Session on 14th April 2025

In this week’s Platforum9 Session, Greg Jackson, head of the strategies and transformation practice at PwC for law firm clients and former strategy director at Linklaters, provided insights into significant developments reshaping the legal industry. From major law firm combinations to the impact of new trade policies, the session highlighted how geopolitical shifts are creating both challenges and opportunities for legal practices worldwide.

HSF and Kramer Levin: A Transformative Combination

The latest major transatlantic deal to reshape the legal landscape is the approved combination between Herbert Smith Freehills (HSF) and US firm Kramer Levin. Partners at both firms have signed off in principle on the deal, with the formal closing date set for 1st June.

This combination represents “a massive success for the HSF leadership team,” according to Jackson, who noted the deal “catapults them into quite a different market position.” The merger will create a firm with over $2 billion in revenue, significantly strengthening HSF’s US presence with Kramer Levin’s $500-600 million practice.

What makes this combination particularly notable is that it “was not one that was on a lot of people’s radars outside of the firms themselves,” with little market rumour preceding the announcement. The deal will make HSF larger in the US than many UK top-tier firms, positioning them as a potential member of the “emerging new global elite firms that can operate both in the US and across Europe and Asia.”

The Mechanics of Law Firm Combinations

Law firm combinations differ fundamentally from typical corporate mergers. As Jackson explained, “Most firms who want to think about that as a process, the most important thing is to think about criteria. What is it that you are looking for in some sort of deal with another firm?”

Unlike corporate acquisitions, law firm combinations rarely involve money changing hands. Instead, the process focuses on “articulating the value to the partners in both firms about why this is the right thing to do, why now, how it will work, how a compensation system will work, how governance will work, what the name of the entity will be.”

The HSF-Kramer Levin deal emerged from “lots of discussions and friendships built between the leadership teams,” highlighting the relationship-driven nature of these combinations.

The Strategic Imperative for Growth

When asked about the strategic drivers behind such combinations, Jackson emphasised that firms across all market segments are ultimately “trying to put yourself in a position where you are growing the size of the profit pool.” This growth provides both “offensive” capabilities (acquiring partners, opening new geographies) and “defensive” benefits (remunerating people more effectively, investing in technology or culture).

Critically, Jackson warned that in today’s competitive environment, “if you are not thinking about that, there may be more risk in not doing something than in thinking about or doing something.” This perspective helps explain the acceleration of consolidation across the legal sector.

Looking at historical data reinforces this trend. Jackson referenced research showing that of the UK top 100 firms in 2004, less than 10 had not engaged in some form of combination by 2024. While some were small “bolt-on” acquisitions, the cumulative effect has transformed the market landscape.

Integration Challenges: The Real Work Begins Post-Merger

While the announcement of major combinations garners headlines, Jackson emphasised that “the real work starts” after the deal is signed. Challenges include operational integration, partner integration, and cultural alignment.

Drawing an analogy to other transactions, he noted that people often “let out a sigh of relief” when a deal is signed, but that represents “just 0.001% of creating the value in the organisation that comes thereafter.”

This insight was echoed by Pavla Riva, a former equity partner in a regional Eastern European firm, who shared that over 25 years, her firm never progressed to any combination “because we couldn’t find simply anyone who would be fitting to our mindset and the way we operated.” She emphasised that beyond making a deal happen, the greater challenge is “to live it.”

Technology Integration: A Hidden Complexity

Technology integration represents a particularly thorny challenge in law firm combinations. Jackson noted that according to PwC’s annual law firm survey, many firms “are still on a big journey to get to cloud” for their enterprise systems (document management, practice management, finance, CRM, HR).

Firms that have built up complex legacy systems face significant integration challenges when combining with another organisation. “Lots of firms unfortunately suffer from… they’ve built and built and built on things that they have, and then they’ve got tons of complex integrations. So then trying to add another firm into that mix is a challenge.”

The implication is clear: firms with modernised, cloud-based technology stacks will have an advantage in executing successful combinations.

Economic Uncertainty and Trade Tensions

Beyond firm consolidation, Jackson addressed the significant impact of new US trade policies, particularly tariffs. He characterised recent developments as “just another link in the chain of the degradation of the global order as it has been in a stable way for the last 70-80 years.”

Rather than viewing current tariffs as an endpoint, Jackson warned they likely represent “the beginning of things,” with a “high degree of likelihood” that additional measures will follow. For law firms, this creates immediate opportunities, particularly for those with established trade practices. “Those who built good trade practices in a Brexit period, fresh fields in particular, they will really benefit from this level of complexity.”

However, Jackson also questioned whether these developments might signal “the beginning of the end” of the current growth cycle for law firms, which have enjoyed “five or six years of big income and profit growth.” The key question becomes how well firms have “planned for shocks in an organisation which ultimately is quite short-termist.”

Political Complexity and Lasting Impact

A particularly insightful observation concerned the longevity of current trade policies. Jackson challenged the assumption that tariffs could be easily unwound by future administrations, noting “the politics of it is going to be really hard.” He explained that while “lots of the mainstream view will be these tariffs are dumb,” the reality is they create constituencies that benefit from them, making them “quite difficult to unwind.”

“Most normal voters have no understanding of how tariffs work, what they mean in practice,” he noted, making it politically challenging to explain the benefits of removing them once established. This suggests firms should prepare for a sustained period of trade complexity rather than a temporary disruption.

Industry Response to US Developments

The session also touched on the recent pledge by nine American law firms to commit $940 million worth of legal services to support various US government initiatives. Jackson speculated that these resources could be directed toward work on “tariffs and trade and all sorts of things.”

He noted that beyond client concerns, part of firms’ motivation to cooperate might stem from the complexities of their internal governance and compensation systems. “If you’re a firm that has compensation that’s black box, what do you do if the government has to review the way in which people are paid, the way in which people are promoted within your organisation, when lots of that has historically been very private and/or subjective?”

Conclusion: Navigating Uncertainty

The legal industry faces a period of significant transformation driven by both strategic consolidation and external geopolitical pressures. For law firm leaders, this environment presents a “massive management challenge” that touches on “cores and ethics and values and clients and people.”

Successful firms will likely be those that can balance strategic growth through combinations with the operational agility to navigate an increasingly fractured global landscape. As Jackson summarised, the question is no longer just about geographic or practice area hedging, but whether firms have the resilience to “react to a more contentious and difficult environment” while continuing to “find value in supporting clients” through unprecedented challenges.

For legal practitioners at all levels, understanding these structural shifts in the industry will be essential for career planning and professional development in an increasingly complex global legal marketplace.