The allure of a merger brings with it visions of expanded market share, reduced operating costs, enhanced niche practice areas, and many other benefits. But, to achieve a truly successful merger requires a vetting process that does not permit gaps that often occur in decisive areas. When thinking about a merger, play it "SAF."
Strategize Your Merger Plan
Before moving forward, lay out your reasons for the merger. Fresh blood for the organization? Revitalizing a niche? Regional growth? Set up teams with defined responsibilities. Your internal merger team will evaluate the possibilities, identify merger candidates, and whittle them down to the prime merger choices. A team from management should then review the recommendations of the merger team. For a dispassionate perspective, choose outside advisors to perform the due diligence.
Adaptability — Do They Fit Into Your Culture?
Poor cultural adaptability has dissolved many mergers and made others very unpleasant unions. With their sights on the prime candidates, your merger team should perform a cultural analysis. What is the work environment like? Are there different practices under one roof or is there a single, firmwide mentality. Get a reading on operating and administrative decision-making policies. What decisions are made by consensus and what come under the rule of the executive committee? Look at the candidate’s executive team and determine who will join the combined organization. Gauge the reliability of their internal controls — practices, supervision, and training. Examine the policy for taking on a case or client and include a look at their engagement letters and conflict checks. At the very crucial partner level, what are the requirements for partnership entry, compensation methods, and capital requirements and funding? These are only a few of the areas that can highlight the stress points in blending your cultures.
Financial Obligations That May Be Off Your Radar
In the mass of financial information to consider in a merger, some obligations are not so apparent. If you’re considering keeping a candidate’s office, play out the cost to rebrand the location, from creating new signage to the stationery. Determine if there are any unresolved malpractice or other litigations and assess the likelihood of the cost to your firm and damage to your reputation. See if the candidate's loans are recourse or nonrecourse — your partners will likely not want to contend with being held personally liable for the debt in recourse loans. There may be other red flags in the firm’s borrowing. Has it taken out loans to pay employees, fund case costs, or cover existing debt?