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Law firm mergers need joined-up thinking (First published in Managing for Success )

Law firm mergers come under the spotlight as Sue Bramall features in the latest edition of Managing for Success, from the Law Society Law Management section.

Mergers are becoming increasingly common for legal businesses of all sizes, but exploiting the business development opportunities arising from a merger is not a quick win.  Sue Bramall explains how to make the process smooth and successful.

With most firms reviewing their strategic options in light of the changing competitive landscape, we are seeing a steady stream of law firm mergers. The largest in 2011 included Clyde & Co joining forces with Barlow Lyde & Gilbert, DWF’s merger with Crutes, Weightmans with Mace and Jones, and most recently, Martineau’s tie-up with Sprecher Grier Halbertstam. In addition, many smaller firms have seen mergers as a necessary route to their survival.

The attractions of a merger tend to fall into two categories: cost savings generated from economies of scale; and increased sales generated from cross-selling and exploitation of the synergies created by the merger. Achieving the cost savings is comparatively straightforward, as these are likely to have been identified in advance of the merger, and an outline plan agreed as part of the negotiation process.

However, the management of change challenges any business, and exploiting the business development opportunities of a merger is not such a quick win. The communication process around a merger often requires an unanticipated amount of management time. Equally, cross-selling activities – not generally a strong point in law firms at the best of times – require an ongoing investment of energy and resources to generate forthcoming and measurable returns. And it can be hard to sustain fee-earners' enthusiasm and momentum for making that effort, as they will be keen to get back to normal business and start recovering chargeable hours lost during the distractions of the merger.

In the August 2011 edition of Managing for success, Nick Jarrett-Kerr looked at the different types of merger, and how to overcome lawyers' common objections to mergers. This article looks at post-merger integration from the business development perspective, including how to integrate these functions in the new merged firm, and how to use them to crystallise the benefits for the firm.

Pre-merger planning

Establishing a cross-departmental team to plan and manage a merger is essential to its success. The business development perspective can help stop leaders falling into the trap of being too internally focused and getting bogged down in politics. Setting key implementation dates and ensuring that they are adhered to is key to getting the business back to 'normal' operations.

Many firms underestimate the huge demands which can be placed upon the HR and marketing departments or functions, and these are areas which may benefit from additional outside assistance. Employee perceptions and expectations need to be managed, so HR will need to work closely with marketing from the initial internal announcement.

Post-merger integration

Weighing up a potential merger partner will include an analysis of the client base and market strengths, which will usually reveal a set of opportunities which contribute to the overall attractiveness of the union.

Ideally, a plan to exploit these opportunities should be drawn up as early as possible. However, partners will be focusing on structural and financial issues at this stage, and even the marketing and business development team's initial focus is likely to be elsewhere – on the branding and launch of the merged firm.

This can mean that the exploitation of those market opportunities falls into the post-integration phase, but a plan must be drawn up as son as possible.  Key success factors and a timeframe (short, medium or long) should be set for each activity, and the incorporation of these factors into the post-merger integration plan makes it more likely that they will actually happen, and goals will be achieved.

Remember that speed is of the essence to ensure smooth integration, so that the combined firm can start to build a new future, and speed necessitates compromise; there is no one result which will keep everyone happy. This is as true for a business development team as for any other. For example, each business development team may argue for its preferred contact management system, but the decision may actually be determined by the financial and IT considerations related to the practice management system. The integration team needs to continue to meet regularly to ensure progress continues as planned, and iron out any problems resulting from such compromises.

Core messages

Before you start communicating about the merger, you need to get your messages clear. It is important to recognise that the merger will mean different things to employees, clients, introducers and the media. Be clear about the particular benefits to each audience and develop a set of appropriate "benefit statements".

Size is not, in itself, a benefit, although benefits may be created by increased size. For example, for employees, size may provide better career opportunities and access to training. For clients, it may bring the benefits of new areas of service, enhanced geographic reach, or access to new technology.

