3 Critical Things to Consider Before a Law Firm Merger or Acquisition

In the past two years, we’ve seen many law firms throughout the country seriously consider a merger or acquisition or have already undergone one. Given the current business environment, it’s a trend that’s likely to continue.

Acquiring or merging with a different law firm can be advantageous. If the firm is the right fit for your business, you could reduce your operational expenses, leverage combined services and/or expand your geographic footprint. The unfortunate truth about mergers and acquisitions, though, is that only about half of them have an overall success rate.

Before entering into a merger or acquisition, it’s important to consider three foundational components of what drives a firm’s success. In the default industry today, those components are clientele, cultural mix and technology.

  1. Clientele

When two firms merge together, both entities take on more than just new staff and a new way of doing business. They also have to consider the client mix. A few questions you might ask during a pre-merger discussion are: “Who are your clients? Will clientele from both firms carry over to the new entity? What clients will move forward and which ones will need to be dropped?”

Answering these questions will help you re-examine contractual agreements with your clients and determine if the firm with which you are merging or acquiring is a good fit for you.

  1. Cultural mix

Merging two firms is much like the process of merging two families. Everyone has their own rules, schedules, rituals and communication styles. During a law firm merger/acquisition, you have to decide which firms’ standards will be followed, or whether new standards will be set. It’s also important for two firms that merge have similar cultures.

If cultures aren’t aligned, it is almost guaranteed that a large majority of your staff will ultimately become disengaged or leave the firm. To prevent this from happening, always over-communicate to your staff about what’s going on, and discuss the vision and values for the new entity.

  1. Technology platform

Technology is one of the most discussed topics among firms contemplating a merger or acquisition. An ineffective technology platform can be one of the biggest financial drains and can result in an economic disadvantage for your firm.

When discussing technology, both firms should collaborate to develop a documented plan of action that includes a cost-benefit analysis. Three key technology areas the firms should consider and agree on before moving forward are the case management system, accounting system and document management/imaging system.

Entering into a merger or acquisition can lead to a successful long-term strategy beneficial to your firm and employees. Conversely, it can also be a recipe for disaster. Engaging an outside consulting firm can help you set realistic expectations and increase your chances of a smooth transition. Contact us today for assistance!