Leon Shapiro’s recent “How to Improve Your Organization’s Succession Planning” in Executive Street: The Business Leader’s Resource, reviewed the state of succession planning among many business organizations. Mr. Shapiro’s article noted the near universal recognition of its importance among business leaders, yet their confession that in many cases not enough is done for its preparation.
Among law firms, the same is often true. The press of everyday business pushes succession planning to the bottom of the “to-do” stack until it is too late. Many firms approaching the time for succession do not know who will succeed existing leadership, don’t have an actionable plan to implement succession, have not executed on succession a plan if it exists and have done too little in terms of developing a roster of future leaders. Some firms that allow their succession planning to slip and end up staring at a looming succession crisis turn to merger as a solution. This is especially true among smaller law firms, and many of them solve their dilemma by merging with larger, more established firms.
No doubt the smaller firms combining with larger firms frequently are being absorbed rather than surviving or entering into the combination as equals. In the case of law firm merger in which a smaller law firm is absorbed, any number of reasons can drive the decision to abandon independence. But given an aging of law firm leaders from the boomer generation, merger in which smaller law firms are absorbed may present an alternative to a more traditional law firm succession plan. Mergers driven by the need to provide for succession make sense for a number of reasons.
For the firm being that has not adequately planned for succession, merger can resolve many succession-planning issues. Without providing an exclusive list, a firm facing succession addresses some of its issues by agreeing to merge, including:
Leadership Dilemma. For some small firms, a future generation of leaders just never developed. Law firm leadership at those firms face the uninviting prospect of turning the reins over to unqualified or uninspiring junior partners. A merger can solve that problem.
Post-merger Continuity. Existing leadership may be concerned that a non-merger succession plan won’t go well and their firm gradually may wither away. Combining with a larger firm with solid leadership may reduce that risk and promise continuity. And that continuity may mean, at least in the mind of the boomer leaders, the law firm they started lives on.
Post-merger Opportunity. Feeling a possible lack of confidence in the leadership readiness of the smaller firm’s lawyers, boomer leadership may believe that a new and larger firm will provide better opportunities for their people for whom fondness remains. Leadership riding into the sunset knowing that they have provided opportunity to their people may feel more content.
Good-bye Worry. It is an overstatement to say that a merger removes worry for the former leaders of the absorbed firm. But a well-negotiated merger certainly can provide some sense of security to law firm leaders that have fought the good fight for so long without an end in sight.
Benefits. The merger agreement may include benefits to the absorbed law firm’s people, including former leadership, that are better than or more secure than benefits currently extant at the smaller law firm. It is inescapable that a law firm that closes due to a lack of succession planning will not continue to provide its people with benefits.
Although a smaller firm’s leadership may be motivated to merge in order to solve some of its succession issues, it is not as if the acquiring law firm does not benefit. The existence of firms with succession issues presents to the larger firm a market opportunity it may not otherwise have. In addition to gaining access to a desired market, the needs of the smaller firm to resolve its succession promptly may improve the economics of the deal and gains for the larger firm market intelligence that may exceed any that could be obtained by hiring a lateral or two to a de novo office.
These considerations already have been enough to propel some firms into merger-do they address the issues your firm faces?