Faint heart never won... Successfully navigating the path to merger

Law firm mergers continue to dominate the legal press as firms strive to expand their service capabilities. For every successful merger, however, there are many more failures, either in the negotiation stage or more fatally, further down the line. Neville Eisenberg, managing partner at Berwin Leighton Paisner, assesses the challenges from the standpoint of the successful merger of Berwin Leighton and Paisner & Co.

J. Paul Getty famously said that the meek might inherit the earth, but not its mineral rights. Mergers are not for the faint-hearted. Aside from the transaction itself, which requires great courage and effort, a merger provides plenty of opportunity for organisational renewal. In order to fully reap the potential benefits, however, the firms involved have to be prepared for a massive organisational commitment to the change process for it to be successful.

It is now two years since the merger between Berwin Leighton and Paisner & Co, which has, rightly in my view, been hailed both internally in the firm and externally as a great success. This article examines five aspects of law firm mergers, drawing primarily on the experience of creating Berwin Leighton Paisner.

Strategy

It is doubtful that mergers in themselves constitute a strategy. A merger can, however, form an important part of the toolkit for achieving a strategy. It is, therefore, vital that at least one of the parties to a merger has very clear strategic objectives, which the other party either shares to a material degree, or comes to be persuaded is the right strategy for both firms. In the case of Berwin Leighton and Paisner & Co, the common strategy, in broad terms, included:

Creating a firm focused on three main practice areas: real estate, corporate and finance – both contentious and non-contentious;
Providing a platform in London from which to develop a significant international capability for clients;
Improving the growth prospects and competitiveness of the firm through having more depth and profile.

More specifically, for Paisner & Co, the merger also provided the following key strategic benefits:

A strong finance capability – this was an area that had not yet been developed at Paisner & Co;
A solution to the future development of its real- estate practice as part of one of the country’s leading real-estate departments;
An opportunity to accelerate the development of its already successful corporate department from a larger base.

For Berwin Leighton, the merger presented the following strategic benefits:

An opportunity to double the size of its corporate department – at the time, Paisner’s corporate department was very highly rated for the firm’s size in London;
The new firm would have more balance in terms of practice areas;
A better platform for further growth of its finance department, which was the fastest growing practice area in the firm.

For both firms, there were the additional benefits of a greater base for investment in the firm’s infrastructure and an opportunity to achieve in the new firm a wide-ranging change programme to increase overall competitiveness.

The strategic logic of the Berwin Leighton/Paisner & Co merger was not only rigorous, but there was an alignment between the strategic needs and aspirations of the two firms. This provided a conceptual bedrock for the merger process itself. Based on our experience, the stronger the strategic case for merger, the greater the prospects of success and the higher the level of internal and external support that the transaction will receive.

Communication

There are three constituencies that must be convinced of the strategic merits of a merger:

1. The partners and staff of the firms involved;

2. The clients of the two firms;

3. The marketplace generally.

There is much truth in the statement that one cannot do enough internal communication in any business context. From the date our merger discussions were announced, a very detailed internal communication programme was implemented, which included:

Staff briefings;
Partner discussion groups;
Full partner meetings;
Partner social events;
Departmental social events;
Practice area social events.

There were many social events. It is probably fair to say that some people became tired of attending so many, but if anything, we could perhaps have done with even more. Critically, these were all held before the merger date, so that by the merger date everyone had had several opportunities to get to know their counterparts at the other firm in a number of different contexts. Furthermore, these events involved literally all parts of the firm including support departments.

The internal communication programme was complemented by a detailed plan for communicating the logic of the merger to our clients and other external audiences, both before and after the merger date.

Operational merger

Our objectives with the mechanics of the merger were simple: we wanted to review all aspects of the operations of the two firms and achieve the fastest possible integration of the two firms at all levels.

