The Importance of Romance

Customarily, law firm leaders approach merger discussions with the same detached objectivity that they bring to clients’ transactions.  But when it comes to convincing their partners of the value of something that represents massive change to their everyday work style, it can’t just be about numbers and synergies.  There has to be some romance.

Picture a law firm managing partner’s nightmare scenario.  After months of negotiations, countless meetings between the firms’ respective practice group leaders, hard fought resolutions to knotty issues of non-qualified pension plans and unfavorable leases, and never ending due diligence reviews of old Executive Committee meeting minutes, the merger is ready for partner approval.  Then, at the meeting, several partners give impassioned speeches in opposition and the vote fails.  Perhaps, even worse, the vote passes by a narrow majority with the resulting likelihood that a significant number of partners will depart from the newly merged firm.  And the firm’s leaders who initiated the merger are left wondering, “What happened?”

At the risk of stating the obvious, a merger of any size – but especially when a smaller firm is being merged into a larger firm – is a seminal event in a law firm’s history.  A firm’s name, traditions and culture are likely to dissolve.  Of course, it won’t happen instantly; perhaps a portion of the prior name will be used for a couple of years, but in short order, a cherished institution will have disappeared from the legal scene.  The replacement firm may be better positioned to respond to client needs, provide a broader platform and be more profitable.  But the firm for which partners have cherished affection and, for some, represents the only real job they have ever had, will be dramatically and permanently changed.

Any business transaction has to be built on a logical base.  It has to position the resultant business more favorably in the marketplace and produce a likelihood of greater profitability.  But in a law firm merger, all of the shareholders come to work at the business everyday, enjoy a shared history and, most importantly, have motivations beyond return on investment.  Therefore, to support a merger the partners must feel that the new firm will be a safe and comfortable place for them to practice law for the remainder of their careers.  In short, they must accept that they are giving up what they have for something better.   There has to be some romance.

Although overused, dating is a useful analogy.  It basically represents a four-step ritual leading to marriage.
1.    Attraction.  For the process to begin, there must be some initial attraction.  Whether a couple meets in a bar, on a dating website or is introduced by a matchmaker, there must be some spark that cause the couple to consider each person to consider the other of interest.  With law firm mergers, the attraction is often the other firm’s reputation but it can be their geographic location or a specific practice.  It is often just the personal chemistry between the firms’ respective managing partners.

This need for attraction presents two instructive morals for law firms.  The first, if you’ll excuse a sexist metaphor, is that firms need to show a little leg.  There seems to be a compulsion for law firm leaders to be excessively candid about exposing their faults at a first meeting with a potential merger partner.  Instead, firms need to dress themselves up on the first date by leading with their strengths.  Talk about marquee clients and signature practices.  Even if the firms end up having no attraction, the private practice of law is built on reputations which means a firm’s peers must think highly of them.  There is plenty of time to show your surgery scars down the road.

The second moral is that the partner designated to represent each firm has to be a bit of a natural salesman.  In most firms, the sheer act of getting elected as managing partner is sufficient to demonstrate some level of charisma, but occasionally firms elect a partner whose basic personality qualities are barely sufficient for human interaction.  Usually, there is a story behind these people, “She’s the only partner that has no agenda,” or “He never built a practice and doesn’t have much work to do, so he might as well spend his time managing.”  If you have a “story partner” running your firm, find somebody else to be the front person on merger discussions.

2.    Wooing.  This is the part where couples fan the sparks of the initial attraction into romance.  It involves complements, unexpected little gifts and surprise phone calls.  Usually one person is the suitor and the other exhibits (or feigns) some level of reluctance.  This is the part where it often falls apart for law firms.  The transactional lawyer instinct kicks in and firms start exchanging financial statements and compensation schemes.

For law firm merger discussions, romance involves a dream.  A shared vision of what the future could be like together and why it would be so much better than continuing separately.  Unless one party in the merger is so desperate that they figuratively say, “Take me, I’m yours.” (not a good image for a potential merger partner), they will need a sustaining vision to carry them through the riggers of courtship.  Therefore, rather than exchanging banker boxes of firm financial records, in the early stages of merger discussions, the focus should entirely be on, “What it is that we can build together and why it is better than what we have now?”

3.    Courtship.  The courtship occurs after a couple has begun to fall in love and begins to flesh out the dream of their life together.  It is also the time when they introduce each other to their respective families and friends.  This involves both the risk of your potential partner meeting strange Uncle Fred and seeing if the relationship is strong enough to withstand potshots from the naysayers.

In the law firm setting, the courtship is when the firms’ leadership introduces the concept of a merger to the rank and file partnerships.  It is when the firms start seeing each other’s dark sides (the domestic relations partner who keeps a gun in her desk and the single lawyer office in Timbuktu that has no discernable strategic purpose).  The process allows partners who had a bad experience with a lawyer from the other firm to meet the rest of the firm or hear the other side of the story from that lawyer.  Usually, if the merger is of sufficient size, this is also when the newspapers get wind of it and the firms’ clients get a chance to weigh in if they have an objection.  It vets the obvious subject matter conflicts as well as the immediate clients conflicts.  Most importantly, the courtship gives partners from the firms time to meet each other, kick the tires of the dream behind the merger, and become comfortable with the concept.

4.    Pre-engagement.  This is when a couple begins to consider marriage and starts making serious long and short term plans.  They talk about where they will live, discuss how many children they want, raise issues of politics and religion and generally work out the details of their marriage.  In the process they do some in depth consideration of their respective backgrounds and the accuracy of what they know about each other.  Details of previous relationships and unpaid student loans are disclosed and, if there are significant concerns or unresolved issues, they may elect to draft a prenuptial agreement.

For law firms, the pre-engagement is when the business lawyers get involved and the serious merger negotiations and due diligence occurs.  The significant take away is these two activities come at near the end of the process, not the front.  There are merger consultants who believe that the really tough issues (firm name, differences in profitability, unfunded pension plans, differences in capitalization, etc.) should be handled up front to get them out of the way so that time is not wasted on unproductive discussions.  The difficulty is, absent the excitement and optimism that comes through the romantic process, the likelihood of resolving such complex issues is low.  When firms are romantically attached, they are more willing to make the compromises necessary to consummate a merger.

Perhaps the most significant difference between a merger and a marriage is mergers really are forever.  While there is an established process for dissolving a marriage, the intertwining of clients, practices and finances of a law firm merger makes its dissolution effectively impossible without blowing up the entire firm.  All the more reason to make sure the union is based on some true romance.