The ‘M’ word is currently all the rage – especially in professional services (and the law in particular) as firms respond to the new competitive market place for ownership in the UK and a continuing low growth economy. According to a recent survey, 50% of law firms questioned have either put in or plan to put in place a new structure to allow non-lawyer ownership. In a traditionally ultra- conservative sector, that smacks of dynamism.
But it is best not to get carried away, so here are some observations from experience on some of the pitfalls of mergers and how to avoid them. They apply not just to lawyers but all businesses contemplating the big M move.
There’s no such thing as a merger
In professional service circles, firms ‘merge’ almost 100% of the time. Nobody ever gets ‘taken over’ or ‘acquired’. In most cases this is a sop to the feelings of partners. From experience, in nearly every ‘merger’ game – at the end – one side invariably emerges from the deal changing room wearing the trousers (so to speak).
When big’uns acquire (sorry merge with) little’uns, those in the minority firm should never fool themselves (but some DO) that things will remain the same as before. They won’t. Nor should anyone else if you aren’t on the winning side.
Culture eats strategy for breakfast
One of Peter Drucker’s pithier comments has a particular resonance for mergers. Firms spend much expense and many hours of due diligence coming up with valuations, assessing financial and resource (mis)match-ups, systems compatibilities, client base analyses and making other assessments and decisions that fulfil the strategic imperative – quite often based around numbers.
I wonder how many mergers really put serious effort into assessing the most important intangible for Mr Drucker – the cultural fit (I think we know the answer to this)? Yes, it is difficult to pin down but there are methodologies out there for making a detailed comparison…if you decide to use them.
What about the morning after?
Yes, and as we’re speaking about all that effort that goes into analysing, deciding and doing the deal – how much grunt goes into the bit that follows, the waking up together on the first day of a new marriage and (hopefully) the next 50 metaphorical years? If you’ve seen most of the focus go on the ‘before’ – leaving the ‘after’ to be “sorted out later” (presumably by someone else) – then you’re not alone.
There isn’t a pill to take. Instead, there is a detailed post-merger plan with clear activities, responsibilities, time frames, budgets, resource and buy-in….and an awful lot of hard work to make it happen.