Selling a Merger

We’ve seen it dozens of times.  The leaders of two firms work to put together a merger, but when it is introduced to the respective partnerships, the merger gets shot down.  The firm’s managing partners have wasted months on a fruitless effort and are left wondering how this could have happened.

The dynamics of selling a merger are as complex as the differing cultures of law firms and the diverse interests of their partners.  As often as not, the individual partner concerns that tank the merger discussions don’t really relate to any specific issues.  If fact, they frequently are more a matter of form than substance.  It comes down to a basic problem: before you can sell people a better mousetrap you have to convince them that they have mice.

Having been through close to 100 merger discussions, I believe there are five keys to successfully selling a merger.  These are not the only actions a firm’s leadership needs to take, but they are the ones that often seem to be pivotal in the successful acceptance of a merger by both firm’s partnerships.

1. Clear firm objectives.  This is the “…convince them they have mice” part.  Each firm has to lay out some clear objectives that they want to accomplish.  These can be as basic as achieving a level of profitability equal to peer firms or capturing more work from a major client by having a presence in a specific location.  Lawyers’ minds are trained to work by linear logic – if you do this then you will get that – so you must begin by dealing with the importance of what the firm is trying to accomplish.
2. Business case. This involves demonstrating how the merger will accomplish the firm’s objectives. I sometimes call this the spousal test.  The business case must be simple and obvious enough that partners can easily go home and explain to their spouse why their firm is doing a merger.   The arguments don’t have to be heavily detailed but it must be logical, e.g., “we find that larger clients have quality and capability concerns about firms that do not have a critical mass of lawyers; this merger will provide the necessary critical mass.” 
3. Personalized benefits.  Most law firm partners respond to issues based on enlightened self-interest.  This means giving grassroots explanations of how the merger will affect individual partners.  Most partners are reasonably altruistic about mergers that benefit others so long as it is not directly detrimental to their own best interests.
4. Best option available.  Law firm partners often have a tremendous fear of sellers’ remorse.  The concern is that by merging they may miss some other better opportunity.  The best response is for each firms management to think through the possible merger partners who would fulfill their objectives and discuss why a merger with each of those firms would either not be feasible or would not be as successful as the proposed merger.
5. Early warning.  Most people have a distrust of change.  Therefore, keeping merger discussions top secret and then springing the merger on the partnership as a done deal is virtually assured to generate a negative reaction.  Bringing in a continuously widening number of partners into the merger discussions builds involvement and acceptance.

These actions can’t assure partners acceptance of a merger, but they go a long way to developing the comfort level necessary for approval by both firms.