The spring of 2018 has produced a spate of large law firm mergers.  Despite this noticeable activity, the interest in mergers is not something new-over 600 mergers and acquisitions have closed since 2007.  Based on the tactic’s popularity among firm leaders seeking a competitive edge, we can expect more mergers in the future.

For law firm combinations to make sense, however, a lot of things need to fall into place.  Financial considerations are hugely important to any combination.  Not surprisingly, firm leadership tends to focus on financial issues to assure that any deal proves accretive.

Factors that assess the compatibility of two firms also receives a lot of attention.  Client, practice, and strategic compatibility must be considered to avoid painful and ill-fitting combinations.  Yet when it comes to thinking about compatibility, the most important compatibility test is whether the cultures of the two firms mesh.

For the firm thinking that “merger” may be in its future, the importance of culture can’t be discounted.  But what does “culture” mean?”  “Culture” can be a lofty word that requires specifics to be more than aspirational.   Based on our experience, getting past platitudes and understanding the cultural fit between two law firms is aided by examining six areas of day-to-day law firm life:

Law as a Business.  Today, most firms acknowledge the importance of operating as a business but beyond that unanimity there can be widely divergent views about what that means.  A firm’s unyielding dedication to business principles may be tough to swallow for another firm that has been slowly moving from a “law as a profession” philosophy to a more business-like approach.  Understanding where the two firms stand on the business/profession continuum is important.

Financial Objectives.  For some lawyers and their firms, making as much money as possible is the only important driver.  Another firm may value a comfortable living while enjoying an equally satisfying quality of life.  Forging a union between two firms at distant ends of the spectrum could be intolerable for both parties.  The financial objectives of firms can say a lot about their cultures.  Comparing those objectives is important in finding the right match.

Compensation System Driven Behavior.  One firm’s approach to compensation can be very different from the next firm.  The incongruity of two compensation systems obviously may suggest a poor fit.  But the bad fit can go beyond the technical process of evaluating and rewarding performance.  Compensation systems inevitably encourage behavior.  Bringing together two groups of lawyers whose behavior is widely different can compound an already formidable integration challenge.  Understanding how lawyers from different firms behave is one key to determining whether cultures align.

Non-monetary Values.  All firms make decisions respecting the non-monetary values they find important. There is no right or wrong answer to whether a firm should be civic oriented and/or committed to bar activities.  The law firm industry has more than enough room for firms of varied persuasions.  That said, two firms at opposite ends of the non-monetary value spectrum might prefer to remain apart.

Valuing People.  How a firm’s people (professional and non-professional) are treated says a lot about a firm.  Organizations often thrive when their work-forces enjoy their place of work.  Lawyers or other personnel at a “people place” may find life at a more cutthroat shop demeaning or otherwise unfulfilling.  Conversely, personnel used to a strict bottom-line mentality may feel unchallenged in a softer environment.  In any merger, the human resources equation must be solved.

Collaboration.  The teaming atmosphere at one firm can be dramatically different from a place where being collaborative is neither expected nor rewarded.  If a merger will bring together lawyers not on the same page about the concept of teamwork, inefficiencies and resentment will mount to the detriment of the merged firm.  A culture of collaboration will not likely fit well in a culture where Lone Rangers are lauded.

In any merger, the importance of a cultural fit cannot be shrugged off.  If two firms thinking about combining are different in many of these six areas of day-to-day life, the two cultures may not be aligned.  If merger is being considered and many of these day-to-day characteristics don’t match well, would it be wise to go forward?