Focusing on intangibles

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BITHIKA ANAND and NIPUN BHATIA ask why law firm mergers often fail

The trend of law firms exploring synergies by way of mergers is not new. Mergers are seen as an easy way to build a stronger position in the market vis-à-vis competitors. The benefits and synergies of a merger seem straightforward – more management bandwidth, better service capabilities, more partners contributing to the top line, increased geographical presence and the coming together of the goodwill associated with the merging brands. However, law firm mergers often tend to be hit or miss affairs.

Bithika-Anand-Legal-League-Consulting
Bithika Anand

Despite all the advantages of such mergers and alliances, why do several of them fail? The obvious reason is that the high expectations of the merger are often not met. If the delivery falls short of promises in terms of additional business, the foundation of trust, on which the mergers are established, becomes shaky.

There may not be a secret formula for a successful merger, however, an underrated yet important ingredient is the cultural alignment of the firms and partners. The lack of a cultural match could be one of the primary reasons that lead to a fall out between the merged entities.

Ensuring that the work culture and mindsets, especially on the softer aspects of business, are in sync is important to the success of a merger. Personality types, management styles, leadership flair and cultural beliefs are areas where an alignment between the two parties is essential. For instance, a firm that believes in delegating decision-making may not fit with a firm where the founder partners believe in centralized decision-making. Similarly, a technologically advanced firm may not be a good match for an old-school firm. A considerable age difference between the partners could also be a cause of disagreements owing to the generational gap.

Nipun-Bhatia-Legal-League-Consulting
Nipun Bhatia

In other cases, one firm may be proactive in ensuring staff welfare – taking care of rewards and recognition, arranging off-sites and excursions, and seeking employee inputs while making policies –while the other firm may have a more serious set-up and focus on the work rather than being concerned with being a fun place to work.

Cultural differences are often overlooked in favour of more tangible factors such as revenue figures, business plans and possible growth in strength, without realizing that these subjective criteria play an equal, if not a more important, role in a successful merger.

Before taking the plunge, it is important to look beyond the numbers and projections, and concentrate more on building a common vision and ethos. Take the time to know your prospective business partners and gauge whether you gel with them on issues other than the business factors that led to the merger.

Managing partners of merging firms should not only do due diligence on the numbers, but also spend some time with each other, both in work and non-work environments. A person’s behaviour outside the office often reveals more about them than their conduct in the office, where everyone is usually at their best behaviour.

Once the merging entities are on the same page on the tangible aspects, they often decide to combine their forces quickly without taking internal steps for integration. Ideally, during the final stages of a merger, the firms should take a series of short-term and long-term steps across different levels of the firms’ hierarchy to create a sense of a larger team working for a common cause.

It may be worthwhile for the parties to first test waters by exploring opportunities to work jointly on some assignments or matters. This will also enable them to check professional compatibility and identify areas of possible discord. Working together, without entering into a commitment and without formally announcing a merger, may save the parties from the possible embarrassment of a breakup.

It is advisable to take the help of third-party professionals who can assess the cultural fit more objectively and assist in ironing out possible areas of incompatibility. A third-party professional could help put together a proper integration plan to ensure that similar benefits and policies are provided to the workforce in the combined entity and that there is a role for each one to play. This can help create an inclusionary management and governance model, as well as help cultivate a sense of belonging in the merged entity.

BITHIKA ANAND is the founder and chief executive officer and NIPUN BHATIA is the vice-president for strategic management and process redesigning at Legal League Consulting. The authors can be contacted at: [email protected] and [email protected]