Law firm mergers are being announced all the time. As we saw in Jennifer Smith’s Big Law Mergers Questioned, their unveiling tends to stimulate extensive discussion. The pace of mergers is ahead of last year and as Catherine Ho wrote in Law Firms Experience Big Jump in Mergers, the number of combinations in 2013 is noteworthy. Mergers of regional firms, mergers of firms with international reach, mergers borne of strategic vision and potential mergers possibly encouraged by necessity—reasons aplenty seem to be fueling the current merger activity.
A successful merger depends on a lot of things, not the least of which is the ease and thoroughness with which two firms assimilate. As I wrote last week in Resolving Law Firm Transition by Merger-Important Compatibility Issues for Management’s Consideration, achieving the desired assimilation is greatly aided if the firms are compatible in key areas. Cultural compatibility is very high on the list of “must haves” when considering a merger.
No two firms’ culture is alike. Expecting to find an exact match is expecting to find the impossible. While a perfect fit is unrealistic, David Parnell noted in his The Orrick/Pillbury Merger–Three Things You Should Know that it is very important that cultural similarities and dissimilarities be noted and considered. If the similarities predominate, a good match from a cultural standpoint may exist. If not, extra caution should be exercised.
Cultural compatibility, unlike some measures, is not data driven. But it is more than a gut feel. At a minimum, in addition to compensation/ performance compatibility which were discussed last week, testing two firms’ cultural compatibility requires a focus in five areas.
Management Style. A firm run autocratically is far different than one that reaches decisions through a more democratic process. A firm that takes risks is not for everybody. Owner involvement can be very different in a firm with a heavy emphasis on practice group management as compared to a law firm centrally managing only a transactional group and a litigation group. Lawyers subject to laissez-faire management may chafe when post-merger management seeks accountability. A law firm that holds lawyers accountable is also more likely to try to motivate its lawyers in a structured way—mere pep talks will not work.
Working Environment. The elements of a firm’s work environment are many. Are lawyers collegial, do they work collaboratively and are they helpful to their fellow lawyers, all without asking for credit? The answers to these questions define the interrelationships between lawyers. In addition, the institutional support for lawyers delivering legal services impacts the work environment. How a law firm deals with adversity also speaks to the work environment. Are layoffs or other unpleasant personnel moves handled coldly, or with dignity and grace?
Inclusiveness. A sense of belonging, or its lack, can be felt every day. Management solicitous of owner opinions is far different from management that dictates how things will be done. Even if a law firm has centralized decision-making, a sense of belonging is enhanced if decisions are explained transparently. Lawyer interaction outside the office also can add inclusiveness. In contrast, a law firm that informs its lawyers on a “need to know basis” or in which its lawyers never see each other outside of the office is a different place.
Values/Intangibles. A firm’s core values can be particularly important. Things like trust, work ethic, civic involvement, civil treatment of others, fairness, client centeredness and opportunity for advancement on the basis of objectively evaluated performance go to the core values of a firm. Two merging firms that approach these topics differently may struggle once combined.
A Sense of Place. When two firms merge, they jointly look to the future and envision a better or more successful day. Creating a new vision can break down if the firms’ respective short term and long term strategic visions prior to merger were vastly different. Moreover, how a firm views itself in the community and the profession says a lot. Does its marriage partner have a similar self-image?
When law firms merge, they bring together different cultures that must be understood. No matter how similar two firms may seem to be, they are not identical. How cultures mix can be very important. For you, what are the culture “show stoppers” in any merger?