Our now-retired colleague, Duncan Ogilvy (former managing partner at Mills & Reeve), used to opine that when two small, failing law firms merge, the outcome tends to be a larger failing law firm. It sounds obvious when you see it there on the page and yet, of the firms considering mergers in these less certain times, a significant proportion are unlikely to be as prepared for the change as they should.

With Duncan having left 3Kites a few years back, you might wonder why we would pick this as the topic for an article, notwithstanding the fact that merger activity has been climbing for some time now. However, this article is also part announcement as 3Kites is pleased to welcome not one but two former managing partners to our team.

First up, we are delighted to have Malcolm Dickinson on board. Malcolm was managing partner at Michelmores for many years before assisting a number of firms and managing partners with strategy reviews, succession planning and various other initiatives. More recently, he has been the CEO for the largest law firm in Oman. Malcolm brings a wealth of experience from running and growing small and medium sized law firms, to operating internationally in the GCC and China.

Second, we are equally delighted to have Vivienne Williams as a Kite. Viv was managing partner at BLM for many years and was in the seat for the planning and preparation of its merger with Clyde and Co, as well as other smaller acquisitions. She has since been working through the challenges that law firm mergers (including the UK’s second largest) bring, which can affect colleagues, clients and technology.

It therefore makes sense for us to tap into the experience each of our new Kites brings to provide a short checklist for firms considering a merger. We will also be running a number of seminars to cover this topic in more detail and allow managing partners and other senior leaders the chance to ask the sort of questions that may have been vexing them but for which there was no obvious outlet.

So, to the checklist – and first on the list is why? Why does your firm want to merge and, rolling back before this point was (or is) reached, what is it about the current shape and performance of the firm that is not meeting the needs of the equity (or its clients)? If the equity is not questioning the status quo and those partners coming through are happy investing into the business in (more or less) its current form, why are you looking to change? For many, of course, there will be dissatisfaction with the place the firm is at or is headed to, which leads to the next point on the list… what type or size of firm do you want to become? Bigger? More profitable? More broadly based? Or even more focused?

Once you have answered these questions, you can move on to how to meet your objectives. It might be that a merger is simply the least difficult option… but is it the best one? Other options might include getting investment (and not always from outside – this could include using office space, pensions planning or some such). Assuming the due diligence is done and a merger is the agreed course, the next point on the list is the profile of potential merger firms. Should they be bigger or smaller than yours? Practice aligned or filling gaps? What will the impact be on any shared clients in terms of service and pricing? Could technology have a role here too, for example if you need a new system that a merger target has, would that target become more attractive?

Now the dancing starts as firms try each other out for size – is there a good cultural fit? Will each tick boxes for the other? And so on. It may be that you only ever dance with a single candidate or that you look across a number of firms before alighting on the one which feels best… and which offers benefits on both sides (no-one wins when one side feels it has somehow been left with the wooden spoon).

So far, so good… but now the real work starts. Terms need to be agreed, which means getting your equities on side, including parity of remuneration. Glossing over the political manoeuvring that this will involve, it is then onto the operational considerations – where people will sit, which office space can be relinquished at reasonable cost or using a breakout, what systems will be adopted (especially
where both use something different to the other), or should the opportunity be taken to adopt a third way that has always seemed too difficult? And last but not least, bringing the people together within a potentially new or evolved culture.

If the process sounds difficult, that’s because it is. However, is it worth the effort? For the answer to this, you need to go back to the beginning of the article and look at the reasons for going down the merger path and the objectives that you had agreed would mark it as being a success.

3Kites is able to provide assistance for firms considering a merger. This includes undertaking a review of a firm’s existing position (covering plans, gathering aspirations from current and upcoming equities and such like), creation of a strategy roadmap, guidance throughout the process and support with technology and culture changes. 

If you would like further information about this or any other of 3Kites’ services, please contact us by calling Paul Longhurst on 07785 254909 or emailing [email protected] 

Paul Longhurst is a director of 3Kites. This is the 49th article in the series Navigating Legaltech.

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About 3Kites and Kemp IT Law  
3Kites is an independent consultancy, which is to say that we have no ties or arrangements with any suppliers so that we can provide our clients with unfettered advice. We have been operating since 2006 and our consultants include former law firm partners (one a managing partner), a GC, two law firm IT directors and an owner of a practice management company. This blend of skills and experience puts us in a unique position when providing advice on IT strategy, fractional IT management, knowledge management, product selections, process review (including the legal process) and more besides. 3Kites often works closely with Kemp IT Law (KITL), a boutique law firm offering its clients advice on IT services and related areas such as GDPR. Where relevant (eg when discussing cloud computing in a future article) this column may include content from the team at KITL to provide readers with a broader perspective including any regulatory considerations.