• Proceed with caution: use a framework for analyzing mergers and alliances

As soon as you decide that a merger and alliance would help you achieve your goals, put up a sign in your office that says:  “proceed with caution.”  Mergers and alliances are dangerous animals.  You’ll get excited.  You’ll likely see everything – from cultural incompatibilities to compensation issues – as surmountable barriers.  There’s lots of literature on why mergers fail and projections are almost always overly optimistic.

So, you should enter your quest of a merger or alliance with a framework that allows you to stay focused and grounded through the search and negotiation process (for more on this, take a look at these Bruce MacEwen articles: Mergers 101 and Mergers: Finance Before Cuilture or Vice Versa?     As Bruce recommends, it’s best to “set up “must-have,” “nice-to-have,” and “dealbreaker” criteria.”  He also suggests considering these elements in evaluating a merger: culture, partner compensation structures, productivity, geographic and industry overlaps, conflicts, back office issues, revenue synergies, personality concerns and likely client reactions.  However, it “should all boil down to whether the combination augurs well for creating a financially stronger, more profitable firm with greater client service capabilities.”

Just like a merger or alliance may not be right for you, not every target will be.  The fact that a firm is available, that it’s the first one you find after a long search or that it’s asking you to merge doesn’t make them right for you.

Also, don’t underestimate culture.  It’s a difficult and, oftentimes, wrecking factor for merging firms in the same country.  It’s critical when dealing with a cross-border combination.  Your lifestyle will likely change.  You’ll probably change the benefits and burdens of independence and small size for the benefits and burdens of belonging to a global business.  You’ll have a foreign boss, you’ll have to report your financial performance to him/her (in Dollars, Pounds or Euros, at likely unfavorable exchange rates.)  You’ll have to work across time zones.  And you’ll have to treat (as you should) the firm’s Russian client with small, sporadic interests in your country as you treat your top local client.  This isn’t bad or good per se.  You just need to be aware of it and make sure that it’s right for you.

You should also use the framework you come up with to negotiate a solid merger or alliance agreement.  The success of your plan will largely depend on it.  For example, if you’re joining a global player, the way you negotiate your integration into the firm will likely make a huge difference.

  • Fortune favors those who act: implement

Many of the promises of mergers and alliances fail to materialize because of poor implementation.  It’s not enough to have a plan or a good merger agreement.  You must have the leadership and the right systems to ensure that what’s on paper gets done.

Our research shows that one of clients’ main concerns with mergers and alliances is patchy quality.  Therefore, you should focus on ensuring standardized quality across offices and teams of the merged firm.  You should convince your clients that you have the best team in your practice areas and that you work as one firm.

These five steps (1 – recognizing the ground; 2 – taking a stand; 3 – thinking, not feeling; 4 – proceeding with caution; and 5 – acting) seek to provide a deliberate, patient, methodical process for approaching mergers and alliances.  Using them will likely spare you many headaches in the future.


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