Best Practice Tips: Law Firm Growth – Partnership/Merger

Asked and Answered

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

Q. I am the sole owner of a six-attorney energy law practice in Houston. I have had my practice for twenty years and have enjoyed the independence of being the boss, but I am tired of being solely accountable for the success of the practice, having to do all the management, and having all the worry and stress. I believe I have reached the point where I am ready for a partner or partners and I believe that the practice can be positioned for growth if I bring in a lateral partner, make a couple of my associates partners, or merge with another firm. I welcome any suggestions that you may have.

A. Whether you bring in a lateral partner, elevate your associates to partnership, or merge this will be a major step for you and you will need to do some serious soul searching. Here are some general thoughts:

Partnership is like a marriage. You must marry the right person or persons. Most partnerships that fail do so as a result of partnering up with the wrong partners. Compatibility is critical. Consider:

1. Long term goals of both parties
2. Work ethic computability
3. Common interests
4. Money and compensation

Thinking of merging? 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 produce 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.

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 partner that is strong in these areas. Strong leadership, management, and administration may be hard to find in a firm under 25 attorneys.

Partnering up with others can be a great move for you if you make the right people partners for the right reasons or merge with the right people for the right reasons. Due your due diligence and your homework.

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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 and author of The Lawyers Guide to Succession Planning published by the ABA. 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.