We were fortunate in that we had a highly motivated and extremely effective group of professional directors redesigning the support areas of the firm. By the time the partners voted on the merger (at the end of February 2001), we had worked out most of what needed to be done. Two months later, by the merger date of 1 May 2001, we had completed about 80 per cent of the operational integration and one month later, all integration, other than the physical moves of people, had been completed. The extent of the change was profound – here are a small number of examples:

We created a new logo and branding for the firm – this exercise, from briefing designers to selecting the final branding, was completed in three weeks;
We reorganised the structure of the firm including all legal and support departments as well as all the management positions;
All the systems of the two firms were fully integrated – from telephones to the entire IT platform;
The staff benefits package was completely reviewed and harmonised with a single package for all staff implemented from the merger date;
The partner compensation system was fully reviewed and changed, taking elements from both firms’ previous systems.

In short, while we drew on what existed in the two constituent firms, we created a new firm not only in form, but in substance. This process allowed us, under time pressure, to achieve a programme for change that, under normal circumstances, would take much longer. The extent of the changes also demonstrated very tangibly to people in the two firms that there was real substance to the merger and that integration was an immediate reality.

The final stage of our integration programme occurred during the Summer of 2001: namely moving people in order to create geographical integration of teams. In less than two months, we moved 850 people and this was fully completed by September 2001.

Management

Our merger and integration process benefited from a very high degree of management unity. This was not only relevant at the negotiating team level before the merger was agreed but was also extremely important after the merger. Our objectives were firstly to present a unified management team to the firm and secondly to ensure that management would be effective in demonstrating leadership and decision making.

Regular fortnightly meetings of the management board, which includes the heads of all the legal and support departments plus elected partners, ensured both efficient decision making and a high degree of knowledge on the part of management as to what was going on in the firm.

Managing the aftermath

One of the decisions we took pre-merger is that we would handle the integration process ourselves without supplementing the team with outside consultants. It is difficult to generalise about the value of consultants because it all depends on the circumstances. In our situation, we decided for a variety of reasons to do it ourselves.

One of the consequences of this was that the burden on management during the integration process was very high and there is a limit as to what any organisation can cope with. In addition, we knew that, notwithstanding the fundamental change that creating the new firm involved, for Berwin Leighton Paisner to continue to be successful and achieve its strategy, there needed to be a process of continuous change which did not stop with the end of the merger integration programme.

It will always be a question of fine judgement as to how one achieves the consolidation necessary after a merger, while at the same time driving the strategy of the new firm. Furthermore, it is possible that the enthusiasm (some might even say euphoria) associated with a merger begins to dissipate after a while and the real challenge is to maintain that enthusiasm in the medium term.

In the two years since our merger, we have continued to drive our strategy. To illustrate some our major achievements, we have:

Devised and implemented a new international strategy. We have agreed strategic alliances with New York law firm Kramer Levin Naftalis & Frankel and Italian law firm Studio Legale Santa Maria, which has now given us capability in five countries. This is set to continue;
Installed an entirely new practice-management system for the firm, which has enhanced the quality of reporting available to management and the accessibility of information to everyone in the firm;
Devised, created and launched an entirely new knowledge-management system which is already achieving usage levels that are more than three times in excess of usage of our previous system and has begun to have profound effects on knowledge sharing among our different practice groups. Over ten per cent of the firm’s lawyers and many people in our support departments are involved in developing and up-dating the content of our new system which is an extraordinarily high degree of participation.

While there will always be many differences between two firms, a successful merger process does require one to focus on the commonalities. One of the important similarities that the management teams felt existed between Berwin Leighton and Paisner & Co was the “people culture”. This perception was mirrored by an external perception that both firms looked after its people in a way that gave the firms competitive advantage.

While many other commonalities existed, the management team felt strongly that the set of values involving how people are treated and behave needed to be a fundamental cultural feature of the new firm. We were concerned that as firms grow larger, it is sometimes these values that may become compromised.

Recognising the value of our people and creating an environment that gives them the best opportunity to achieve their greatest aspirations continues to be a major cornerstone of the firm’s philosophy. How we achieve that is probably the subject matter of another article. But one thing is clear, the success of a merger is entirely dependent on the support and involvement of everyone in the firm and, in the end, the credit for a successful process belongs collectively to that community.

Our experience is that provided one has a clear strategy with sufficient internal support, then a merger that is effectively managed can, in the right circumstances, accelerate the achievement of that strategy quite significantly.

Neville Eisenberg is managing partner at Berwin Leighton Paisner. He can be contacted at: neville.eisenberg@blplaw.com.