Ten Advantages of a Law Firm Merger

- Brad Hawley

During turbulent times, it is natural for law firms to withdraw, hunker down and ride out the storm. And that is certainly an understandable approach. As with most aspects of life, however, fortune often favors the bold. For those firms that are able and willing to think and act boldly, turbulent times can create enormous opportunities for increasing firm revenues and profits.

Law firm mergers are one of the best ways to capitalize on the unique opportunities created by uncertain market conditions. Why is this? What are the advantages of law firm mergers? Let’s look at ten advantages created by law firm mergers: five for the acquired firm and five for the acquiring firm.

 

Advantages for the acquired firm:

1. Expanded Client Base

The first benefit to the acquired firm is the immediate access to a much greater client base.  Clients that were previously unavailable to the smaller firm, whether due to geographic limitations, minimum firm size requirements (i.e. bench strength) or a lack of expertise in certain practice areas are suddenly accessible.  This is often the primary reason some firms pursue law firm mergers. 

 

2. Expanded Practice Offerings

Another inherent benefit to a completed law firm merger is the acquired firm usually has access to a greater array of practice expertise it did not previously have.  For example, if the acquired firm had no Commercial Real Estate lawyers, but the acquiring firm has a robust Real Estate practice, the acquired firm suddenly has access to experienced lawyers who can provide a valuable service to its existing clients.  These new cross-selling opportunities can strengthen the existing relationships and increase revenues from the established clients. 

 

3. Greater Resources

Larger firms, like the acquiring firm in our example, typically have greater resources which can provide invaluable benefits to an acquired firm.  These resources include marketing expertise, business development professionals, cutting-edge technology, and a larger pool of associates and service attorneys to help perform the work.  All of these resources can significantly improve revenues and profits. 

 

4. Greater Management Skill

One of the most common challenges in small firms is law firm management.  The fact of the matter is most lawyers are not great managers.  They are often great lawyers, but the skill sets are very different for the two roles.  Larger firms have usually figured out which lawyers are in fact good managers and have put them into management roles within the firm.  Moreover, many larger firms employ non-lawyer business professionals to help run their firms like the business entities they are.  Effective leadership can have a dramatic effect on law firm profits and overall firm culture. 

 

5. Improved Performance 

Closely related to #4 above, a law firm merger usually results in significant performance improvement for most of the lawyers in the acquired firm.  In many smaller firms, the partners often have close personal as well as professional relationships.  While this has its obvious benefits, these relationships also make it difficult to have necessary conversations.  When a partner’s performance is insufficient (and there no extenuating circumstances), the leadership of the firm needs to be able to candidly address the performance issues.  Because of the close personal relationships often found at smaller firms, these difficult conversations frequently do not occur, and this negatively impacts the overall performance of the firm.  With a law firm merger into a firm with better management, this performance problem is usually mitigated if not eliminated. 

 

In the next article, we will look at five advantages of a law firm merger for the acquiring firm.