With all the talk of law firm mergers within the profession recently, lawyers might be wondering just what goes into the biggest strategic decision a firm can make.
While those who have been there admit each merger deal is different and calls for a unique approach, there are several common threads to be aware of.
Gerald Courage, chairman of Miller Thomson LLP and whose firm linked up with Saskatchewan’s Balfour Moss LLP in December, says it has adopted a similar approach to the long list of mergers it has engaged in over the past decade.
He says one of the first questions a firm must ask is whether it needs a broader presence in a particular jurisdiction. In answering that question, it will likely be useful to consider the strength of the local economy, client needs, and the firm’s strategic goals.
Courage says his firm will then begin researching possible target firms. It will look at lists of firms within a particular city along with their web sites and make discreet inquiries in the community of interest about who’s operating there.
It may also seek information from lawyers internally who may have knowledge of the legal marketplace in the particular city. An initial meeting consisting of a small group from both firms is typically the next step, with confidentiality being a key concern.
Courage describes this type of meeting as “fairly exploratory, focusing on three things primarily: potential synergies, what’s the appetite to do anything — do they have the vision to see that there could be benefits — and some attempt right from the outset to assess the cultural fit between the two firms.”
Following that comes an exchange of information in which the parties further explore the potential synergies and the other firm’s economics and policies. They typically reveal financial statements, accounts receivable history, major policies, compensation system details, client lists, and partnership agreements at this point, Courage says.
“Inevitably at that point, a confidentiality agreement is signed,” says Courage. “You would look at their warts and say, ‘Are those warts fixable? Are there deal-breakers that we need to talk about right off the bat to see if we’re wasting our time?’ Largely, the focus is on looking for a positive outcome.”
Next comes a series of meetings where progressively more detailed talks take place. A wider circle of players will also gradually come into the process, something Courage says is important to do as soon as possible.
“Our mergers have been very successful, and we’ve done a good job of saying no where we ought to say no, and getting groups of people together helps you assess whether there’s a good cultural fit,” he notes.
This idea of a cultural fit, a common phrase you’ll hear from any managing partner following a merger, is at the top of Courage’s list of deal-breakers.
“Do I want to have these people as my partners? Are my partners going to want to have these people as their partners? If you can’t satisfy yourself on those questions, I think you’re just buying trouble down the road,” he says, noting that a willingness to adapt is perhaps equally as important.
Once the parties have laid out a broad agreement, typically via a term sheet, an additional group of lawyers will come in to negotiate the official documentation.
“You’re looking for synergies to believe that you can make one and one to be more than two,” Courage says of the overall process.
Of course there’s plenty more work to do after finalizing the deal, says Bernie Miller, managing partner of McInnes Cooper. His firm completed a merger with Haynes Law in Halifax in March.
“That’s really where the real work begins, and that’s probably where people get off track on mergers the most is by thinking that once they get to the announcement of the merger, the work is done,” says Miller.
“That’s really about five per cent of the work. Ninety-five per cent is afterwards because there is an important acclimatization [or] cultural shift that occurs when there’s a merger, and that can take a long time to work through.”
Miller believes communication is a key consideration at this stage. It’s important for lawyers to be able to discuss the merger and work out what the firm needs to fine-tune in order to make the deal work more effectively.
For Courage, it’s also vital to get new colleagues together in a face-to-face forum as soon as possible. Miller Thomson, for example, has scheduled a retreat this month that will bring many members of its new Saskatchewan office together with the rest of its lawyers for the first time since the merger.
For more on this story, see "A big year for Bay Street consolidation," "Integration a challenge for McMillan merger," and "Ogilvys hopes global deal will be magnet for other firms' partners."
While those who have been there admit each merger deal is different and calls for a unique approach, there are several common threads to be aware of.Gerald Courage, chairman of Miller Thomson LLP and whose firm linked up with Saskatchewan’s Balfour Moss LLP in December, says it has adopted a similar approach to the long list of mergers it has engaged in over the past decade.
He says one of the first questions a firm must ask is whether it needs a broader presence in a particular jurisdiction. In answering that question, it will likely be useful to consider the strength of the local economy, client needs, and the firm’s strategic goals.
Courage says his firm will then begin researching possible target firms. It will look at lists of firms within a particular city along with their web sites and make discreet inquiries in the community of interest about who’s operating there.
It may also seek information from lawyers internally who may have knowledge of the legal marketplace in the particular city. An initial meeting consisting of a small group from both firms is typically the next step, with confidentiality being a key concern.
Courage describes this type of meeting as “fairly exploratory, focusing on three things primarily: potential synergies, what’s the appetite to do anything — do they have the vision to see that there could be benefits — and some attempt right from the outset to assess the cultural fit between the two firms.”
Following that comes an exchange of information in which the parties further explore the potential synergies and the other firm’s economics and policies. They typically reveal financial statements, accounts receivable history, major policies, compensation system details, client lists, and partnership agreements at this point, Courage says.
“Inevitably at that point, a confidentiality agreement is signed,” says Courage. “You would look at their warts and say, ‘Are those warts fixable? Are there deal-breakers that we need to talk about right off the bat to see if we’re wasting our time?’ Largely, the focus is on looking for a positive outcome.”
Next comes a series of meetings where progressively more detailed talks take place. A wider circle of players will also gradually come into the process, something Courage says is important to do as soon as possible.
“Our mergers have been very successful, and we’ve done a good job of saying no where we ought to say no, and getting groups of people together helps you assess whether there’s a good cultural fit,” he notes.
This idea of a cultural fit, a common phrase you’ll hear from any managing partner following a merger, is at the top of Courage’s list of deal-breakers.
“Do I want to have these people as my partners? Are my partners going to want to have these people as their partners? If you can’t satisfy yourself on those questions, I think you’re just buying trouble down the road,” he says, noting that a willingness to adapt is perhaps equally as important.
Once the parties have laid out a broad agreement, typically via a term sheet, an additional group of lawyers will come in to negotiate the official documentation.
“You’re looking for synergies to believe that you can make one and one to be more than two,” Courage says of the overall process.
Of course there’s plenty more work to do after finalizing the deal, says Bernie Miller, managing partner of McInnes Cooper. His firm completed a merger with Haynes Law in Halifax in March.
“That’s really where the real work begins, and that’s probably where people get off track on mergers the most is by thinking that once they get to the announcement of the merger, the work is done,” says Miller.
“That’s really about five per cent of the work. Ninety-five per cent is afterwards because there is an important acclimatization [or] cultural shift that occurs when there’s a merger, and that can take a long time to work through.”
Miller believes communication is a key consideration at this stage. It’s important for lawyers to be able to discuss the merger and work out what the firm needs to fine-tune in order to make the deal work more effectively.
For Courage, it’s also vital to get new colleagues together in a face-to-face forum as soon as possible. Miller Thomson, for example, has scheduled a retreat this month that will bring many members of its new Saskatchewan office together with the rest of its lawyers for the first time since the merger.
For more on this story, see "A big year for Bay Street consolidation," "Integration a challenge for McMillan merger," and "Ogilvys hopes global deal will be magnet for other firms' partners."
