LAW FIRM MERGERS
Managing & Dealing With Organizational Change

Legal Marketing Association (LMA) Bay Area Program
May 30, 2001

COPYRIGHT 2001 THE COSMIDES GROUP. ALL RIGHTS RESERVED.

There were 21 law firm mergers or acquisitions in the past year, according to the CORPORATE LEGAL TIMES Sixth Annual Survey of the 1,000 Largest Law Firms in America (released June 2001). Of these 21 mergers or acquisitions, 20 occurred among the 200 largest law firms in the survey, and of those 20, 16 mergers or acquisitions occurred among the 100 largest law firms in the survey.

What is it like to merge with, or be acquired by, another law firm? It can be compared it to planning a massive wedding, or to an earthquake that lasts for two years. It affects every person, every department, and every operation in the firm. Two different IT, financial, marketing and H.R. systems must be blended into one. A new identity must be created and new strategies formulated. People grow anxious about job security and the viability of the venture. Clients can become nervous. The press looks for stories. Headhunters step up their calls. Uncertainty surrounds the entire process. All the while, the practice of law must continue.

When it succeeds, however, a merger or acquisition is a monumental accomplishment, a marshalling of extraordinary human, organizational, and technical resources.

So went the accounts from representatives of 2 of those mergers or acquisitions: Joseph Macrum, Director of Communications at Pillsbury Winthrop (the 20th largest law firm in America, according to the survey); and Nicholas Unkovic, Managing Partner (Palo Alto) of Squire Sanders & Dempsey, L.L.P. (the 32nd largest law firm in America, according to the survey). Joining them was organizational consultant, Diane Woods, of Diane Woods Consulting.

It Can Happen To Your Firm
As companies grow larger and global, the law firms that serve them must grow larger and global, as well. They can grow alone or by finding a partner whose expertise and locations complement their own. Increasingly, law firms are choosing the latter route. However, the work of marrying two established organizations, each with its unique culture, clientele, and history, into a single new entity, is an exhausting feat. Nonetheless, it is a path that many regional and national firms may have to take in order to stay competitive.

For Pillsbury, Madison and Sutro, the press helped prod them to this decision. The venerable San Francisco-based law firm was being perceived as directionless and without a clear market position. Known primarily as a West Coast technology and IP firm, they lacked the critical mass to fully serve their market on a national and international scale. "We were getting killed in the press," recalls Macrum.

Graham & James, LLP needed a partner with a true appreciation for international law, and a similar culture to their own. However, their big concern was finding a place for all of their people. They knew that mergers often produce redundancies. Finding a symbiotic partner was key.

Each described the process in three distinct stages:

1. COURTSHIP ­ Finding Your New Partner
Pillsbury, Madison & Sutro spent over a year meeting candidates. They were looking for a partner with a strong international practice and a good East Coast presence.

Graham & James, LLP sought a partner with a strong presence in Europe to complement its own strength in Asia. They turned to the AmLaw 100 for candidates, and found twelve. They talked to seven firms, reduced the list to three, and found their match in the Cleveland, Ohio firm of Squire Sanders & Dempsey, L.L.P.

In the end, Graham & James, LLP would retain all but 10 of its employees, and lose only one lawyer in Northern California. They would also see their New York office split off to join another New York firm. This was a mutual decision because that office focused primarily on pharmaceutical patent prosecution, an area that did not fit well under the new profile.


2. PREPARING FOR THE MERGER ­ Communicate, Communicate, Communicate
Months before the merger is finalized, a great engine of change roars to life in both firms. Experts are brought in to facilitate the union. These include strategic planners, organizational consultants, and public relations firms. Naming the new firm is one of the first big decisions. In the case of Graham & James, LLP, their name would disappear altogether, whereas Pillsbury, Madison & Sutro would blend its name with its new partner.

A recurring theme from all three speakers was the importance of communication during this stage: internally, with the new firm, with clients, and with the press. As Woods reminded, expectations must be clearly communicated in order to leave no room for misunderstanding during a time of such rapid change.

Macrum's firm worked closely with the press to keep false rumors from smoldering and to keep positive and accurate information flowing. He said, "It takes careful thinking and rapid response" to keep a positive spin flowing from the press. Both firms sent combined legal teams ­ attorneys from both merging firms ­ to meet clients together. Some of these teams actually won new work from existing clients.

Unkovic was pleasantly surprised by two observations.

First, a large organization can keep secrets so long as its people remain fully informed.

Second, several competitive firms offered to assist them with overflow matters and administrative loads during the process, without stealing their clients or their attorneys.

1. Be self-aware, and prepared to manage yourself

2. Be empathetic. Gain the capacity to see the world from the perspectives of others.

3. Communicate clearly and often, so as to leave minimal room for misunderstanding or confusion. Never assume anything.

4. Exercise good scenario planning. Think through various "what ifs", and have action steps in place.

1. If you work for a large firm, there is a good chance that your firm will have to merge or be acquired in the next few years.

2. Clear and constant communication at all levels -- internally, with the new partner, with clients, and with the media -- is the most important factor for success.

Bay Area legal marketing consultant, John Cosmides, is principal of The Cosmides Group and director of Barustors, a State Bar-certified referral service for business and corporate clients. John can be reached at john@barustors.com or at 415-957-1330.