It comes as news to no one that mergers have recently been changing
the legal landscape. Tony
Williams and I share the view that we are witnessing the transformation
of the industry’s fundamental structure, into a form that may endure
for decades going forward but which will scarcely resemble what it looked
like, say, 10 years ago.
So if a law firm merger is analogous to a marriage, isn’t it worthwhile
to make as certain as humanly possible beforehand that the union will
be solid and enduring and that the whole will indeed exceed the sum of
the parts? (I don’t need to tell you what the divorce statistics
are like; and in corporate-land, McKinsey has published an estimate that
only 23% of acquiring firms recovered their acquisition costs within
10 years.)
Today we have two perspectives on what it takes to make a go of a merger—the
financial and the cultural—and if merger or mergee is in your future,
I commend them to you for reading and reflection.
First is an admirably sane
piece stressing the utility of analytic business
intelligence tools before, during, and after the due diligence and firm-integration
periods. Despite all the many and varied considerations that
go into assessing a merger’s advisability (culture, partner compensation,
productivity, geographic and industry overlaps, conflicts, back office
issues, revenue synergies, personality concerns, likely client reactions,
etc., etc.), it should all boil down to whether the combination augurs
well for creating a financially stronger, more profitable firm with greater
client service capabilities.
To attempt to answer this question with any non-zero degree of confidence
requires rigorous analysis of the basic performance metrics for each
firm: Would the deal put key clients at risk? Key attorneys? Where
can we enhance productivity, cut costs, or pare down unwanted debt? Business
intelligence software gives you at least a fighting chance to come up
with answers to these questions that you can rely on and project from.
Oh, and before we go any further: You do understand the strategic
imperative or benefit this deal will serve, right? (If you
find yourself or your firm suffering an identity crisis in the midst
of full-scale negotiations, the only non-demented reaction is, as they
say at the spa, to "push yourself away from the table.")
Once you know why you might be merging, set up "must-have," "nice-to-have,"
and "dealbreaker" criteria—preferably in advance of thinking
about any particular potential partner firm so you don’t subconsciously
put your thumb on the scales. The other reason for setting
these up in advance is that once a deal is in play, events can tend to
move rapidly. If you don’t have the right questions figured
out beforehand, it may be too late to regain the analytic clarity you
need.
Second is
our cultural perspective. The most salient risk here is that
your firm doesn’t have one (a culture, that is). Sure,
every firm will tell you it has one, and having lived some of my tender
years in the corridors of both the hyper-civilized, elegant and refined
Breed, Abbott & Morgan, and then the high-decibel beware-of-flying-objects
Shea & Gould, I’d like to believe it true of all firms as well. The
plain fact is it’s not. Here’s the problem, as described
by the U.S. Chief Marketing Officer of Lovells:
"law firms have been so comparatively slow to focus on brand
marketing that differentiating factors between firms are relatively non-existent.
Apart from knowing partner X from law school, a client would be
hard pressed to articulate differences between the service received from
Firm A or Firm B. To a marketing professional, this means danger ahead."
Wherein, precisely, lies the "danger?" If your firm
lacks a culture susceptible of crisp definition or capable of articulation,
then a
fortiori it lacks a brand identity.
Let’s unpack "brand identity" for a moment: First of
all, never confuse your brand with a mission statement (and shame on
you if you’ve devoted more than 10 minutes to a mission statement to
begin with). Your firm’s brand identity, which hopefully rises
to the level of "brand equity" (yes, there is such a thing as "brand
liability"), is the promise of that "certain something" that sets your
firm apart. It’s the glue that makes a client of your firm feel
unlike they do as clients of the other firms they use—as well as
what makes it special for your partners and associates to be at your
firm and not somewhere else.
What has this to do with mergers?
More mergers founder, or under-deliver, based on cultural misalignments
than on any quantifiable disparities. To cite a legendary
example, was the Clifford-Chance/Rogers & Wells deal a problem child
for years because of the quantifiable lockstep/eat-what-you-kill disparity? No: I
would argue the numbers could have been made to work, certainly better
than they did, had the clarity of a virtuous, unitary and forthright,
culture been achieved earlier. (I believe, for the record, they’re
at long last pulling it off.)
So once the numbers between your firm and your putative acquisition
add up, you’ve only begun the dance. Articulate your firm’s
explicit and implicit values and expectations about quality, service,
and value-for-money. Give breath to why clients see you differently
(they do, don’t they?). Know what you stand for.
Now, if you still want to merge, you have a chance.
