Every year law firms of all sizes merge. For some of the smaller law firms merging, the decision to combine may have been driven by the need for an effective succession plan. In these cases in which long-time management is unenthused about the prospect of turning the keys over the next generation, merger can be pursued in lieu of the more traditional internal succession.
From the point of deciding to seek a succession plan merger to getting to the closing table, a lot of things must happen. Indeed, care is essential in any merger but especially when a succession plan merger is pursued. Mistakes along the way can make the plan impossible to achieve or result in the options available being less than desired. An undisciplined approach may yield no merger while leaving the firm weakened. To maximize the outcome in a succession plan merger strategy, there are at least five key considerations.
Establish Your Objectives. As in any major transaction, a clear set of objectives should be established at the outset. If the succession plan merger is primarily designed to wrap up the smaller law firm’s affairs with dignity, then the approach will be far different than for mergers designed to “cash out” or to leverage the combination into the next achievement for a law firm steeped in a history of success. But if the objectives are not well understood from the beginning, pursuit of a merger will not only be haphazard but also potentially ineffective, or worse yet, harmful.
Objectively Assess Your Attractiveness. Nothing can waste more time than being unrealistic about your firm’s attractiveness. Conversely, nothing will be more disappointing than to realize that your merger strategy undersold your value. To avoid missing the mark, hire an advisor experienced in law firm mergers that will provide an unbiased assessment of your place in the market. If the advisor concludes that no market exists for your firm, you clearly would want to know in order to avoid pursuing a fool’s errand. If a market exists, geography, legal strengths or specialties, size, financial performance and personnel will be relevant factors to developing a strategy.
Make Your Firm Look Good. Many times, a home sells more quickly and at a higher price if it is “staged” to look more attractive. The same can be true if proposing to enter the merger market. Deferred maintenance needs to be remedied, lingering problems need to be addressed and contingent liabilities need to be resolved or at least contained. Presenting your firm in the best possible light, with professional assistance, can be very helpful to optimizing your results.
Develop a “Sale” Strategy. Law firms are best marketed discretely and without being on the market for too long. For that reason, it is essential that your advisor develop a strategy that presents your firm to good candidates without shoving a “for sale by owner” sign in the front yard. An indiscriminate blanket approach to marketing your law firm can be counter-productive. And a law firm marketed for too long will become market worn and perceived as rejected by the market.
Communicate Internally. The fact that your firm is seeking a merger partner should be closely contained. But because word has a way of leaking out, it is essential that an internal communication plan exist. A plan serves at least two objectives. First, it keeps key law firm contributors on board and minimizes their premature departures. Second, it can build support for the merger. But because pursuit of a succession plan merger is based on the conclusion that an internal succession plan is not desirable, any communication plan needs to be carefully developed.
A succession plan merger can be a useful strategy for law firms of the boomer generation. Pursuing that strategy requires care and commitment. Has your firm considered a merger as a way to address its succession issues?