Often the conversation goes like this – “Hey Roger, we received a call from the firm of Smith and Jones. They are a pretty successful firm based in Timbuktu and they are interested in expanding here. They think we would be a perfect fit. Can your firm help us look at this opportunity?”
First, let there be no doubt — we are thankful for every one of these calls. Far too often, when we ask whether this firm measures up to their definition of a good merger partner, the answer is something like, “we haven’t really thought about a specific type of firm.”
A couple weeks ago we discussed the importance of integration planning in achieving success in the dangerous waters of law firm mergers. Today we want to talk about another key to merger success — the creation of a Target Profile.
The law firm market is absolutely obsessed with mergers. If your firm has concluded that some type of combination is the best (or only) way you’ll achieve your objectives, there are scores of firms that would love to talk to you.
Sadly, the track record of, when it comes to law firm mergers and long-term success is . . . well, to say it is dismal is to putting it mildly.
The odds of selecting a firm that is a “best fit” are highly unlikely if you haven’t taken the time, in advance, to define what a “best fit” for your firm looks like.
The elements of the target profile will vary from firm to firm. That said, here are some factors to consider when you’re considering the idea of a merger.
- Culture and values — the standards for the way individuals will relate to and work with each other.
- Client types — the nature of the work you want to do, and the individuals / companies you want to work with.
- Practice mix — the specific set of capabilities essential to building the practice you envision.
- Size — is bigger better? Are you looking to become part of a much bigger organization, is a merger of equals your ideal strategy or are you really seeking an acquisition in which your firm maintains control?
- Financial characteristics — this is the stuff of business…profitability, productivity, debt and rates…and without compatibility here, the likelihood of success is greatly diminished.
- Compensation system –a system that is consistent with your firm’s culture is essential to “key partner” retention post merger.
- Type of firm governance — will decisions be by way of consensus…or will decision-making be delegated to a select group?
- Geography — what locations support the nature of practices, specific capabilities and size you believe serves the interests of the partnership?
Without a pre-defined Target Profile for a prospective merger partners it is impossible to know if conversations with specific firms should be had!