Case Study / Merger Analysis
A single-city firm considering expanding its regional footprint
Key Issues
The Managing Partner of a firm we’d worked with for several years had identified a target firm in the region as a possible merger/combination candidate. He’d determined that there was interest at the candidate firm. Adam Smith, Esq. was engaged to analyze the pros and cons of the proposed transaction.
We tend to approach mergers with a great deal of caution; much more can go wrong than can go right. Too many firms fail to conduct serious due diligence, which can grievously backfire leaving both legacy firms worse off than before the merger.
As is often the case with merger consideration, time was short (the more time elapses during merger negotiations the lower the likelihood of pulling it off).
Actions
Since we knew the firm well, we had a leg up and could focus our attention on the target firm and other critical considerations of the potential combination. We quickly developed and set out to implement a comprehensive plan:
- We interviewed every senior partner at the target firm
- We assessed practice area and geographic fit between the two firms–complementary, overlap, “orphans”
- We did a deep dive into the target’s financials and, importantly, their compensation system
- Our “stable” of researchers conducted background analysis into the economic strengths and weaknesses of the two key metropolitan areas and the macro- outlook for each.
Delivered extensive report concluding the combination would deliver immediate benefits under almost any reasonable set of assumptions, including client demand for a “one stop shop” firm offering an elite presence in the two cities, and that the combination would also ameliorate looming demographic problems in the partnership ranks of our client firm. Outlined integration priorities and requisite steps to attain and maintain rigorous financial and performance-related hygiene.
Results
Strongly recommended the transaction move forward.
