Law firm mergers can be a bit of a caution. Mergers take place in all business sectors. However, there is a widespread belief in the legal community that they are a fast-track to growth, efficiency and increased profitability.
Take a deep breath before you go rushing headlong into one!
The popularity of mergers waxes and wanes depending upon the prevailing economic climate. So, if your practice is facing difficult times, surely a merger makes sense? Not necessarily. The suitors who have approached you may have their own skeletons in the closet.
The golden rule is quite simple: 1 plus 1 must equal more than 2. 2 is not enough and less than 2 can spell disaster.
Many moons ago, I was sitting in the office of the Managing Partner of a medium-sized regional law firm. No names, no pack drill. The poor fellow was holding his head in his hands but not solely because I was there.
Eight months earlier, he and his ambitious team decided to set up shop in another city. Rather than going through the difficult process of building a reputation in the new location, he decided to merge with an established practice. This doubled the equity partner count and created a culture clash. Two armed camps emerged and decision-making gridlock followed. In this instance, 1 plus 1 equalled 1.5 – or perhaps even less. The situation was not resolved for several, very difficult years. Even more ironically, had he waited a little longer, he would have been able to pick up the financially ailing local firm on his own terms.
It’s definitely a case of caveat emptor – but it’s not all doom and gloom. Correctly handled, mergers can lead to benefits for both parties and to a fitter, more profitable resulting single entity.
So, what are the key things to consider?
If any of the above are not obvious when merger negotiations start, it might be time for a rethink.
If you receive overtures from another firm, there are a number of common-sense things to consider:
When you have considered all these, there are a few further questions to ask yourself. Is the opportunity to merge a distraction from your business strategy? Opportunities should be grasped but they should not take your eye off the ball. Lastly, do you want to end up like The Leeds Building Society? It merged with The Halifax. To rename the new organisation, The Leeds supplied the words “Building Society” and The Halifax supplied… you fill in the gaps.
You would think the list of what to avoid in law firm mergers would be as long as your arm. In fact, it’s much more straightforward.
Avoid mergers where you can see no mutual benefits. Avoid anything that resembles a bail out for the other party – you can pick them up for much less when the insolvency practitioners arrive. Try to steer clear of anything that does not “feel” right strategically and, particularly, culturally.
Other than those, the only remaining thing to control is ego. Offers of merger are very flattering and many people can get carried away by them.
Just remember the 1 plus 1 equation – it has to make sound business sense.
I began this article with a cautionary tale about the chap who merged his firm to achieve a quick fix. Naturally, the quick fix did not work, but it was a salutary business lesson for him.
He learned from that lesson. When he retired recently, his firm had gone through many more mergers and acquisitions that were handled correctly. It’s now a top 50 Legal 500 practice. However, still no names and no pack drill from me.
You can read an interesting article in the Law Society of England’s blog on the cultural effects of law firm mergers by clicking this link.
Mike is an experienced marketing professional who has spent much of his career working in and advising the legal profession. For further biographical details click this link.
© LawWare Limited 1995-2020
Our clients range from small start-up legal practices to multi-partner, multi-site firms.
Another great customer service experience from LawWare. My laptop had to be stripped back to factory settings as part of a repair - taking hours! In contrast, restoring LawWare took one phone call to the support team and I was up and running in 6 minutes. If only everything was so easy!
As the first commercial user of LawWare back in 1998, we have had no hesitation in remaining with the product through its development. We thoroughly recommend it to any firm looking for a practice management system.
The helpdesk is exceptionally good. Whatever the query there is always a human being there to help. No leaving messages or being advised to go to a website. The best computer service for solicitors I have ever used!
The linking of documents and casefiles saves so much time! I have experience of several accounts packages and I like that LawWare is simple to use and easy to learn. Support is quick and effective and staff are helpful and courteous.
I have worked with a number of Case Management providers over the years but have not come across anything with the attention to detail and thoroughness of LawWare. My colleagues and I have not been disappointed.
I can’t imagine trying to be a law firm in the 21st Century without 21st Century IT systems. Having a ‘single system’ that underpins all the work, whether we are in the office or out, is an integral part of what we are building.
The level of support is the main benefit using this system. The system itself once you have had training is simple and easy to use. We have a great relationship with LawWare and the ongoing support is second to none.
Significant preparation was required to configure and import the data from our old firm. We had to get all clients onto the new system and then learn how to use it. We just find it very easy to use, much easier than our old system.
Being a busy litigator with a growing firm it is incredibly useful to be able to view my files from any location with some form of internet connection. I am a fan, and want to keep working with LawWare to make a good product great.
The switch to the new LawCloud system, which is still on-going, has gone very well. We found the LawWare team without exception to be very helpful and knowledgeable. All queries are followed up and dealt with promptly.