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Best Practice: Contemplating merging with another law firm

Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC

Q. We are a 15 attorney estate planning firm just outside of New York City. Ten years ago we had 37 lawyers in the firm. We have had several defections due to internal management problems pertaining to structure and compensation. We have operated more as a group of solo practitioners than as a true law firm. Recently we have considered the option of merging with a larger firm. What are your thought regarding the pros and cons of doing this?

A. Research indicates that 1/3 to 1/2 of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone. Right reasons for merging might include:

  1. Improve the firm's competitive position. Increase specialization - obtain additional expertise.
  2. Expand into other geographic regions.
  3. Add new practice areas.
  4. Increase or decrease client base.
  5. Improve and/or solidify client relationships.

I would start by thinking about your reasons for wanting to merge and your objectives. Ask yourself the following questions?

  1. Do you want to practice in a large firm? If not, what is the largest firm that you would want to practice in?
  2. What is driving the desire to merge?
  3. If the desire to merge is being driven by a desire to retreat from internal problems - what have you done to address these issues internally?
  4. Is your name being part of the firm  name important to you?
  5. What are your expectations and objectives for a merger?
  6. What are you  looking from a merger partner?
  7. Make sure that you look for a complimentary fit. If you are weak in firm leadership, management and administration - look for a firm that is strong in these areas. Strong leadership, management, and administration may be hard to find in a firm under 25 attorneys.

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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.

Posted on November 16, 2011 by Chris Bonjean
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