vehrs says Lindquist had about 100 to 110 attorneys.
Now the Minneapolis office of Ballard has about 80 attorneys. The shakeout that often occurs when big mergers unfold has been happening at Ballard over the past two years.
That reduction in headcount doesn’t shock Vehrs because some attorneys typically leave a firm shortly before or after a merger.
“It is a meaningfully different [legal] platform,” Vehrs says. “We are not a mid-size Midwestern law firm anymore.” Instead, she says, Ballard, a national firm with Philadelphia roots, competes for business clients as one of the 100 largest U.S. firms.
“The reality is that there had been longtime Lindquist attorneys whose practice was really focused in an industry or in a segment of the market that just wasn’t a great fit anymore for Ballard,” she says.
For example, Lindquist’s family law group transferred to the Barnes & Thornburg office in Minneapolis. She adds that other Lindquist attorneys moved to other firms “that made more sense for their practices.”
In part, Vehrs says, law firms are catching up to broader changes in the economy. “The business world has grown and evolved and become more sophisticated and more specialized,” she says. “It is also natural that lawyers’ practices have had to evolve and deepen and specialize to correspond to those changes in the business world.” Ballard Spahr attorneys brought in $689,000 in revenue per lawyer in 2018, which was less than Dorsey attorneys but more than Fox Rothschild lawyers, according to The American Lawyer.
Twenty years ago, Vehrs says, virtually every Lindquist attorney would say: “We’re a full-service business firm.” Characterizing Ballard’s national role, she says, “We are not all things to all people even though we are that much larger.” She emphasized that Ballard wants to provide a deep bench of attorneys in its practice areas.
A Lindquist value that is shared with the Ballard firm is a commitment to public service, Vehrs says.
Vehrs has a long history as a pro bono attorney for immigrants who have suffered human rights abuses or been victims of crimes, including human trafficking. Lindquist attorneys also have held key roles in elected or appointed offices. Recent examples include the late Bert McKasy, a state legislator and commerce commissioner, Paul Thissen, current Minnesota Supreme Court justice and former Minnesota House speaker, and Mike Freeman, current Hennepin County attorney and former state senator.
How Briggs became Taft
As the Briggs & Morgan law firm chair, Steve Ryan recognized in 2014 that treading water was the biggest enemy of the firm. “The status quo was ‘We’ll hire people out of law school, we’ll have them work for seven years, and they’ll become partners.’ ’’
But the demand for complex legal services outstripped the capacity for Briggs to grow its legal talent organically, so the firm pursued a merger partner after a lengthy, firmwide process of weighing its strategic options.
Ryan and other Briggs leaders talked to 35 potential merger partners, including in-person visits with more than 20 law firms. That 35 figure is no exaggeration. “I kept the list,” Ryan says with a smile.
Briggs leaders wanted a merger partner with a strong financial standing, but they also sought a partner with a minimum of conflicts of interest. “You can’t be on both sides of the same litigation,” Ryan says, which is why big Twin Cities firms are not merging with each other. Even in the Taft merger, Briggs lawyers still have had to deal with some cases where legal representation conflicts exist.
But perhaps the most challenging criteria was finding a law firm that aligned with the Briggs culture. “This is a hard-driving group of people,” says Ann Rainhart of Briggs attorneys. She is the past COO of Briggs and now serves as the firmwide chief strategy officer for Taft.
“We believe in individuals,” Rainhart says. “We have had a very entrepreneurial culture. We are relatively informal. We walk to the beat of our own drum here. We don’t have a lot of specific rules for people. We want to create an environment where people get to do their best work.”
Rainhart, who has worked for six law firms, says many in the legal profession don’t spend a lot of time talking about workplace culture. However, in a merged firm, she says, “it is what makes or breaks you.” As Rainhart and Ryan evaluated potential merger firms, they wanted to make sure their new partner would not harm the Briggs culture.
“There were doors we walked through and sat down, and in five minutes, you knew there was no chance we were going to merge,” Ryan recalls. But Taft was not the only law firm that got a serious examination from Briggs. “There were at least eight that we put under non-disclosure agreements and had multiweeks-long or months-long conversations,” he says.
“I can’t overstate how deliberative this process was and intentional it was,” Ryan says. Many lawyers and staff were involved in scrutinizing merger candidates. And when it finally appeared that Taft was the right fit, Rainhart says, Briggs did something novel. “We shared that information with everybody in the firm,” she says, so all employees could have deep knowledge about Taft and provide their feedback to Briggs leaders.
