The typical press release announcing a law firm merger extolls the excitement, the opportunity to have one plus one equal three, and the great fit of culture, practices and people.  It’s perfect until it is not.  In fact, by some measures more than half of all law firm mergers fail. When the realization sets in that your law firm merger is a bad one and not the combination of your dreams, what can you do?

Besides whistling past the graveyard, you’ve got to do something.  And while a solution stimulated by panic is not recommended, prompt action is advisable. As action plan options go, the following three options generally are presented and often are considered:

Annulment.    If the merger was misguided and won’t work, lucky is the firm that realizes it quickly.  For a law firm just easing into its merger, annulment is available if significant pieces of the deal are still in process and the integration, if any, has not undone the parties’ culture, identity, and sense of being.  If annulment is still possible the first step at the undoing is to address the topic with your merger partner and reach agreement on the unwind. If agreement can be reached, the elements of the unwind should be identified and implemented quickly. Financial considerations often dominate (including dividing up the expenses), but issues of timing and communication (internal and external) also comprise an important part.  If an agreement to unwind cannot be reached, a whole different discussion beyond the scope here is implicated.

Divorce.  The firm facing divorce has given the merger a fair shot and the combination is too integrated to opt for the fast and furious annulment.  Divorce can be complicated, especially if the integration of systems, people, clients, leadership and market presence blurs any identity of the pre-merger firms. Much like annulment, ideally a discussion amongst the unhappy leads to a consensus that a breakup is in the best interest of all parties.  If so, the sides seeking to split should work collaboratively to smooth out the coming bumpy road.  In a less than amenable divorce, inevitably the unhappiest of the unhappy grows impatient and takes unilateral action, typically leaving with a group in tow and breaking some dishes along the way.  A contested divorce can end up being a pox on both houses and typically involves issues too complex to be fully covered here.

Staying Together for the Kids.  Sometimes the two unhappy parties, after due consideration, view the act of splitting up as worse than the alternative of remaining together, even if they will remain somewhat estranged.  For multiple reasons, toughing it out can be risky, and firms should be careful about utilizing such an approach if the fit simply is not right.  But if chosen, some key things should be attempted.  First, the cause of friction should be clearly identified and discussed to explore whether a remedy, even a partial one, is possible. Even if finding a complete solution is not possible, consensus about the source of the discord gives the parties some chance of easing it some or avoiding behavior that inflames the unease. A by-product of the discussion, admittedly likely to be intense, is that it might lead to a dramatic restructuring of the combined firm or even a reexamination and ultimate agreement on the option of divorce.  A second thing the estranged parties should do is to modify or amend the party’s constituent documents, policies and procedures, to clear up any ambiguities. This exercise will put the parties in a better place about expectations for the future and how future disputes, if they should arise, are to be handled. This discussion may also stimulate another look ending the association-a step that might be best in the long term.  Third, the key camps with different expectations at the firm should immediately and continually communicate with a goal towards achieving a unified set of aspirations for the future.  This is not always easy, but the fact that the breakup was eschewed indicates that each “side” sees something redeeming in the other.  Stoking these embers of desire, rather than letting indifference cause them to grow cold, is a good idea.  With time and effort, the parties may smooth out many of the differences and learn to love each other.

Bad mergers create highly volatile situations that require resolution.  Finding the right solution can be difficult, especially if the participants are emotional or too close to the drama to see clearly.  If your merger has not lived up to your expectations, what are you doing?