Competitive Intelligence - Mergers within Law Firms

During these challenging times a number of law firms have taken the opportunity to merge their resources.

Mergers can bring a period of uncertainty, concern and can often bring strong players into your market, transforming a moderately successful competitor into a raving monster.

Don’t Shut the Monster in the Cupboard

Shutting it in the cupboard will not make it go away; it will just make it more dangerous.

Unless the merger results in the acquisition of specialist skills or technology or in the case of airlines, valuable landing slots, it is rare to find mergers taking place with both firms doing very well, with focussed managing partners and thriving client base.  After all, unless retirements are on the cards, why would a partner of a very successful firm want to significantly dilute their earnings?

What does a merger mean and can you assess how it affects your future.  Was it a merger or distressed takeover? Will this firm now take all your clients and destroy an already fragile business environment?

Don’t Panic!

Competitive Intelligence can help you decipher the situation, allowing you to make decisions to positively affect the future of your firm based on intelligence, not rumour, gossip and blind panic.

There are a number of questions to ask and if you are conducting efficient ongoing competitive analysis you should already have a good idea of most of the answers:

• Which one of the associated firms in the merger is the largest?

• Who will be the managing partner of the new entity?

• Who are the new partners of the merged firms? Have some of the partners moved side ways or retired?

• Who are emerging as the key players in the merger?

• Has one the firm’s key partners left a few weeks earlier?

• • Did they leave for a new opportunity?
  • Did they not like the thought of the new merged firm?
  • Was there a better alternative within their discipline within the other firm?
  • Was the leaving a surprise?
  • Does it indicate a dominant partner in the relationship?
  • Was she head hunted or did she initiate the move?

• Which firm has the better the client base?

• What is the newly merged firm saying to its clients and the media? More importantly, read between the lines, what isn’t it saying?

• Is one of the firms involved relying on a couple of demanding entrepreneurs with little loyalty or specialise in an industry sector which has struggled, such as construction?

• What are the service levels of each of the firms? Will the merger affect this? Will it give you an opportunity to pounce?

• Analyse each of the firms’ financial performance and their markets. These in their very nature are historical, but can you see why a firm would want their situation to change?

• What were the firm’s credit ratings before the merger? What is the credit rating of the new organisation?

• Does the amount of fee earners in the firms equate the published revenues?

• Do either of the firms have too many non fee earners on their payroll?

• Have the firms made a lot of recent redundancies? If so which sectors were affected?

• Have either of the firms had a recruitment freeze? If one has not recruited and the other has, it could be a sign of which one is the dominant partner?

• If you have decided who the dominant member of the merger is, what is in it for them?

• Did either of the firms approach anyone else to join them in a merger prior to the deal?

• Is there strategic intent to buy the expertise and the key people in the other organisation?

• Does one of the partners already have a foothold in the market in that area?

• Has one of the players recently merged with another firm?  Has that been successful, was it an equal partnership or acquisition in all but name.

• What was each of the firm’s growth strategies in the past?

• If they are high profile, what have they said in the past about their growth plans? They may have said they plan to have a number of regional offices by a certain time. Have they done what they say they were going to do? Which PR consultant was terminated?

• When speaking to a partner from the smaller firm do they get defensive when you suggest it was a take over? Provocative questioning is an excellent technique, but that’s for another time!

• Likewise when discussing the situation with the larger member of the merger do they not comment, leave things unanswered or give you that knowing look?

Answering these and other questions you may get a picture of what has actually happened. Clearly to protect your interests it is essential that you understand your new rival.

Using Competitive Intelligence on a consistent basis could have predicted the situation months before hand, but using some tools now will help you to see a future with this new entity within in your market place.

Watch out for future leavers within both teams, perhaps head hunt professionals you would like to have in your team. See if they are sitting delightfully happy or as uncertain as you may be.

Informally speak to the people who left and see what they say. Talk to the recruiter. If you use a long standing local firm with an excellent reputation in the market they will know what is going on.

Conduct a mini war game with your partners and interested parties. Some act as if they were the managing team of each of the merged firms; perhaps another rival and your own management team.

Gather as much information as you can about your rivals and the key players. Take about 6 weeks to collect this information (if you don’t already have it) Define a number of questions you would like answers to and spend the day (with a facilitator) challenging each other over the moves each of the players make.

If done properly you will learn a lot from this exercise about your new rival and your own firm.

Competitive Intelligence can help you understand mergers and acquisitions and make you aware of what’s going on long before it happens.

If you hold most of the cards you can direct the game.

If you have any questions about this article, I am very happy to take a call, email or grab a coffee with you.