Want to attract talent and boost your DE&I? Is a merger the answer?

Diversity, Equity and Inclusion (DE&I) are vital elements for attracting, hiring or retaining staff and are a key way to measure success. The Harvard Business Review has reported that inclusive organisations are more likely to capture and lead markets, whilst Global Management Consulting firm, McKinsey, found that 43% of businesses with diverse management deliver consistently higher profits.

Pressure is increasing within the legal sector to put their money where their mouth is when considering DE&I. For example, Swiss pharma giant Novartis now require their legal panel firms to have diverse teams or face the possibility of having 15% of their fees withheld. However, in a recent survey carried out by the Solicitors Regulation Authority (SRA) it found that overall, legal firms are slow when it comes to increasing the number of ethnicities within the legal sector. Currently, there are around 17% of Black, Asian and minority ethnic solicitors working in legal practice, and when it comes to gender, even though 61% of lawyers are female, only 35% become partners.

In an attempt to bring some balance to the profession, and with competition between firms becoming ever more fierce, many firms are now factoring DE&I into their merger targets. In respect of gender imbalances within the legal profession, it is interesting that when British firm Lovells merged with the US firm Hogan & Hartson; they set a post consolidation goal to achieve 30% of female partnership by 2022.  Unfortunately, they just missed the target, reaching 27%, but this is a significant improvement from 2012, when female partners only accounted for a mere 21%.

When Wragge Lawrence Graham & Co merged with Canadian firm Gowlings in 2016 and became Gowling WLG, their combined female partners averaged just over 23%. Fast-forward to 2022, and the number of female partners has increased to 31%. This is down to a real post-merger commitment to increase the number of female partners, which has proved successful.

The effort to increase the number of female and diverse partners has been strengthened by the Chief Diversity Officer at US law firm Gibbons, Robert Johnson. In 2011, this firm was named as the ‘best law firm for women’ and in the eleven years since, it has reinforced this position. Johnson believes that: “There’s a data that proves diverse companies with diverse boards have a higher bottom line. It’s logical to think… diversity, equity and inclusion could be major drivers of deal value.”

So far, we have only discussed larger international firms that generally attract fee-earners from a wider talent pool by dint of their position in the market. But smaller practices have a DE&I advantage because ethnic diversity numbers tend to be higher. The percentage of female solicitors is also higher in smaller firms. It has been reported that in firms with between six and nine partners, 57% of them are female. Although only slightly up on the 2019 figure of 56%, it is going in the right direction.

Given the DE&I ratios for smaller firms, and the tangible benefits related to such robust strategies, the question to be answered is whether larger firms should be trying to catch-up with their smaller counterparts via merger. Value in a deal is essential and the greater diversity and inclusion within a practice, the greater the likelihood it will lead to better quality of markets, profits, and productivity. In conclusion, diverse partnerships and workforce, from fee-earners through to support staff, must be something all firms in the legal sector should address and making this happen via merger strategies can only increase value-added for clients.