Current market conditions are being dictated by the increased competitive pressures on more firms of all sizes, but particularly those with less than 10 partners. The growing number of "involuntary" merger partners has had an adverse effect on practice values. As a consequence of this, the traditional concept of valuable goodwill has all but disappeared. More and more mergers are completed only on the basis of net asset values adjusted for future liabilties.
It is important to understand from the outset that few mergers fit the traditional model where similary sized firms combine and achieve economies of scale. The vast majority of mergers today are actually disposals and acquisitions by a different name. Recognising this distinction is critical to fine tuning your Firm for any potential merger.
At one end of the marketplace, we see a group of aggressive and acquisitive firms developing, keen to build on their own success by acquiring smaller complementary practices. At the other end of the marketplace, a whole generation of smaller traditional partnerships is approaching retirement age with no obvious exit route for the partners. Only the best prepared and most efficiently run of these firms would appeal to the former group. Finally, we still see a few fundamentally successful practices (often in niche areas) seeking to merge with similar firms to achieve competitive advantage, critical mass or other benefits.
Another subsection of the marketplace revolves around partial acquisitions and disposals. Often this is a consequence of individual fee earners and departments switching between firms that are themselves preparing to merge. This type of transaction can generate a whole range of additional problems to be solved, both for those moving and their new parent firm.
Where niche firms are seeking to merge, it is critical to define exactly which niche each occupies. Some niches centre around a particular service or work type, where as others are built upon a particular type of client. It is essential to ensure that the risk management and marketing strategies of the combined firm reflect these niches and the way that they fit together.
Traditionally, mergers between Law firms were few and far between, a major event for all concerned. Whilst the amount of work required to complete a successful merger has not changed, their frequency is increasing. At the same time, the number of unsuccessful, or at least unsatisfactory mergers is growing even faster. The 360 Legal Group will provide the materials and the expertise to ensure that your merger is a successful one.
