David Feldman's book, Reverse Mergers: Taking a Company
Public Without an IPO, now in its third printing, was published in 2006
by Bloomberg Press (available on http://www.amazon.com).
View David Feldman's reverse merger blog at www.reversemergerblog.com.
Joseph Smith and David Feldman are coauthors of PIPES:
Revised and Updated Edition - A Guide to Private Investments in Public Equity
(Bloomberg Press, 2005) available on http://www.amazon.com.
In the News
David
Feldman is quoted in the lead paragraphs
of a Crain's New York Business article
dated September 2, 2002 entitled "Mergers
Lower Bar for Small Law Firms".
Mergers
Lower Bar for Small Law Firms
by
Lisa Goff
Small
law firms like Feldman Weinstein are
used to eating the crumbs from the tables
of New York City's mid-sized firms.
When one snatches a $55 million deal
from those same firms, as Manhattan-based
Feldman Weinstein did recently, it comes
as a surprise.
"The client was inches away from using
a midsized firm for the sale of his
business, but he realized he'd pay 50%
to 100% more in fees," says firm founder
David Feldman. "I'd done smaller jobs
for the same client in the past, and
he knew I'd throw five people with a
four-hour call-back rule at this deal."
The sour economy is partly to thank
for Mr. Feldman's good fortune, but
so is the rash of consolidations among
the city's midsized law firms. Firms
including Baer Marks & Upham, Robinson
Silverman Pearce Aronsohn & Berman
and Squadron Ellenoff Plesent &
Sheinfeld have merged with or been subsumed
by larger practices.
That means boutique shops like
Feldman Weinstein face less competition
for ever more cost-conscious clients.
In addition, smaller or more entrepreneurial
clients may find themselves increasingly
estranged from the new mega-firms with
their grander ambitions.
Goliaths retain an edge
While these factors have whittled away
at the sizable advantages held by big
firms and the remaining midsized ones,
many of those advantages remain. "It's
still hard for a small firm to compete,
because clients expect specializations
in so many areas," admits Jeffrey Platte
of Platte Klarsfeld & Levine, a
small real estate law practice in Manhattan.
In fact, consolidation can work both
ways-opening up opportunities for smaller
firms eager to service disaffected clients,
but also creating formidable competitors.
"Sometimes, the new incarnation
serves the client better than the smaller
one," says Alan Scharfstein, president
of DAK Group, mergers and acquisitions
specialists in Rochelle Park, N.J. That
is especially true, he notes, when the
union creates access to attorneys outside
of New York City, so clients can get
big-firm quality at a lower cost.
For most small New York firms, however,
the merger wave has been a significant
plus. Partner Stephen Lazare reports
that Lazare Potter Giacovas & Kranjac,
with five partners and eight associates,
is getting more of what he calls "either-way"
work: business that doesn't require
the resources of a huge firm but isn't
a natural small firms, either.
"In the past, the midsized firms
were the receptacle for a lot of the
either-way work", Mr. Lazare says. "Now
clients who are being forced to make
a decision are finding that smaller
firms can handle the business, and at
substantially lower cost."
One factor that makes it easier for
small firms is technology that puts
their research capabilities on a par
with those of larger firms.
In addition, small firms' ability to
offer the personal attention of a partner
instead of an associate droid now has
extra currency, as clients see their
status drop once their attorney becomes
part of a larger firm. Besides, bigger
firms often don't want to deal with
entrepreneurial clients, who may account
for $500,000 in fees one year and zip
the next, or who may expect law firms
to negotiate fees or payment schedules
when the clients' profits fizzle.
Re-evaluating needs
At the same time, clients who used to
believe they needed to hire a big firm
for the credibility and access it purportedly
brought are reconsidering, given the
price tag. "Business owners are getting
smarter about who they choose to represent
them," says Mr. Scharfstein.
The wave of consolidation is also creating
unusual opportunities for small firms
to load up on attorneys, often skilled
specialists who feel that they just
don't fit in at their suddenly enlarged
practice groups. Mr. Lazare, where firm
specializes in insurance law, plans
to add four more lawyers-most likely
defectors from larger firms- and intends
to move to bigger space after the beginning
of the year.
