Tis the season, but holidays are not involved. Rather, market forces, activity and trends confirm that law firm merger is on the minds of law firms. While mergers once seemed to happen mostly around the start of the year, the complexity of the merger exercise means mergers can happen at any time. And even for the many law firm mergers that happen to close around year-end or as the year begins, there is no doubt that the courting, planning, and negotiating that goes into a consummated merger occupies many months of the year. In reality, law firm merger season never ends but runs from January 1 to December 31 every year.
Despite the heightened number of mergers recently, the impactful act of merger is not for every law firm. Pursuing merger “because everybody’s doing it” is a misguided take on what should matter to firms thinking about their future. Only if merger strongly supports a strategic firm imperative should the idea of merger be considered.
For the law firm unsure about merger, there are at least five reasons it may be worth considering.
Client Driven. When the retention or expansion of client relationships requires the addition of more substantive practice areas, greater bench strength, or an ability to serve clients in ways the present profile does not allow, merger may offer a solution. A merger can deliver a turn-key solution to greater client needs that may not be possible through organically developing needed skill, depth, or alternative practice approaches. A client with unsatisfied needs may not be client for long, so meeting those needs through merger is a solution to consider.
Geographic Imperative. Much like the client driven reason for merger, distant markets can beckon a firm to geographically expand through merger. A merger into a far-away market can further the success of an existing practice area, a firm’s attempt to focus on an industry already served by a firm’s local lawyers, or a client that has expanded away from a firm’s home base. Moving into a market not currently served can meet a firm’s strategic need. If so, it may be wise to consider merging with an established firm in an outlying market that helps execute a firm’s strategy.
Platform Improvement. A firm may find itself swimming upstream when it comes to practice innovation, law school recruiting, lateral hiring, retention, and winning beauty contests. These disappointments often have less to do with a firm’s intrinsic worth but more a matter of available resources and perception. A merger can deliver an enhanced platform that instantly provides needed wherewithal and changes perceptions. Instantly lawyers and their firm can seem more innovative, more attractive at law schools, pleasing to lateral candidates, more immune to attrition, and “in the game” at every pitch. A firm tired of finishing second may have a platform problem that can be solved through merger.
Need for a Lifeline. Some firms wait too long to tackle platform deficiencies and cross into the dreaded zone of crisis. For these firms, a merger may smack of desperation, but it also may be a matter of survival. A firm leering over the precipice may have an excellent reason to consider merger. And while negotiating a merger while weakened is far from ideal, there may be no other or better alternative. If a firm needs a rescue, it may seriously want to consider merger.
Succession. Law firms everywhere have inadequately prepared for succession. Whether the failure of planning pertains to leadership or client succession, it can leave a firm at risk. Unfortunately, shortcomings in planning succession can take a number of years to correct if done organically. The long road of organic succession can be complex, subject to fits and starts, and subject to unforeseen developments. Firms facing succession challenges that do not have the luxury of time or the confidence to implement an organic succession plan may view merger as a good solution.
Merger is not right for every firm or suitable in all situations. But in a number of instances, like the ones discussed above, it can be an effective solution. Based on how things are at your firm, should it consider merger?