Mergers with the benefit of hindsight

A successful merger should begin with a clear expression of the reasons for doing it. Why should the firm undertake the cost and risk of merging?


What is it you are trying to achieve? What will success look like? What are your objectives

and will they be met if you merge? You need a purpose and vision to aid success. The

vision needs to be better than both legacy firms, with new values and goals for the newly

merged business. Merger is not a strategy: it is a tactic that supports your strategy and

that needs a realistic plan. It is surprising the number of mergers and acquisitions that

have no robust planning at all, there is no analysis as to what advantage a merger would

bring and if the other party are looking for similar gains. In fact, there is no analysis, but

it is often a reliance on people that are known to partners often in a similar location who

have a lightbulb moment that they should merge. The strategy becomes a desire to merge

rather than a thorough, analysed plan with the desired outcome that has tangible benefits to

both firms. Those benefits need to be expressed clearly and link to the overall strategy to

ensure partners understand why they should support their managing partners vision and

ideas. Having space in a building is not a strategy, though it might be a cost-saving benefit.

Do not fight battles on route, use your vision to aid success. When mergers work the

benefits are profound, whilst the integration often proves to be far trickier than anticipated.


“It is the hardest thing you will ever do in your life, to say it was hard would be an understatement.”
“Plan, plan and plan again and when you think you have done enough planning, plan again on every single thing.”
“The partnership was totally engaged and were totally behind it, the unity of purpose was brilliant.”

The reality is that very few mergers are equal, and one firm is very likely to be dominant.

All the firms we spoke to had been looking for a merger or acquisition partner for several

years and most firms had entered several discussions before finding the right synergy with

their eventual merger partners.


Some firms felt that they benefitted by using a merger broker.


The most quoted reason for using a broker was because the firm remained anonymous

through initial forays on match. Best use of time was also high on the list because whilst

partners can conduct research or already know firms that they wanted to approach it saves

valuable management time in both the research and approach phases. Whilst larger firms

have the resource to access public data on firms with turnover in excess of £14m there is

very little publicly available data with firms with revenue up to £14m. Using a broker with a

deep dataset is advantageous and provides a quicker route to conversations.

A broker does have applied knowledge and critical thinking about why a merger will benefit

both parties with a focussed target list. They can also help give an exciting vision of the

benefits of merging with a larger firm rather than the “you know you want to join us”

approach which only reflects the benefits to the acquirer.


Points of interest

  • Firms wanted to take on more complex work with their existing clients or wanted to be able to pitch and win work they would not have been considered for pre-merger.

  • Able to have a full service offering as clients had wanted strength and depth and fear of losing clients drove mergers.

  • Geographical alignment featured strongly, extending territories in complimentary areas with complimentary services. Some firms stated that it was hard to grow in a particular location and by extending geographically they had a different offering to clients.

  • To strengthen areas of the business, gaining deeper expertise in weaker areas and to further strengthen areas that were doing well.

  • Several regional firms wanted to increase their profile by having a foothold in London, sometimes as a gateway to international work, or to offer clients London service with regional cost benefits.

  • Attracting and retaining staff because the joint entity was now of a size that a career path was clear. This applied to both fee earning and support staff.

  • Several firms wanted to reinforce and cement their ranking in the top 100 UK law firms.

  • Accelerated growth rather than trying to grow organically or after several bolt ons.

  • Some firms had capacity in their existing building and their merger partner was coming to the end of their lease, so it made sense to merge to reduce their combined property cost base.

Key hindsight


  • Find the key reasons to merge and explain that vision to your partners and keep referring to it so you continually engage them with the vision you started with.

  • Engage a project team so you can release your partners to get on with what they do best and do not let them get into the minutiae of the deal process.

  • Do not merge just because you know another firm. Really get to the bottom of why there is benefit to merging and that needs full analysis.

“Merger is a step forward, but not the magic wand that will solve everything.”
“It was more successful than I dared to dream of and so much harder than I ever thought.”
“Have a strategy not an opportunistic approach.”

Acquisitions

Firms that had gone on the acquisition trail had all done this multiple times with different

levels of success. Some found that there were fractures in the partner group of the acquired

firm that did not become apparent until after the deal had been completed. Others did not let that happen because they embedded their staff with the acquired firm and really got to know them. We heard of attitude issues in both fee earners and partners and conversely, we heard that a firm quickly got rid of dissenters because they affected so much of what was good.


Common successful actions for acquisitions:

  • Key to success in acquiring firms was centred around getting to know new colleagues and ensuring staff at all levels were integrated by combining teams.

  • Ensure that the acquired firm move immediately to your IT systems, it cannot work if on day one there are several systems.

  • Get them out of their old building and when they move office they feel and act as part of the new entity.

  • Act quickly on difficult decisions and be honest then you will win hearts and minds.

  • Remove dissenters quickly, the firm you acquire usually have a list of people they believe will be an issue.

  • Agree salaries beforehand so there is no argument.

  • Let clients know what is happening and that you are there to support them. It is important they know that you are now offering a broader and deeper resource but that their relationship is unchanged. Ask them for feedback, you are a relationship business and clients need to know that they are supported.

  • Use partners to help you. We heard from one participant that a partner had left to join another firm because he did not agree with what was happening with the acquisition. He quickly asked to return, and they now use him to tell partners in firms that they are acquiring the reality of what it is like working with them. If people allow things to settle down, they will see that the changes are for the better.

Key hindsight

  1. Do not get so invested in the excitement of the pursuit of a merger party that you make a bad decision, if it does not feel right walk away.

  2. Communication is key but the approach to communication varied hugely between the two firms. The acquirer can change approach in the future, in particular how they informed staff that they had been acquired