Why law firm merger mania will end in tears

 By Nick Hood

Does anyone out there know a traditional mid-size UK law firm that isn’t merging with someone? Blink right now and half your contact database is out-of-date, or is riddled with the wrong email or website addresses.

The latest news that Charles Russell and Speechly Bircham are in talks with each other simply creates another challenge for those poor souls who have to come up with the least ego-challenging and goodwill-destructive name for the newly combined firm.

In just the past few weeks alone, we have learnt of tie ups within the UK between Davenport Lyons/Howard Kennedy FSI, Lawrence Graham/Wragge & Co, CMS Cameron McKenna/Dundas & Wilson, Bond Pearce/Dickinson Dees, etc, etc; the list is seemingly endless. Cross border mergers are equally prevalent, as witnessed by the integration of Dentons SNR (itself a multiple merger hybrid), Salans and Fraser Milner Casgrain.

A recent survey of mid-market law firms in Manchester by the Law Consultancy Network confirmed that 75% had either made or received an approach in the second half of 2013. Presumably the other 25% must be feeling particularly unloved at the moment.

And does anyone except the merger players themselves think any of this is a good idea? At a pinch one might ignore the sorry tale of over-expansion by Linder Myers which prior to its demise this month had swallowed Rowland Field Cunningham (December 2011), Turnbull Garrard (April 2012), SNG Commercial Law/Senior Calveley/Drummonds (all in autumn 2012) and Dickson Haslam (September 2013).

Despite all efforts to overlay a corporate culture, the inescapable reality is that, with the exception of the largest practices, law firms are still fundamentally collegiate. And for all the expensive gibberish spouted by branding gurus, there’s a greater truth which persists to this day – in the justification alleged to have been given to Parliament during the passage of what became the Partnership Act 1890 (for the original upper limit of 20 persons who could be partners): “it is the maximum number of gentlemen who may sit around a table and discuss their affairs without raising their voices”.

Firms are about their people, and about the relationships these people have with each other and with their clients. In professional services like no other sector, people buy from people. They also only work happily with people they respect and like sufficiently to continue to do so, even if it will sometimes be through gritted teeth.

Little wonder then that many recent mergers have been immediately preceded or soon followed by significant partner defections. It matters little whether the reasons are arrogance, pride, muddled compromises over partner compensation arrangements or intolerable inter-partner personality clashes. Talented people are often loose in their professional trees, so the violent shaking of a merger is bound to have consequences. The strategists who promote mergers will see this as creative destruction, confused clients may think otherwise.

We all wish merging firms every success in realising the starry-eyed gains they expect from coming together, or rather from the disguised takeovers that almost all of them represent. But bitter personal experience, both inside professional services and elsewhere in the economy, tells me that there will be a price to be paid for achieving this. This will not just be the dead weight of heightened central control and the extraordinary profit-sapping cost that this entails. It will also necessitate the blending of distinct cultures into unhappily homogenised services, sometimes largely indistinguishable from one engorged firm to another.

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