Law Firm Marriages 101
The basics of pulling off a successful law firm merger.
As law firms continue seeking growth and stability in these uncertain economic times, mergers have been a useful tool for many. Mergers can help deepen a firm’s bench of expertise, open opportunities for cross-selling, and reduce per lawyer overhead through economies of scale.
The firm where I work, Fennemore, has completed four combinations of various forms over the last two years — roughly doubling our headcount and revenue. Although there are plenty of things I think we did well, there have also been lessons we’ve learned along the way.
Merging law firms has often been compared to a marriage, and I think the comparison is an apt one. Done between the right partners and with the right approach, a merger can make both partners stronger, better, and happier. Done wrong, it can lead to fighting, stress, and unhappiness.
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With that in mind, here are five tips to a long and happy merger.
1. Do Plenty Of Dating First
There are plenty of stories of couples meeting on the Vegas strip, running to a drive-thru chapel, getting hitched by Elvis, and toasting each other joyfully at their 50th wedding anniversary. But most people don’t find lasting love at first sight, and most firms aren’t ready to join up after the first time their management teams meet. The best candidates for a merger are firms that share the same values, culture, and economics. Those are things you can only really get to know over time.
Keep meeting, keep talking, and keep finding opportunities for your key leaders to interact. If you’ve got cases or deals that would benefit from co-counsel, consider referring the work to your potential merger partner so your teams can get a sense of how they’d work with one another. The longer you spend getting to know one another, the more confident you’ll be when it comes time to decide whether to take the next step.
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2. Embrace The Whole Family
Like a wise person once said, you’re gonna get some hop-ons. Those of us who’ve tied the knot understand that you’re not just marrying your spouse. You’re also marrying their family and friends, and the social life that person built before they met you. Although you might get that charming and hilarious sister-in-law, you might also get that cranky uncle who always wants to talk politics over Thanksgiving dinner.
The same is true when merging firms. It’s not just the executive teams hashing the deal out that will be your new colleagues. You’re getting everybody: the rock star partners, the associates still figuring it out, the happy employees, the disgruntled, the people excited for change, and the ones who fear what’s ahead. If you’ve done your homework, you should feel good that the overall mix will be a positive one for your new combined firm — but you’re always going to have some folks that come along that might raise eyebrows or be skeptical of the deal.
Do your best to make everyone feel welcome and secure, and to let them know you’re there in good faith to make everyone’s lives better. It may be messy for a while, but soon all those new personalities will feel like part of your own family, too. Over time, that cranky uncle may even grow on you.
3. Accept That Someone’s Going To Be Against It
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You know that childhood friend who barely makes the invite list who gets a bit too tipsy at the reception and lets it slip they think their one-time bestie is making a mistake? They’re going to be part of any law firm merger, too, and they’re not even going to feel embarrassed about it at brunch the next day.
Most lawyers are born with a contrarian streak, and the rest have one trained into them in law school. That’s why it’s almost guaranteed in any merger that there will be at least some people on both sides who are against the merger — often in very loud voices.
The best way to minimize any potential negativity is to get ahead of it. Before you’ve even found a potential merger candidate, identify the gaps you see in your firm and communicate to your partners where you’d like to see your firm grow, and what weaknesses need to be patched up. Helping your partners see the logic behind the move, or better yet finding ways to give them ownership of the process, can do a lot to soothe anxieties. Then once a favorable merger candidate is found, management’s No. 1 job becomes building consensus for the decision. Sometimes all people need is a bit of time and attention, to feel heard, and they’ll be more inclined to go with the flow. Give it to them.
That said, some people will understand everything about the deal and still be against it.
Hopefully those voices are few and far between; if not, you may not have had the requisite consensus for the deal, which could be a bigger problem. When this happens, there’s a firm culture concept called “disagree and commit.” The idea is that everyone gets their opportunity to speak and be heard, but once the decision is made everyone is expected to work to make the decision a successful one. If you can add that concept to your firm’s cultural tool kit ahead of time, it’s a useful one to pull out at times like this.
Ultimately, these problems tend to solve themselves. Either the partners against the merger learn to live with it, or they move somewhere that feels more aligned with their views. Losing some partners or team members after a combination can be disappointing. But, in some ways, it may be for the best in the long term. Having someone openly hostile to the firm’s new identity or unaligned with its vision isn’t good for anybody.
4. Brace Yourself For the Fact That Integration Is Going To Be Hard
Humans are creatures of habit, and adding another person to our daily routine is often tough. Figuring out how to live in the same space as your significant other can be hard. Figuring out how to share space between merging law firms is orders of magnitude harder.
One chronically underestimated piece of any merger is the technological integration. Firms never have identical tech suites. That necessarily means one group of lawyers is going to have to relearn how to access documents, enter time, open files, and edit prebills. I’ve seen people nearly having steam spouting from their ears trying to learn new systems.
There are a few ways to make tech integration easier. More training, planning, and support are always good, but any large technology changeover is going to involve headaches at some point. Prepare your team for the bumps in the road, and trust that things will settle down after a while.
5. Build Something That’s More Than The Sum Of Its Parts
In life and in law, good unions don’t happen without a reason. Law firm mergers usually involve efficiencies and practice synergies, but at their best they’re also mergers of ideas. Both partners should try to understand one another and take the best practices and concepts from each to create a stronger whole.
Ensure that key members of both firms are represented in the leadership of the new enterprise. If your merger partner is substantially smaller than your own firm, go out of your way to make the members of the smaller firm feel heard and represented. If there are traditions or cultural issues important to one firm, make sure they survive the merger. One of our merger partners had a long history of big St. Paddy’s Day blowouts and other office celebrations that were important for them to keep. This tradition has continued and has been expanded given its importance to clients, firm members, and the community.
Two can do more than one. That’s true for people, and it’s true for law firms. Choose your partners wisely and work hard, and your combination can be a successful one.
James Goodnow is the CEO and managing partner of NLJ 250 firm Fennemore. At age 36, he became the youngest known chief executive of a large law firm in the U.S. He holds his JD from Harvard Law School and dual business management certificates from MIT. He’s currently attending the Cambridge University Judge Business School (U.K.), where he’s working toward a master’s degree in entrepreneurship. James is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.
