Midwest firms are forgoing headquarters

As big Midwestern law firms continue to branch out, their roots are becoming less apparent.

The Nov. 19 announcement that Taft Stettinius & Hollister LLP was jumping into the Chicago market through a merger with Shefsky & Froelich reinforced a trend of firms operating in multiple markets without a specified home office.

“We don’t really have a headquarters,” said Robert J. Hicks, partner-in-charge at Taft’s Indianapolis office. Hicks said that as Shefsky considered merger opportunities with 10 firms, Taft’s decentralized management structure that came with a promise of local autonomy “was really the single factor that tipped the merger our way.”

Hicks

Historically traced to offices in Ohio, Taft absorbed the Indianapolis firm Sommer Barnard, which began operating under the Taft name in 2008. Taft’s merger with Shefsky becomes official on Jan. 2, 2014, at which time its 70 attorneys also will begin to operate under the Taft name.

The merger will bring Taft to nearly 400 attorneys firm-wide, billing in the range of $175 million to $200 million annually. About 100 attorneys work in Taft’s Indianapolis office.

“When people say Taft is an out-of-state firm, we just laugh,” Hicks said. “The headquarters is where the nucleus of management is, and the nucleus of management is all over the place.” Senior management is in offices in Indianapolis and Cincinnati, but executive committee representatives come from all offices. With the acquisition of Shefsky, Taft will have offices in seven Midwestern markets plus Phoenix.

But Taft isn’t alone in recognizing the advantages of moving away from a headquarters structure. Ask where a firm is based, and you’re likely to hear something like this from Frost Brown Todd LLC Chairman John Crockett: “We don’t have a firm headquarters or a home office.”

Or this, from Faegre Baker Daniels LLP Chief Operating Partner Tom Froehle: “I don’t really think we saw a reason for a headquarters.

“We don’t have an office that has a majority of people, and we’ve got people in leadership in a number of offices,” he said. Like many firms, Faegre has invested heavily in telecommunications technology connecting its 14 locations. “We wanted to encourage people working across offices,” he added.

Froehle said that for firms based in New York or Los Angeles, for instance, it might be more advantageous to retain the cachet that comes with such an HQ address. But for firms where no particular market dominates, equity among offices is the trend.

Jeff Abrams, partner-in-charge of the Indianapolis office of Benesch Friedlander Coplan & Aronoff LLP, said the firm continues to seek merger opportunities in the Midwest, and that in doing so, realizes that where a firm originated will be less important than its vision for the future.

Like others, he said Benesch pulls its management team from all offices. While Cleveland has the greatest number of lawyers of any of the firm’s seven locations, “We still run things pretty much as a consensus and I don’t think there’s any emphasis on Cleveland people vs. Columbus people vs. Indianapolis people,” Abrams said.

“You want to be represented on the management level as well as in compensation.” Of firms moving away from a home office structure, Abrams added, “I think this is going to continue to happen around the country.”

Moving away from a headquarters structure also helps with recruiting, Abrams believes. “We want to send a message that coming to work in this office, in this city, is going to be just as important as coming to work in City A, B or C.”

Crockett said Frost Brown Todd’s executive committee meets monthly and the location rotates between offices. “We presently have nine offices in five states and we have what we believe is a collaborative, firm-first environment without regard to location.”

Froelich

As firms expand, Crockett believes there will be less attention to central locations. “It’s probably a trend we’re likely to see continue as long as law firms continue to merge and combine,” he said.

Law firms have combined this year at a record pace, according to legal consulting firm Altman Weil’s MergerLine. By the end of November, Altman Weil reported 78 law firm mergers were announced in 2013. The previous record for mergers and acquisitions had been 70 in 2008.

Hicks said Taft has invested heavily in technology that allows easy teleconferencing between offices, and the firm emphasizes face time with annual retreats attended by lawyers from all branches.

In a statement announcing the merger, Cezar “Cid” M. Froelich of Shefsky & Froelich praised the partnership.

“With this merger, we will strengthen our core practices, but we also will be able to provide many services and cover areas of expertise that we just couldn’t before with a firm of 70 lawyers,” Froelich said. “Best of all, we will not change our client service culture and we will maintain our direct relationships with them. Our respective firm cultures and internal structures align remarkably well. We will be able to provide our clients with all the benefits of a large firm, while maintaining our historical fee structure and client attentiveness of a midsized firm.”

Founded in 1970, Shefsky built a national reputation in gaming law, Hicks said. The firm’s litigation practice, appellate practice and corporate and real estate practices are outstanding, he added, often “fighting out of their weight class” against much larger firms in the market.

Hicks said under the Taft model, Shefsky’s current management team in Chicago will remain in place and the local office will have autonomy. Some of Shefsky’s executives will join Taft’s executive committee, and some key Shefsky personnel, including finance and IT personnel, will take on more regional or firm-wide roles.

Hicks and Taft managing partner Tom Terp from the Cincinnati office plan to spend a considerable amount of time in the Chicago office, but he stressed, “The local guys will manage the office. We’re not going to terminate any employees.”

Taft makes clear “how you’ll be rewarded for being successful,” Hicks said, based on incentives.

“Lawyers are pretty independent cats,” Hicks said. “We’re not a ‘We’re going to tell you what to do’ type of firm. We want everyone to succeed and we have a common compensation system that rewards people. … People want to chase a carrot at the end of a string rather than getting hit over the head with a stick.”

Hicks said the merger also aligns with Taft’s vision.

“Our goal is to have a substantial presence but stay in the Midwest and be in all the significant centers of the Midwest,” he said. “We want to have a Midwestern rate structure with the quality of one of the firms on the coasts.”•