Law firm mergers seemingly are announced weekly and continue a trend as to which most observers are accustomed. Just last week Locke Lord and Edwards Wildman Palmer jointly announced the signing of a letter of intent to combine their two firms. Not all law firm mergers are marriages of equals, or instances when the strategic visions align into making a combination a “no-brainer.” More than a few mergers stem from one of the merger parties needing to combine to avoid a potential collapse. Unfortunately, for the law firm “needing” to do a merger, pursuit of a combination presents a “double-edged sword.”
Going down the merger route, under any situation, can be unsettling to a firm’s personnel, including its key contributors. Uncertainty abounds and producers, non-producers, associates, and staff wonder whether a combined firm, from a personal standpoint, will be good or bad. Indeed, uncertainty can result in unanticipated departures that can tarnish a firm’s appearance and attractiveness. Without adequate advance preparation, departures can adversely affect the merger discussions and, in some instances, spell their doom.
Preparing to pursue a merger takes more than addressing some deferred maintenance, polishing some dulled surfaces and identifying prime merger prospects. Because merger discussions can foment anxiety at all levels, attention to dealing with that anxiety is a must. Most particularly, it is important to prepare for potential departures prior to diving deep into the merger waters. To do so, law firm leaders must:
Recognize that Turmoil May Arise. Before any merger discussions get started, leadership must understand that anxiety at the firm will increase in a multi-fold way. Contributors of all degrees will wonder whether a merged firm is a place they want to work. Once merger is in play, normally calm people can become skittish. Leadership must be sensitive to this potential and act to provide a calming influence.
Understand that Intangibles Matter. Merger preparation means that data will be assembled to identify a firm’s strengths and explain its weaknesses. These analyses, especially regarding the firm’s producers, will focus on their economic contributions and downplay or explain away the negatives associated with some of the more challenged firm segments. Yet the firm’s real weakness can be the lack of glue or adhesion in its component parts. Leadership must identify where fissures might erupt and take steps to bond around them.
Negotiate Knowing that Departures are a Possibility. Nothing can hamper merger discussions more than experiencing lawyer departures after having touted those same lawyers as key pieces of the proposed combination. For that reason, no one component of your firm can be oversold. Negotiations should emphasize that the firm is greater than the sum of its parts and is an institution of great value.
Confront Departure Issues Head-on. If you have an idea that a departure is possible, deal with that risk directly. Visit the potential expat to address any disaffection that is fueling those thoughts. While this is where persuasive powers are critical, it is also critical that leadership address with other attorneys any fallout if departures do occur. For those that remain, a departure of one or more lawyers may create panic. Eliminate their concerns with a factually backed analysis of the firm’s remaining strength.
Provide Comfort to the Merger Partner. In instances when the departure cannot be averted, inform your prospective merger partner about the departure quickly with an analysis that emphasizes the remaining value of the institution. If you have been successful in tamping down any panic, consider informing your potential merger partner that additional departures are not expected and why. Finally, if your firm’s original pitch presented the firm as an institution more valuable than the sum of its parts, a leader’s ability to comfort a potential merger partner is enhanced greatly.
Pursuing merger is a high risk/high reward proposition. It should not be pursued without understanding that lawyers may leave the firm in the midst of the initiative. Can you firm withstand departures and make a merger work? Can you firm continue if merger discussions cause departures and no merger is consummated?