By Gregor Angus, Head of Business Development at Cashroom
We spend a lot of time talking to our current clients, new prospects, and strategic partners to ensure that we keep an ‘ear to the ground’ with what is happening in the sector. One theme that we are hearing a lot at the moment, is that mergers are very much back on the radar again. One solicitor we spoke to described it as a time when the stronger players will ‘eat up the weak’! A bit extreme, perhaps! However with continued uncertainty, fundamental changes to the way people work, more changes to PI work in England and Wales, inevitable tax increases in the near future, and a whole host of other reasons, it is understandable that consolidation may well appeal to some firms.
By merging with the right firm, you can gain expertise in other areas of practice. Perhaps a geographical reach you don’t currently have, put a succession plan in place for those nearing retirement, and share costs of suppliers, premises, PI Insurance etc etc. So, what are the things you need to consider when choosing a potential merger partner, or when responding to an approach made to you?
The first thing you will need to consider is whether you get a good ‘feel’ for the other firm. A bit vague, I know, but it really is important that there is a good ‘gut instinct’ that the two firms could come together well, that there is a logical reason for it, and that the cultures align.
If you can tick that box, you can move on to some due diligence and valuation work. This is where the Accountants come in, and there will be extensive number crunching to try and ascertain the ‘worth’ of the entities. Regardless of which side you are on, you need to agree amongst the Partners/Directors what your ‘yes, lets do the deal’ or ‘no, thanks ’ numbers are. When it comes to negotiation with the other firm, it doesn’t have to be, and indeed shouldn’t be, an acrimonious process. There needs to be a collective will of both firms to make it work if it is going to be a success. You will obviously also need to consider how you are going to fund the acquisition if you are doing the acquiring, but that’s a whole different article!
Once a deal is reached, that’s when the hard work begins!
There is a huge piece of work in making the merger a success, and ensuring that the two firms don’t just continue to work in silos, albeit under the same firm name. You shouldn’t underestimate the time and work involved in this. The time and work should be factored into any merger budgeting, if the two firms collectively are going to be better than the sum of their parts.
Work hard at the post-merger integrations of people. Involve specialist business coaches or consultants where possible,. Facilitate specific sessions for the people from both firms to get to know (and trust) each other. For the firm to operate as one business going forward, I can’t emphasise how important it is that the people feel that they are on the same team. It might also be a good opportunity to re-structure the decision-making process, depending on the size of the new merged firm. For example, you might look to move away from collective committee decision making of ‘the partnership’ towards a Managing Partner, or Executive Board, that are empowered to make decisions more quickly.
Systems Technology and Process
When it comes to systems, technology, and processes, again bring in experts if possible. Review what each firm has or does, and how to either knit those together seamlessly, or possibly even bring a new way of working for the new expanded firm as a whole. This ensures that the merged entity does in fact bring the efficiencies and cost savings planned. Without a specific and well-defined plan on this, both firms will simply default to their old ways of working, and some of the benefits of the merger disappear quickly.
Manage the messaging around brand and culture for the new firm, internally and externally, carefully and constantly. Again, invest in the right experts to help you with this. This means who and what you now are is known by everyone in the firm, and as many people as possible outside the firm. The merger is fundamentally about being a ‘better’ firm going forward, so let everyone know that.
So, there is a lot to think about, and even more to do, if you are going to successfully merge two firms together. However, with significant efficiencies and cost savings to be made, and the possibility of creating a more robust and future-fit firm, it may just make sense for you.