Opinion: Beyond the obvious in international mergers

By Nick Jarrett-Kerr and Ed Wesemann

Without doubt, every law firm possesses a distinct organisational culture, and that culture influences the firm’s success. Therefore, if two law firms merge, the manner in which their cultures merge also dramatically influences the merger’s potential for success. Accordingly, conventional wisdom advises us to consolidate the cultures of merging firms as quickly as possible. Indeed, in some circumstances, this importance of merging cultures may be accurate. However, in other circumstances, particularly in international mergers, consolidating firms’ cultures can produce disastrous affects.

When two law firms begin to discuss a possible consolidation or other less formal means of affiliation, they expect to encounter cultural differences. Indeed, those differences may be part of the attraction that brought the firms together. This is never as true as in international mergers where the parties may even embrace their less accurate stereotypes of each other. We recently advised a US law firm in merger conversations with a UK firm. The Americans fully expected their British counterparts to stop everything for tea at 4pm – and to be extremely formal and proper in conducting discussions. The English lawyers expected the US attorneys to be brash and boisterous while threatening to sue everyone in sight. In fact, both sides were a bit disappointed when the reality of the respective firms was different.

But both sides were so intent on accepting the nationalist culture differences that they almost failed to consider the cultures of their organisations. As it happened, the firms’ methods of dealing with their members and the manner in which the members dealt with each other represented the greatest cultural incompatibility issues. For example, in their early conversations, both firms claimed to operate on a consensus basis. For the British firm, this meant that the managing partner would talk to a few trusted partners to make sure they were not opposed to a contemplated action and then move forwards. Consensus for the US firm, however, was a much more formal process of seeking the approval of every partner. Indeed, consensus meant unanimity and, like the UN Security Counsel, the failure to consent by any one partner was in effect a veto. The pivotal cultural issue here was the degree of trust the respective firms’ partners had in each other. The difference was subtle and could easily have been masked, but fortunately the two firms recognised their organisational issues and reconsidered the proposed merger in favour of a ‘best friends’ relationship.

Three key ideas are central to accepting cultural differences: understanding the culture of each firm; identifying the cultural elements significant in each firm’s historic success; and permitting those elements to survive in the merged culture. Merged firms don’t have to cobble together cultures like a quilt. Certain elements of culture are essential to the success of each of the merging firms. Other elements are simply differences of historic evolution.

Firms can easily identify the elements of culture necessary for success, but these elements vary so dramatically from firm to firm that it’s impossible to create a definitive list for all firms. Typically, however, the important aspects of culture concern the manner in which attorneys practice law. Aspects such as team orientation, availability of associates and paralegals, and the manner in which firms charge clients for services, can fundamentally change a merged firm’s competition and business model.

As well as maintaining both firms’ core culture, some aspects of those cultures must merge in order to operate effectively. Obviously, the firm must adhere to the same ethical standards (including a single conflicts checking and clearance system), the same standards for partnership consideration, and the same standards for lawyer quality and professional development. And, of course, all partners should fall under the same compensation system.

The peaceful coexistence of cultures can be made more difficult by language differences, distance and different time zones. In these situations, the best strategy may be to create a new culture derived from the best aspects of the two existing cultures, while allowing for cultural deviations in specific offices or practices where it makes sense.

Nick Jarrett-Kerr and Ed Wesemann are principals with Edge International. They can be contacted at Jarrett-Kerr@EDGE.ai and Wesemann@EDGE.ai