Category: Mergers and Affiliations

Checklist to Make Sure Your Firm Isn’t Dewey

Every once in a while I read a blog post or article which is so spot-on I am compelled to share it.  That’s the case with “A (Don’t Be) Dewey Dozen: Use This Checklist to Make Sure Your Firm Isn’t Dewey” which was written by Paul Lippe.  It appeared in ABA Journal Law News Now.  If you’re wondering why Lippe’s name is familiar, he’s the guy that worked hard to get Gary Hart elected President — twice.  The insightful comments at the end of his post  (over 25) add much food for thought on top of this excellent post.  No matter what the size of your firm, this should be on your must read list.  Following I highlight and comment on a couple of points I feel strongly about.

4. Do mergers and acquisitions advance the strategy? Whether it’s merging with another firm or bringing in a lateral partner, law firms are constantly engaged in some form of M&A. When I was running M&A for my old company, our one-question test was” “What do we say to our top 20 customers the morning after the deal is announced explaining how they are better off?”

If you look at some of my past posts and articles regarding mergers, you’ll see me ruminating about this same point.  [See, for example, "Post Merger Economics".]  It’s not simply about size or economies of scale when it comes to mergers; it’s about synergy.  One plus one better equal more than two, or the merger has no external value, and probably even less internal value.  Lippe really nails it with his one-question test.  Simple and eloquent.  He really says a  lot  in few words.  I’m thinking about printing this and adding it to the very few items on the tack-it board above my monitors — reserved for especially cogent thoughts.  I consider it my business haiku bulletin board.  Earning a spot on there means a lot.  I’m sure I will be sharing this one-question test with clients in the future.

6. Does management render unto Caesar? Lawyers use logic and reason to argue indeterminate facts, and they do it well. . . .but at minimum firms need to recognize that there are some inarguable facts. As my old boss Sen. Daniel P. Moynihan said: “Everyone is entitled to his own opinion, but not his own facts.”

The old adage, “figures lie, and liars figure” came immediately to mind when I read this.  I continue to encounter attorneys who somehow manage to dismiss what I find to be self-evident facts which are as plain as, well, the nose on their face.  It’s one thing to play devil’s advocate for love of the debate.  It’s great at the dinner table with cherished guests, during a round of golf, or over drinks at ones favorite establishment.  But it’s not so great when it’s a never-ending process at the firm.  It wears the heck out of your partners and administrative management.  It seriously impairs the firm’s ability to evolve and realign to a constantly changing marketplace.  It creates dissension and dissolves the glue between partners which many firms work so hard to develop. In short, it’s detrimental to the health and vitality of the firm. 

I’m not suggesting that you blindly accept numbers put in front of you.  Far from it.  But there has to be collaborative effort to allow and enable objective analysis, and let the chips fall where they may once that is done.  Stop arguing endlessly just because you don’t like the numbers.  Put that same energy into improving them through some innovative thinking,  difficult discussions and decisions, and an action plan to implement change.

 

Post Merger Economics

I have written numerous articles on Mergers and Affiliations. As I’ve said before, and will probably say again, many mergers happen for the wrong reasons. One of those is growth purely for the sake of growth. While revenues may rise as a result, that doesn’t mean that profitability will in fact improve. In fact, the more complex the organization, particularly when it comes to additional offices, the less the profits per partner, in general.

Firms assume too often that there will be a realization of economies of scale by combining operations. Too often those savings fail to materialize. And then the result is disappointed partners, and cutbacks.

A recent article in The March/April 2006 issue of Law Firm Inc. highlighted statistics from the most recent Altman Weil survey. Altman Weil principal Thomas Clay points out that only time will tell whether some of the mergers were sound business moves. As an example cited in the article, Holland & Knight has “retooled twice since engaging in explosive growth since the mid-90′s. Most recently, despite record revenue in 2005, the firm announced the closing and consolidation of seven offices. Partners in Pillsbury Winthrop Shaw Pittman, created by a 2005 merger, are similarly making course corrections. After reporting a 20 percent decline in profits per partner, some support staff were offered a voluntary buyout, and subsequently layoffs were considered.”

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