Law firms, whether large or small, consider mergers because of perceived benefits such as improved client service, economies of scale or entrance into a new market. Whatever the reason, many mergers fail when due diligence is not used to properly identify the reasons for a merger and to evaluate a potential merger partner. The following are some of the considerations in making the decision whether to merge:
1. How well do the partners in each firm know each other? Do they like each other? What is the possibility of clashes of egos?
2. Do the two firms come from similar cultures, and do they have similar ways of doing business?
3. Will there be conflicts of interests between the existing clients of the two firms if and when they merge?
4. How are the two firms governed? What is their decision making ‘style”? Are there differences in philosophy of governing or decision making style that will cause conflicts? How would the merged firm be managed and governed? Is this a potential source of conflict?
5. How will the practices of the two firms mesh – will they be a good fit, or are there overlapping or similar areas of practice that will cause conflicts?
6. Are the charges made for legal services by the two firms comparable, or are there differences between the income produced from the practices of the two firms that will lead to conflicts?
7. If there is a merger, what would the new firm be called, and how would that be decided?
8. In what order would the names of the partners in the new firm be listed on the letterhead? How would that be decided?
9. How would partner compensation be determined in the merged firm? Is the issue of partner compensation likely to be a source of conflict?
10. Do you worry about being a small firm gobbled up by a big firm, and thereby losing your identity?
11. Is there is a compelling reason for a merger between the two firms? If so, what is that reason?
12. Will one firm become the dominant firm, or is it likely that a “we and them” attitude will develop between the partners of the two firms?
13. How does each firm’s philosophy regarding marketing and promotion fit with the other?
14. How will the costs of the merger he borne between the two firms? Is the merger likely to result in lower profits in the near term, and thereby reduce partner compensation? Does that bother you?