Mergers, alliances and networks: Choosing the best strategy for your firm

Some of the hype surrounding law-firm mergers may have dissipated, but as a recent Managing Partner survey demonstrates (see this month’s news or visit the Managing Partner website at www.mpmagazine.com), there is still a lot of activity in the market, as firms continue to perceive merger as the quickest route to increased competitive capability. Many survey respondents referred to the inevitability of merging, as the globalisation reinforces a trend for major international players in the legal marketplace. Whether in the short or long term, law firms are likely to face the strategic choice of expanding through merger, or reinforcing the firm’s strengths as a small firm with local expertise. And faced with the consolidation of competitor firms, the merger route will likely prove most tempting for instant growth and greater profit.

However, taking the merger path is far from easy and the risks are high. Finding the right partner, and managing the negotiations to ensure that the strengths of both firms are effectively combined for business growth, demands a proactive strategy from beginning to end. Once merger terms are agreed, the firms will then only find themselves at the start of a gruelling integration process, the success of which is essential if the business is to win any benefits from deciding to merge. Firms that fail to quickly implement a one-firm culture are likely to confuse and alienate essential employees and lose the trust of long-standing clients.

It is a prospect that has understandably led some firms to look for alternatives such as joining an alliance or international network. Of course, many may look to forging an alliance as a precursor to a merger, a means of testing the water before jumping in with both feet. But, the best examples are those that have been established as credible alternatives to merger activity, which strive to combine the expertise of firms without impinging on the inherent independence of each member. Such a strategy is well demonstrated by ius laboris, an international employment-law, pensions and employee-benefits alliance. In realising that globalisation did not necessarily mean clients would choose a global law firm, the alliance was set up to protect firms that wished to remain independent and niche. It also enabled those firms, driven by their employment practices, to share knowledge and cross-border expertise, without having to merge with a firm where employment law might not be the driving force behind its international strategy.

While it is unlikely that such alliances and networks will ever prove more popular than a merger, it is refreshing to see that the market has developed some good alternatives. And, for a firm with strengths in a particular practice area, an alliance may prove a much more profitable way of developing a core capability without having to compromise its expertise for another firm’s wider practice areas.

As well as articles covering the essential strategic choices firms face in looking to expand, this issue also previews Ark Group’s Lex Connect UK, which will be held in London on 19-20 January. In particular, we compare the services provided by different legal solution providers, asking how firms will benefit from the renewed competition brought about by newcomers to the legal technology scene.

Caroline Poynton
Editor

Features

To merge or not to merge? Free
Navigating the path to a successful merger is never easy. It is a route that demands careful negotiation underpinned by a realistic appraisal of strategic aims. And once merger terms are agreed, firms are only at the beginning of a difficult integration process, the failure of which will dissipate all potential benefits of a union. With so many possible pitfalls, many firms avoid mergers and instead choose an alliance or network to develop their firms and gain competitive capability. Alan Hodgart, an independent consultant, assesses the strategic case for mergers and asks whether alliances and networks can really be credible alternatives.

Golden rules for successfully negotiating law-firm mergers Free
The merger process can be a long and gruelling experience for all concerned, making employees fearful, clients cautious and the press inquisitive. Finding the right partner, covering all the potential problem areas and keeping everybody on side can prove far from easy, but at least firms can now learn some tips from the many successes, and failures, that have gone before. Stephen Denyer, regional managing partner for Europe at Allen & Overy, provides the voice of experience, with some practical guidelines for navigating the all-important merger negotiations.

Integrating engine rooms: Assessing post-merger administrative challenges Free
In January 2001, US firm Reed Smith merged with UK firm Warner Cranston. There were important similarities between the firms that made a merger beneficial, but there were also many differences that had to be addressed. Tim Stubbings, operational manager at the London office of Reed Smith, recalls the trials, tribulations and successes of integrating the administrative functions of the two firms, from both a physical and cultural point of view.

Same market, different approach: The success of the niche-alliance model Free
While the legal profession abounds with law firms considering merger opportunities, the possible benefits of an alliance or network can be easily overlooked or perceived as merely a rung on the ladder to full merger. Jean-François Gerard, managing director of ius laboris, an international employment-law, pensions and employee-benefits alliance, explains that by taking such an attitude, law firms could be missing out on a golden opportunity to develop their businesses without facing the perils of the merger minefield.

Legal technology: Are lawyers convinced by KM? Free
Back in 1998, I wrote in my book Legal Practice in the Digital Age that: “Knowledge-management systems are not only set to become the next big thing in the quest for the killer app but will also subsequently prove to be a huge waste of money, as well as a wrecker of reputations, hopes and expectations.” Richard Susskind, in his book Transforming the Law, echoed this view when he warned firms to ignore the know-how trap “as a holy grail that will never be achieved”. Now fast forward six years and has anything happened to convince this doubting Thomas that law firms really have got to grasp with the concept of KM?

Playing the technology field Free
On 19-20 January 2004, Ark Group’s business strategy and solutions forum, Lex Connect, will bring together legal solution providers and law firms to discuss the challenges of effectively managing law firms and the technology solutions that can potentially help firms drive their business forward. In preparation for the event, Caroline Poynton talks to representatives of the solution providers that will be at LEX, including Canon, Computacenter, E1 Business, Nortel Networks, SAP and Voicepath.

Regulars

Personal profile: Managing a US venture in a London market Free
John Reynolds has plenty of recommendations for his expertise in litigation, including Chambers & Partners, Legal Experts 2002 and the Global Counsel Dispute Resolution Handbook, all of which describe him as a leader in the field. In September 2000, however, Reynolds agreed to expand his responsibilities and become managing partner of the London office of McDermott, Will & Emery. Can he parallel his litigation success in the management field? Caroline Poynton finds out.

Company profile: Delivering recruitment services in a difficult market Free
Starting a business is never easy, but what about deciding to launch a legal recruitment company in the middle of an economic downturn, when fewer firms are looking to recruit and high-calibre candidates are more nervous about moving? For First Counsel, launched in the spring of 2003, it was merely a challenge to be met head on. Caroline Poynton talks to directors Chris Cayley, William Cock and Tim Skipper about the merits of their business case and how they intend to meet the needs of the legal marketplace, despite the competition.