Reflections on managing M&A for law firms

Over the last ten years, our firm has acquired four other firms and been acquired itself in a private equity buyout in July 2021. As a management challenge, integrating another law firm with its own history, systems and culture is really quite daunting as many firms have found during the same period. The essence of a merger is a coming together of two groups of people with their own outlook, their own way of doing things, their own values and beliefs and their own attitude to clients and to each other. Individuals in the acquired firm will be nervous, suspicious, feeling insecure and unconvinced of the merits of any merger. Making a success of it requires a whole range of skills and all of those skills need to be brought together to plan the merger long before it takes place. A lot of what the acquirer needs to know is in the heads of the staff who you can’t talk to before the merger has happened. Due diligence is essential but not adequate to address all of the issues that will be faced post completion.

So how to manage these disparate challenges? Our own firm has developed a detailed project plan with hundreds of tasks and sub-tasks across issues relating to people, premises, systems, data, marketing and communication (both external and internal), the SRA, the LAA, other processes, contracts trading and insurance, and accounting and banking. These are entirely separate from the negotiation of any terms for the ‘deal’. The key to success is evasive. Fundamentally, it’s all about picking the right target firms by profiling their people, their work, their attitudes (at partner level at least) and their own vision for the kind of firm that they want to be part of. Many smaller firms are running for the cover of a properly functioning management team so that they can concentrate on their own professional work and leave behind the complexities of running a business themselves. It may be a generalisation, but my own experience is that most lawyers want to leave management to others (even if they don’t appreciate the value of those management skills themselves).

There has been a lot of activity in the M&A space over the last two years and there is an increasing trend towards consolidation. There are more investors in the legal market now and it is likely that an increasing number of smaller and mid-sized firms will be seeking partners to merge with or be acquired by as the crisis in the economy deepens. Smaller firms have fared surprisingly well through the pandemic and its immediate aftermath, principally buoyed by the booming property market, stamp duty holidays and cheap government loans. That is all changing and there are difficult times ahead. My advice? Choose your partners carefully. It is not all about the money. It is mostly about sustainability and moving through the process to somewhere better for you and for your staff and clients. It’s complicated.