2015 saw the largest-ever law firm merger, when Dentons announced a merger of its 2,500 lawyers with a giant Chinese firm, Dacheng, with 3,500 lawyers.
Mergers are all the craze. Everyone’s doing it…! Last year saw a record number of law firm mergers and acquisitions, with 91 firms joining forces.
In fact, law firm mergers have been en vogue for a number of years, so much so that it’s most likely that many law firm management teams have already had meaningful discussions about or had actually completed a merger in the last two or three years, and many more are expected to happen.
This got me thinking: what are the challenges to a law firm merger and what can firms do to mitigate these challenges?
What are the top five challenges law firms face when merging or planning to merge?
- Decisions, discussions and agreement
- Leave your coat and badge at the door
- Rivalries and blockers
- Identify deal breakers early and solve
- Culture and integration (both technically and psychologically)
Decisions, discussions and agreement
Normally any plans to merge will be handled by the CEO/Managing Partner and a close set of confidants who may be located globally.
In order to find the perfect target firm you need to make a number of decisions about your own firm first. Historically these would be discussed behind closed doors and via email.
What are some of the key things you will need to do pre-merger discussion?
- Define your reasons for your merger
- Define you growth strategy
- Define your perfect merger candidate
- Define a process for how you will manage the merger
- Proactively identify potential deal breakers and deal with them
Ironically once you have defined these for your own firm you will have to define the majority again for the new entity. It’s likely you will have identified a firm in a similar position but transparency and open discussion is key to ensuring an aligned vision that works for both.
Leave your coat and badge at the door
The important element here is your badge and allegiance to what it used to represent. The value of a merger is all about looking forward, and not back at what once was. Eventually the new entity will have to forget about the way things used to be done and get with the programme.
It’s still common to hear about big mergers that happened many (at least five) years ago, whereby the two firms are still operating like different firms. This will always hinder a firm’s ability to drive forward and make the most of the opportunity.
Rivalries and blockers
It’s always going to happen, lawyers like to win. It’s in their DNA and that attitude spreads throughout the organisation. Therefore it’s common to find that there will be individuals and groups in each firm who will try to one-up each other. This can be related to control of key departments and practices or around infrastructure and business services.
There will always be people in the practice who a merger will not suit, maybe personally or as a group. Each of these groups need to be identified and dealt with appropriately. Small groups can create obstacles and issues which if left alone can create serious roadblocks to a merger process.
Quite simply put, leave your ego at the door and work towards something new and better.
Identify deal breakers early and solve
There will be many potential deal breakers during the merger and careful diligence is essential to help identify them. Once identified these need to be dealt with as early as possible otherwise they become more difficult to manage and resolve as time goes on.
Some deal breakers are more serious than others but here is a small list:
- Client conflicts
- Future name of firm
- Future organisational set-up and responsibilities
- Ghosts in the balance sheet
- Partner compensation
Culture and integration (both technically and psychologically)
This is often the killer blow. The merger has happened, but six months in it’s not “happened”. There are many reasons for this, including bad decision making pre-merger to poor handling of the implementation of the merger once agreed.
Once you have defined and articulated a new firm strategy and identity it’s important to manage that transition, and this process doesn’t stop. There are a couple of “must dos” early on in the process including not compromising and ensuring your new firm is as integrated as possible from day one.
Ensure a plan is made available to all which outlines the process and progress of working towards 100% integration. Build out KPIs and measure against those. Integration impacts all areas of the business including:
- Retention of people
- Improved processes
- Clear client and marketplace communication
- Technical infrastructure
So how can a secure enterprise collaboration tool help you ensure that your merger is a success from the planning to the implementation?
Create a clear corporate communications channel
Take the opportunity to start from scratch and create an enterprise social network. Firms are starting to tap into the human network of the organisation by constructing the cultural building blocks needed to become an integrated work force.
Providing everyone with a voice via a microblogging tool may seem a bit daunting at first but you’ll soon realise that people self-moderate and ESNs don’t become Facebook for the enterprise.
Whilst you need to provide the right channels for bottom-up communication you also need your leadership to buy in and to have a voice. This is could be via a blog (or a series of them) run by the management team of practice heads, which enables top-down communication to flow naturally.
These can be used to ensure timely updates about the new firm and its progress against targets and the integration of the two firms.
Create project spaces
When managing a merger there is a lot of information being shared, tasks to be completed and mile stones to meet. Providing all these elements in multiple project spaces allows you to track key elements of the process.
Whether that is at the very beginning when you are building out your strategy internally, managing the ongoing merger process and sharing information securely, or working with an external design agency to build the new brand for the new entity, it’s all possible in one solution providing management the ability to keep an eye on everything.
Sharing relevant information within the project team and ultimately the partnership
Information will be shared initially within a small group of people within the firm: the spark. This will naturally expand over time to include the smaller groups within the partnership and then ultimately the entire partnership, perhaps some third-party consultants and the representatives from the target firm.
Being able to audit file access and provide granular permissioning is essential. The ability to check whether the entire partnership has read the relevant documentation pertaining to the vote is important, because they will need to be informed to enable the vote to take place.
Create a common intranet
The majority of law firms have something they call their intranet. Many firms host their intranets internally, which poses a challenge when wanting to provide external parties with access to the information held within the intranet.
Introducing a SaaS solution provides instant accessibility and great out of the box functionality. You can share the newly formed HR policies, information about the objectives, and the culture of the new firm with external collaborators.
Importantly you can connect disparate groups of people to start to build key relationships which will ultimately help implement the cross-selling aspirations.
Create communities of practice
Bringing people together post-merger is vital. Providing staff with the ability to start to build relationships with new colleagues is essential in ensuring your new firm gets off on the right foot in achieving new common goals.
It’s again another opportunity to connect the human network of the new firm and start to build up the new culture. Fostering the community spirit from the top down within the new firm will encourage staff to start to feel like they are part of one combined firm instead of two separate entities.
Becoming more than the sum of their parts
Mergers are increasingly likely to happen to law firms within the next few years, so it is vital that they are able to manage the process without difficulty.
When used to their full potential, secure collaboration platforms will enable firms to merge successfully without falling at the hurdles that face them during this complex time.
A successful merger will see firms coming out of the other end as a united entity with clear communication both inward and outward, emerging as one firm stronger than the sum of its parts.