One-Stop Shopping With Mega-Firms Can Cost More Than It Saves

Big Law mega-mergers have been accelerating, and just last week the wave continued, as large firms announced three more. They say expanding will allow them to scale operations, add practice areas, compete for talent, reach more markets, and of course, bolster revenue.

These objectives might sound good on paper for clients, but I’m not convinced the trend is in the best interests of in-house legal teams that are looking for high-quality legal work at good prices. Working with mega-firms can present significant tradeoffs.

What’s really driving the merger frenzy? Besides the usual talk of expanding geographic footprint and driving economies of scale, some firms point to in-house legal teams that are increasingly looking to save money by consolidating work with fewer law firms. To compete in this new world, the thinking goes, law firms need to offer a complete suite of practice areas, and a merger is a fast way to meet that demand.

But in-house legal teams aren’t always well served in a world dominated by mega-firms. I like to shop at Costco, but legal services aren’t as fungible as toilet paper and rotisserie chicken.

When I was a general counsel, I really treasured my relationship with terrific outside counsel. They did more than redline documents and file papers; they gave me thoughtful, nuanced, and practical advice that saved me from making critical mistakes. Those are savings that don’t show up on any balance sheet.

These best-in-class attorneys were scattered everywhere—in big firms and small firms, in different time zones and countries. If I were building an ideal law firm for my company, they’d all practice together in one firm. They don’t.

How do you put a value on getting advice from a great lawyer you trust, versus finding a slightly cheaper lawyer from a “preferred provider” law firm? And how nuanced is the legal work you need from outside counsel? When are you saying, “just get me a capable lawyer” versus “I need a strong thought partner”?

Mega-firms are often more challenging to work with. Big firms struggling to manage 1,000-plus lawyers can mean bureaucracy headaches for you. Retainer agreements that used to fit on one page now often look like merger agreement documents, and getting bills written down or negotiating special fee arrangements now need to run through a committee or a set of written guidelines.

Running a conflicts check with a small firm used to be a routine email to the other 30 partners, but with a mega-firm it practically requires artificial intelligence. You might negotiate a 15% discount off the shelf hourly rate by reducing the number of firms you do business with, but then hit a conflicts problem that leads you back to the same firms you left.

And are you really saving money by consolidating work with a few big firms? In my experience, big firms aren’t terribly efficient, and their rates are often higher to begin with.

You’re paying for a lot of infrastructure (big offices, granite, marketing, summer associates) that the smaller firms don’t have to carry. Their bureaucracy can put more pressure on billable hours that show up in subtle ways on your bill. A nice discount off a high “standard” rate might still mean you’re paying more than what you’d pay to a small or medium firm, where you used to be an important client.

Don’t get me wrong—big firms can be excellent partners and provide great value to your in-house legal team. Depending on your legal needs and the capabilities of the lawyers involved, one-stop shopping might work. You might find that reducing the number of outside firms you work with does bring efficiencies.

Just don’t automatically assume that consolidating work with a few big firms that give you a headline discount is necessarily going to be “better”—it may cost you in a lot of small ways.

Rob Chesnut consults on legal and ethical issues and was formerly general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor and he writes on in-house, corporate, and ethics issues.

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