“When we put this merger to a vote, there were zero dissenters,” Ryan says.
Now former Briggs lawyers are settling into their roles as Taft attorneys. Their four floors of offices in the IDS Center are in the final stages of renovation.
On the 23rd floor, where lawyers have moved into their new glass-walled offices, there is evidence that the Briggs culture of individuality has been preserved.
On a recent weekday, one lawyer had documents spread throughout an office so the paperwork could easily be retrieved to write briefs. A few doors down, Greg Stenmoe, former Briggs president and managing partner, was calmly working at his computer. Hanging on his office wall were three acrylic portraits he had painted of rock music icons.
Jimi Hendrix, Janis Joplin, and Jim Morrison comprise the “27 Club,” because they all died at age 27, Stenmoe says. His decision to hang that type of artwork in a legal office reflects the Briggs, and now Taft, culture, he says.
“People are accepting of different views and styles,” says Stenmoe, who became a Briggs attorney in 1983. “Clients liked working with us because we were fun to hang out with.” He doesn’t expect that dynamic to change now that he’s a Taft attorney.
On the merger sidelines
Straight arrow might be an old-fashioned term, but it describes John Koneck, who is the most prominent keeper of the Fredrikson & Byron law firm culture.
“As lawyers, we serve our clients. That’s our main job,” Koneck says from a 40th-floor conference room in Fredrikson’s offices in downtown Minneapolis. “We serve the communities in which we practice, and what the law firm does is support our lawyers in their service to clients and in service to communities.”
A Yale Law School graduate, Koneck joined Fredrikson four decades ago and has never elected to practice law anywhere else. He became president of the firm 14 years ago. It’s clear he’s competitive in the legal arena but manages for the long haul.
Treating clients, co-workers, and community members with respect is how he conducts business. “The essence of our culture is focusing on those relationships,” Koneck says.
At a time when other big Twin Cities law firms are doing mergers, Fredrikson has stayed out of the matchmaking business.
From a financial standpoint, Fredrikson has been growing rapidly without the benefit of a merger of equals. In 2005, Fredrikson employed 181 attorneys. By 2020, Fredrikson’s roster of attorneys had increased by 73 percent to 313 lawyers.
In particular, Koneck says, Fredrikson’s private equity, mergers and acquisitions, energy, and employment practices have “exploded.” He’s been hiring attorneys from other Twin Cities law firms as well as from outside the metro area.
“We’ve grown because the work we receive from our clients has grown and gotten more complex, and the number of new clients that we are obtaining is increasing,” he says. Among Fredrikson’s clients are Medtronic, Target, and H.B. Fuller.
The three law firms that employ the most lawyers in the Twin Cities are Faegre, Fredrikson, and Dorsey. Koneck says that his firm has benefited from a low turnover rate among attorneys. “Our lawyers are entrepreneurial,” he says, “We are really collaborative, we work together, we rely on each other, and we support each other. Every law firm will say that. All I can say is we really do it.”
Koneck’s clarity about ethics and the societal role lawyers play dates back to his boyhood in Minneapolis. From 1961 to 1965, he was fascinated with the CBS TV show The Defenders. “Sometimes they represented unpopular people, sometimes they took on unpopular causes, and I watched that show and I just loved it,” Koneck says. “It made me want to be a lawyer.”
Now he says he and fellow Fredrikson lawyers spend their time understanding the needs of their business clients. “We ask them lots of questions and we listen to them,” Koneck says, and then they leverage their legal expertise to give clients “practical, creative, innovative” advice. Koneck has avoided a big merger because he doesn’t want to risk losing the Fredrikson culture.
Fredrikson and Dorsey, two large law firms in downtown Minneapolis, have been steadily growing—without doing a big merger of equals.
Prestige long has been associated with the Dorsey law firm. Walter Mondale chose to affiliate with Dorsey after his term as vice president. While Dorsey is headquartered in Minneapolis, it is an international law firm with offices in Beijing, Hong Kong, London, and Shanghai.
Bill Stoeri, Dorsey’s managing partner, has not jumped onto the big merger bandwagon, because the firm is doing well financially.
“We just had the best [revenue] year in the history of the firm, following the prior year that had been the best year in the history of the firm,” Stoeri says. In 2018, Dorsey generated $368.3 million in gross revenue, according to data published in The American Lawyer. That same report showed that Dorsey’s 508 lawyers produced, on average, $726,000 in revenue per lawyer in 2018.
