The Word of Gold: 10 tips to keep a sure footing when entering the unknown with a merger
Leading law firms Fairlie Dyer and Keele Dover are delighted to announce that they have merged and will practise henceforth as Fairlie Dyer Keele Dover. Chief executive Ben Dover said: ‘We have taken this bold, dynamic step boldly and with a lot of dynamism. Our aim is to be a beacon of immutability in an ever-changing world, which seems to be constantly in transition. Our clients have warmly encouraged us to do this merger. Our bankers have implored us to do it. One plus one may not turn out to make three, but with a fair wind, of which we have a great abundance, it should make at least two and a bit. Probably.’”
Unless your firm has been conducting its business deep below the earth’s crust these last 10 years, you will have noticed more than a few announcements like this. There has been massive consolidation in the market. Some of it has been strategic and highly successful. In other cases, it has had the whiff of two struggling, bald men opting to share a comb. Having experienced personally one of the early cross-border mergers, and now worked closely with firms large and small on their own journey, here are my top 10 tips for merger success. (I have assumed the tip to do proper diligence is taken as read.)
Don’t merge with dickheads. This wisdom was vouchsafed by the chief executive of a major City firm, who had learnt it through hard experience. It has nothing to do with legal skills. I have met great lawyers who were, and indeed are, quite tremendous dickheads. So, probably, have you. This is all about interpersonal skills and values. If you see a flashing red light, don’t cross.
A first cousin of rule 1, the greatest determinant of success will be not strategic fit, but cultural fit. If you cannot agree on common values and “the way things are done around here”, no matter how compelling the commercial case there will be grief and pain for eternity. Get out the office with your proposed new colleagues, engage deeply, and see what lies beneath their skin.
Though culture may trump strategy, a crystal clear strategy is vital. Why are we doing this? What are our goals? Are there better alternatives? Why is the status quo not an option? What can we do together that we cannot do separately? Why is X our preferred merger partner? What are the risks and constraints, and how will we manage them?
Preserve the best of each firm. Do not try to impose the will of one side on everything, even if there is a great disparity in size.
One plus one must make significantly more than two. Unless the merged firm will be not just bigger, but better, providing a higher quality service, with greater growth potential, more robust defensive qualities, and the likelihood of higher profits over the long term, don’t merge. Cost savings may be a benefit of merger, but are rarely a good enough reason in themselves, and can usually be achieved in less disruptive ways.
Implementation is best achieved by a tight-knit team of players from both sides, each of whom should have clear, specific tasks, and equally clear reporting lines.
Communicate, communicate, communicate. All kinds of nonsense rush to fill a vacuum. From day one, explain the rationale to colleagues at every level, and as far as you can, keep them in the loop about how negotiations are progressing. Recognise that everyone will ask, quite reasonably, “What does this mean for me?”, and be ready to engage sympathetically with their concerns.
Take the clients with you on the journey, and consult them before you set out. Where, as is very common, 80% of the business comes from 20% of the clients, it is vital that those clients who are fundamental to the firm are asked in confidence for their views and great heed paid to their responses. Change is always a moment of risk for a business. Never assume the clients will just acquiesce.
Estimate with great care how much merger will cost you in time, dislocation and cash. Then double it.
Almost inevitably, there will be issues about leadership and hierarchy. In many cases, the right answer will be obvious. Where negotiation is needed, it should be handled sensitively, but also candidly. Do your utmost to preserve dignity and give reassurance, but not at the expense of a fudge which impedes effective management post-merger. Work hard for success, but be willing, always, to walk away.
Stephen Gold was the founder and senior partner of Golds, a multi-award-winning law firm which grew from a sole practice to become a UK leader in its sectors. He is now a consultant, non-exec and trusted adviser to leading firms nationwide and internationally.
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