We are a small six attorney litigation firm. We have two partners and three associates. One of the partners wants to retire within the next five years. The other partner will continue to practice for another 10-15 years. We love practicing law and consider ourselves to be very good lawyers. However, we find firm management and administration to be a challenge and we are not skilled in this area nor do we want to be. We have a good book of business and clients. Recently, we began discussing the possibility of merging with another law firm. What are your thoughts about firm's like ours merging with another law firm?
Obviously, merger or acquisition of law firms is becoming more and more commonplace. Hildebrand is projecting 44 mergers (firms with five or more attorneys) in 2007. However, research indicates that 1/3 to 1/2 of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone.
Right reasons for merging might include:
I would start by thinking about your reasons for wanting to merge and your objectives. Ask yourself the following questions?
Make sure that you look for a complimentary fit. Since you are weak in firm leadership, management and administration – look for a partner that is strong in these areas. Strong leadership, management, and administration may be hard to find in a firm under 25 attorneys.
John W. Olmstead, MBA, Ph.D, CMC
We are a 25 attorney firm and we are discussion the possibility of searching for merger partners? What is the process?
You start with determining your merger objectives. Why do you want to merge? What do you hope to achieve? Is merger compatible with your strategic plan? What size of firm are you considering?
Once you are sure that merger exploration – in general – makes sense – you should insure that your house is in order. In other words – can anything be done to enhance the value and/or marketability of your firm? For example:
Next, develop a merger marketing plan and begin working the plan. Try to generate enough leads that you can explore merger with several firms rather than engaging in "random merger talks" which often result in isolated merger offers with you having no framework for comparison.
Use an outside consulting firm if you need help organizing, identifying candidates, and managing the process.
Once you have merger candidates identified – the real work begins. Here is a general outline of the process:
Merger Accessment (Due Dilligence)
Philosophies, personalities, life styles, do the partners like each other, why does the deal make sense.
Partner Compensation System Comparisons
Retirement, Voluntary Withdrawl, Expulsion Policies
If the two firms decide to proceed with a merger – then the process of merger implementation begins. A merger agreement is executed and a merger implementation plan it put in place. Then you begin working the plan. If the merging firms are of similar size (as opposed to a large firm acquiring a smaller firm) a lot of infrastructure work will need to be done – ranging from IT systems, management structure, space, etc. to accomodate the larger entity.
John W. Olmstead, MBA, Ph.D, CMC