It almost seems like a broken record to hear about the popularity of law firm mergers.  Legal industry publications report on the latest mergers and hot market trends.  Indeed, just recently The American Lawyerreviewed the merger opportunities that abound for mid-size firms in its Mid-size Firm Leaders Awash in Big Law Merger Offers.

Despite the popularity of mergers among many firm leaders today, positive outcomes are not assured.  Mergers can fail-depending on how success is measured, the failure rate can exceed 50%.  Even a “successful” merger can be a disaster for some of the parties indirectly involved, like certain partners.  The recent headline Biglaw Lawsuit Drama: Partners Allege Merger Deprived Them of Their Moneyin Above the Lawrepresents anecdotal proof that mergers can go wrong, at least for some of those participating.

Of course, a bad merger for one participant may be a good one for another.  And the list of exact ways a deal might turn out poorly can be long if not endless. Nonetheless, it is possible to identify five circumstances that can lead a firm or some of its owners into a bad deal.

Five paths to unacceptable to a shaky outcome are:

The Marriage Partner is Less Than Forthcoming.  No business transaction is immune from a bad actor on the other side.  Even if outright fraud is not present, an agressive counterparty can use non-disclosure, obfuscation, or confusing nomenclature to extract a deal that a clearer understanding would reject. There can be a wide range of savvy among parties to a deal and it is possible your firm’s opposite possesses greater sophistication.  For that reason, it is a good idea to enlist experienced help, especially if differing levels of experience creates an uneven playing field.

Leadership Leads You into the Abyss.  Your law firm or you can end up in a bad place if your leadership negotiating the deal is ill equipped or too invested in a deal consummation outcome.  Because not all law firm leaders are created equal, the default of the managing partner driving the deal does not guarantee a good outcome.  At a minimum, a firm jumping into the fray should get its best deal lawyers on point. Better yet, hire outside counsel and financial advisors.  But even the best professionals can’t thwart leaders that want the merger too badly. Steps to guard against leaders in love are worth considering.

Business Premise Does Not Compute (2+2=3).  A merger should be the tactic to implement a well thought out business strategy. Consequently, the post-merger business case for the combined firm must not only be compelling, but it must be assessed before agreeing to the merger. Two firms made stronger through merger is the objective.  If that outcome is not apparent during the merger discussions, isn’t it worthwhile to question going forward? A merger that is not additive may not be worth doing.

The Firms Were Never Meant for Each Other.  Even if the business case for combining the two firms is compelling, the firms must be compatible on multiple levels.  Compatibility metrics like financial performance, compensation systems, client similarity, culture and operations must be measured.  If too many of the metrics do not align, it is wise to forego the merger opportunity and look for the next one. “A lack of compatibility” has been the epitaph on many merger headstones.  A critical examination of the “things that bind” is essential.

Salt Water Fish in a Fresh Water Pond.  A merger that hits all the markers for the two institutions getting married may be unsuitable for certain individual lawyers. Mergers inevitably create attrition when lawyers are forced into a new home. As the exciting news of the combination is announced, and the sales job gets rolled out, lawyers will look beyond the company line and take stock from their personal point of view.  For that reason, firms selling their mergers should view the deal through their lawyers’ eyes to realistically project attrition. Too much unanticipated attrition can be highly detrimental on many levels.

Before embarking on a path to merger, many of these five pitfalls can make a deal go wrong.  Will you think about these risks before going forward?