Mergers: The benefit of hindsight

When thinking about embarking on a merger, you might have a shopping list of things you want it to achieve. The vast majority of mergers and acquisitions involve little or no planning at all,  and some firms fail to give adequate consideration to whether the other firm is looking for similar benefits or gains. Instead, the strategy becomes a race to merge, as opposed to a detailed and thoroughly set out process with proper defined benefits on both sides. Fundamentally, the ultimate vision for both merged practices must be achieving a better proposition than its respective legacy.

When mergers work, the gains are immense. However, synthesis often proves to be far harder than originally expected.

Most firms enter discussions with several potential merger partners before finally settling on a perfect fit, but many merged firms commented that using a broker, predominately because it streamlined the process and made it more efficient, contributed to an overall smoother transition. Better use of time was a paramount concern, even though partners may undertake their own research, or perhaps know a practice worth approaching. Using a broker saves valuable time in both approach and research phases. Using a merger and acquisition specialist in command of a huge database has its obvious advantages and may provide a faster route for firms yearning for integration.

Key reasons for mergers

There are many and varied reasons for firms to be on the lookout for a merger, but the following appear time and again:

• Practice’s desire to take on work with greater complexity or wanting to win work they would otherwise have been turned away, pre-merger.
• The ability to offer new and existing clients a strength and depth of service that failure to provide may lead to lost clients.
• It may be difficult to grow in a specific location and, by extending geographically, firms have a greater opportunity to offer a wider spectrum of services.
• To gain wider access to specialist lawyers in weaker areas and bolster those areas performing well.
• Increasing their profile by having a foothold in London or another large city, perhaps using it as a gateway to international work, or provide the ability to offer London clients services with regional costs benefits.
• Retaining and attracting employees, both fee earners and support staff, as the merged firms would be of a size that led to a clear career pathway.
• To reinforce their firm’s ranking in the legal top 200.
• Providing accelerated growth rather than waiting for the firm to grow organically.
• Merging firms to reduce combined overhead costs.

Key hindsight findings

Firms or managing partners should identify their own set of primary reasons to merge, and convey that vision to the other principals, referring to it repeatedly in order to engage with the concept you began with.

Think about engaging a project team. This will allow you to release managing partners to get on with their day-to-day fee-earning work. This way, no one gets bogged down in the minutiae of the process or feels pressure to succeed.

Just because you know of another firm wanting to merge doesn’t necessarily mean your practices should become one. Try to think about why there would be a benefit or gain to the merger and what they look like. You should analyse your findings and keep this mind when making a final decision.

Try not to get so engrossed in the excitement of pursuing a merger that you make a bad decision for your practice. The rule of thumb here should always be, if it doesn’t feel right and can’t be fixed, then you should walk away.

Maintaining communication is essential during the merger process. This can vary wildly between firms alongside their expectations, so should be discussed at the earliest opportunity.

It should always be remembered that mergers can take many years to become established, and both practices should be realistic when measuring its success. Think about your criteria for the merger: are the managing partners making more money? Has the practice increased the number of new clients? Do clients feel the practice is offering a better service?

Merging with another firm, even when you have done all your planning and resourcing, is a delicate balance to get right. Those who appear to have had the most success are firms that viewed their merger as a chance to embrace and re-assess changes which provide improvements for both firms, seeing it as a complete metamorphosis rather than a chimera of two separate entities.