Law firm mergers can accomplish a great deal, so it is no wonder they are popular. The number of mergers consummated each year is steady if not growing. Strategically designed and executed law firm mergers can boost combined firms to places otherwise difficult to achieve in the time frames desired.
Even though many mergers make sense and receive the accolades deserved, there are other combinations that fail. Indeed, by some assessments, fifty percent of all mergers fail. Failure can be traced to many reasons, but when post-mortems of failed mergers are performed five ill-conceived notions behind merger are frequently observed. Based on that history, merger contemplated by leadership should be rethought if its impetus is premised on any of the following rationales or motivations:
Obsession with Growth. Without question, growth is a prominent feature with all mergers. But more than the result should be the impetus for pursuing merger. Many mergers that fail can trace their failure to an obsession with growth and allowing that obsession to dominate thinking. The move to merge must be borne of sound strategy, analysis, and due diligence, not a belief that bigger always is better. Growth will be a subsidizing inevitable by-product.
Desire to Dominate in the Wrong Areas. A law firm may be known for a particular specialty and the strategic desire to dominate that specialty may drive decision making. When thinking of domination, it is advisable to look at the coveted area and ask, is it sufficiently profitable, does it have an inspiring future, will it help or hurt other areas of the firm? Applying basic business analytics should be employed so that any merger boosts the brand long-term and is, in the long run, accretive. More “meh” from a merger helps little.
The Clamor for Excitement. It is not uncommon for a faction within a firm to appeal for action to jolt a seemingly staid and stodgy firm to life. Excitement is good, but the big splash that goes with a merger will recede from the consciousness sooner than often imagined. While the excitement may have been fun, a merger fundamentally must strengthen the firm. Being saddled with nothing more than the burden of a bigger firm is the antithesis of exciting.
“Keeping Up.” Closely tied to a clamor for excitement is the interest in “keeping up” with competitors that have grown or merged. While competing is all about keeping up or overtaking your market rivals, channeling that desire into a non-strategic merger is not the answer. All firms are different, and just because another firm merged successfully, doesn’t mean a merger is for you. Strategy, analytics and due diligence, not fads, should drive mergers.
To Fix the Unfixed. Firms with challenges frequently compound those challenges by adding more variables to day-to-day life. A firm with problems should address those problems before jumping into the merger world. Worse still is a merger birthed with the belief that the merger partner will cure ills nagging the present. Bypassing a pre-merger fix will only make things worse in the long run.
When examining the scene of failed law firm mergers, one or more of these five fingerprints often can be lifted. If your firm is thinking about a combination, are its thoughts based on questionable impulses or well-thought-out strategies and analytics?