THE BLOG

Why Merger Manners Matter in Legal Services

26/03/2014 13:47 GMT | Updated 26/05/2014 10:59 BST

Terms like honesty, discretion and confidentiality are loaded with meaning but they can ensure trusting business relationships and the foundation of a good market reputation.

As managing partner of a law firm, the past twelve months or so have reminded me of their essential value, particularly for a business which is actively seeking merger and acquisition solutions to help maintain growth and cement our long term future.

During the recent past, my firm has been subject to a degree of speculation about its future. We are regularly in discussions with potential partners including individuals, teams and whole businesses large and small. As can often be the case in any form of transaction, these talks may lead both parties down a variety of different paths and in many situations the deal doesn't happen.

During these talks we endeavour to maintain absolute confidentiality and demand the same from our potential partners and advisers both during and after discussions are completed, particularly if an agreement cannot be reached .

Our experiences in this process have led me to consider the behaviour of our firm as we navigate these complex waters. I'm pleased to say that we have remained on good terms with every one of the firms and practitioners with whom we've had discussions and while this hasn't been a strategic objective, it has become an essential conduct tool as we seek out merger or acquisition opportunities.

Understanding aspirations

Given the fact it's better for discussions to remain under wraps it is worth defining some of the typical scenarios.

After the signing of a non-disclosure agreement, initial discussions are best had as they would be over the interview table. Our focus is therefore on the aspirations of the potential partner to identify whether they fit with ours. Our own goals should already be clear to the other side; we would like to acquire individuals, teams and businesses which complement our own offering. But for the organisation potentially being acquired the motivation can be complex and sensitive. Succession issues may be of concern to owner-managers who have built a business over many years and would like to see their practice and the careers of their employees secured beyond retirement. Alternatively, a business may be struggling to maintain profitability amidst tightening margins - as is the case with a number of practices across the UK.

During the course of an early discussion we will find out from the business owner about those plans and whether we think as a partner we can extract value that suits both parties. Premises are a straightforward example of an area where cost can be controlled and value can be created by a deal.

Areas of Tension

Naturally, the terms of any transaction can be a sensitive issue and it is on these potentially choppy topics that we have always trodden carefully; Money should never be left to the last minute. After all, circumstances rarely stay the same and maintaining a cordial but up-front approach to the financials of any deal means that if an offer fails to meet the selling parties' aspirations, there is still a chance that minds could meet eventually down the line.

Above all things, merging two companies or absorbing a team into a business calls for a frank assessment of two cultures becoming one. Employees - and in particular the former Partners in the acquired business if they have stayed on - have to want to get out of bed in the morning and too often has there been a transaction in which the cultural demands have demotivated one or another of the parties, destroying value and prompting a brain drain as talented individuals search for the exit door.

Ultimately, we want the people, teams and businesses we acquire to become advocates of the process they were involved with. In 2012, Simpson Millar acquired Macaras, a family law niche practice based in Leeds whose owners now endorse every aspect of the tie up and act as advocates for Simpson Millar to potential partners on our behalf. Equally, we'd like those whom for whatever reason a deal ends up not happening feeling equally positive because they will still tell others about their impressions of the firm. These are not hostile takeovers after all.