In addition to hiring lawyers from other firms, Stoeri says, “we are growing here through acquisitions.” In 2019, Dorsey acquired the Edina-based Webber Law Firm, which consisted of 10 attorneys and paralegals. “They had a very well-thought-out way of doing immigration law,” he says, and many Dorsey clients are dealing with immigration issues.
“Some of these mergers have benefited us,” Stoeri says. “We got the real estate group from Lindquist and that was a really fantastic group.” It allowed Dorsey to bulk up its real estate practice in Minneapolis.
“Our Salt Lake City office has grown exponentially,” he says. “We’ve added a Dallas office that has done very well.” He estimates that Dorsey’s headcount of attorneys is up about 50 from a few years ago. He envisions adding attorneys as business clients grow within the health, technology, food, and banking and finance sectors.
Dorsey also has close ties with some of its largest clients. The general counsels at UnitedHealth Group, U.S. Bank, and CHS Inc., were all Dorsey attorneys earlier in their careers.
Some in the legal community have speculated that Dorsey might be unable to execute a major merger because of pension obligations for Dorsey partners. Stoeri says that’s not the case. “Dorsey is essentially debt-free,” he says. “Several years ago, eligibility was cut off for a retirement plan which already had a total cap on the annual expense. Currently, the retirement plan has been managed to a cost of doing business and will continue to decline over the coming years.”
Saying ‘no’ to mergers
Among the 15 largest legal offices in the Twin Cities, leaders of three firms say a major merger is not in the cards for them.
Mike McCarthy, chair of Maslon’s governance committee, says Maslon has rejected multiple overtures to engage in serious merger talks. However, he’s discovered a silver lining to the consolidation trend.
“The law firm merger activity in Minneapolis has been beneficial to our ability to attract lawyers who would prefer to practice in an office in which they have an opportunity to work with colleagues who are down the hall rather than across the country and to be valued for more than their productivity metrics,” McCarthy says.
Moss & Barnett attorneys considered a merger five years ago, but president and CEO Brian Grogan says his firm concluded, “It was not the right fit for our clients, nor was it the right fit for our attorneys.” They wanted to preserve local decision-making.
“Our attorneys decided they wanted to be in control,” Grogan says. “They were uncomfortable giving up the right to determine how the legal work would be performed, the cost to be imposed upon the client, and the team of attorneys that would be delegated to work on projects.”
Paul Smith, Larkin Hoffman president, says his firm’s strength is building niche practices, such as insurance recovery, franchises, and government relations. “We simply don’t see any competitive advantage in becoming part of a national law firm,” Smith says. He maintains there is ample local talent to staff his Bloomington-based firm.
Minnesota’s merger profile
University of Minnesota professor Paul Vaaler has studied the business of law firms and has a unique perspective because of his joint appointments at the Carlson School of Management and the U of M law school.
“The mergers are happening to respond to client firm demands for national and multinational presence and service scope,” says Vaaler, who holds a Harvard law degree. While he argues that mergers make economic sense, he notes that it’s challenging to exercise oversight of lawyers when they are working in many offices across the country.
He favors consolidation of law firms. “Thoughtful mergers will make these Twin Cities firms better legal service providers,” he says.
Whether through a big merger, a small firm acquisition, or opening a national office, many law firms are seeking access to Minnesota business clients. In September, The American Lawyer published the article “Why Firms Keep Flocking to ‘Perfect’ Minneapolis.” Among the reasons cited were a large number of Fortune 500 corporations, a good talent pool of attorneys, and a relatively low cost of doing business.
Robert Fafinski has been on the receiving end of phone calls from consultants who want to know whether he’d like to do a merger deal. He’s CEO of Fafinski Mark & Johnson, an Eden Prairie-based law firm with about 30 attorneys. “Frankly, I don’t know any firm in town that hasn’t been approached,” Fafinski says. “It’s crazy. There are recruiters calling all the time.”
Moss & Barnett president and CEO Grogan sees a day of reckoning on the horizon, because everybody seems to want pieces of Fortune 500 legal business. “There are simply not enough of those large companies to support the influx of new national law firms and the many super-regional law firms that have merged into the marketplace,” Grogan says.
Liz Fedor is the Trending editor of Twin Cities Business.