Discusses her experience of the SJ Berwin and King & Wood Mallesons merger.
Rachel Reid, COO Europe and Middle East, King & Wood Mallesons.
Many feel that the legal sector is overdue for consolidation. However, firms looking to merge should only do so if 1+1=3, not 2. After all, if two smaller firms combine to create something with no added value for their clients, it is unlikely to be a successful venture.
It is vital to examine the ‘must’ considerations and potential pitfalls of the merger process from the outset. Financial and cultural assessments should be made at an early stage, for example, with roles mapped to ensure uniformity within the new entity. Deal-breakers also need to be identified: will the merger fall apart, for example, because one firm insists on retaining its name?
Above all, clients should be consulted before, during and after the merger – and the same quality of service maintained throughout. The merged firm will need to provide the same level of service – or better – so firms need to make sure that they don’t ‘marry down’.
One major sticking point – which can easily stop a potentially lucrative merger in its tracks – is the 'heir and spare' syndrome, where it dawns on one of the firms’ duplicated department heads carrying out the due diligence that the merger could put him or her out of a job. As a result, rather than facilitating the merger, the department head may attempt to sabotage it.
Other potential pitfalls include differing management styles or profit-sharing models, liabilities stemming from redundant premises, partner annuities and final pension schemes, and a lack of available funds.