Best Practice: Should we merge with another firm?

Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. We are a small six attorney litigation firm. We have two partners and three associates. One of the partners wants to retire within the next five years. The other partner will continue to practice for another 10-15 years. We love practicing law and consider ourselves to be very good lawyers. However, we find firm management and administration to be a challenge and we are not skilled in this area nor do we want to be. We have a good book of business and clients. Recently, we began discussing the possibility of merging with another law firm. What are your thoughts about firms like ours merging with another law firm? A. Obviously, merger or acquisition of law firms is becoming more and more commonplace. Hildebrand reported 57 completed mergers/acquisitions in 2009 in firms with five or more attorneys). However, 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
• 2. Increase specialization - obtain additional expertise
• 3. Expand into other geographic regions
• 4. Add new practice areas
• 5. Increase or decrease client base
• 6. 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. Since 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 fewer than 25 attorneys.

John W. Olmstead, MBA, Ph.D, CMC,  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 General ListServ, which the John and other committee members reviews, or view archived copies of The Bottom Line Newsletters. John may be contacted via e-mail at jolmstead@olmsteadassoc.com.