You will also need to plan how to address the risks and concerns of each audience. Two heads of employment law will naturally be concerned about who will be the future head of that team. While you may not be able to decide immediately, you can answer this concern with details of how the decision will be made, and by when. For staff more generally, putting answers to some frequently asked questions on to the intranet will help. You may also wish to consider a more personal video broadcast from the senior or managing partner to keep staff updated.

Take some time, too, to prepare standard responses to typical questions that you might expect from your clients, such as: whether they will be handled by the same team; how potential conflicts of interest will be handled; and if there will be an impact upon fees.

A set of clear messages and responses will empower managers to respond to their teams and clients.

Internal communications

Communication is critical throughout the merger process, so it is important that one person has responsibility for this. This person must not be a gatekeeper or 'master of secrets'; in fact, part of their role is to ensure that sufficient and accurate information is provided as regularly as possible, and for as long as necessary.

A merger creates insecurity and uncertainty among staff, who will worry about what the changes will mean for them and their career. This can result in genuine stress, particularly in the long term.

Staff will be hungry for information, and will rarely think that they receive enough, so internal communications can be a thankless task. However, regular and frequent communications will help to keep people – your most valuable asset – on board. A lack of information, by contrast, will only result in rumour and speculation.

Four distinct phases need to be addressed in the communications programme: the announcement; the unfolding of the new structure; the implementation; and post-integration.

During the first three stages, senior management will be very busy, and will have less time to spend with their team on general management and encouragement. It is easy to see motivation slide, and that call from a recruitment consultant might suddenly seem more interesting than before the merger was announced.

If there are going to be staff cuts, then it is important to focus on the people who will remain; this means addressing "survivor syndrome “. As for those who will be made redundant, the firm must be decisive and quick, to give people the chance to accept the new situation and move on. A piecemeal approach will simply create insecurity among other team members.

Building relationships between the new teams requires an investment of time and resources. This might be anything from a simple programme of one-on-one meetings, through to more time-consuming and in-depth team-building conferences and activity days. Internal events are invaluable for developing a common culture, understanding, mutual trust and the close working relationships necessary for effective team-working and cross-selling. This all takes time, as partners will naturally be hesitant about introducing their clients to unknown colleagues, even if they are now part of the same firm.

Even within existing firms, solicitors often have a less than thorough understanding of what all their colleagues do, so disseminating this information will benefit the whole firm. In theory, this information probably already exists in brochures and on the firm’s website. However, a departmental presentation and discussion will achieve much more, particularly if it covers the following questions:

  • Who are the main clients for this team? 
  • How do we help clients and add value? 
  • What expertise does the team have in particular industries? 
  • What does the team's target client look like (structure, size, industry, location and so on)?
  • What are the triggers which would cause that client to need our services? 
  • What is the team's unique selling point (USP)?

Client communications

Getting the internal communications right will benefit the firm immensely with regard to the external communications, too. Your solicitors are your best marketing ambassadors, and their enthusiasm – or lack of it – will be conveyed to clients surprisingly quickly.

The merger will be a subject of conversation at every business or social event attended by any of your team. At every contact with a client, they are likely to be asked what is happening and what it means for them, and a 'grapevine' will grow rapidly. Unless you are controlling the key messages about the merger, then gossip can take over. Senior management will sell the benefits of the merger to clients, but if your lawyers do not feel good about the merger, then this information will filter through to clients, too.

Make sure that you inform all your clients at the same time, ideally on the day of the announcement. Typically, each firm will communicate to its own client base, as it may be difficult to co-ordinate client contact data in advance to avoid duplications.
 
However, it is not an option to manage future client communications in an uncoordinated way, so the job of combining databases is required at an early stage. If you fail to grips with this immediately, and follow up with subsequent combined communications going into more detail about new areas of expertise and potential client benefits, you will be missing a valuable opportunity.

Introducing your colleague from a new department can provide a great 'hook' for getting in touch with contacts, and a programme of such visits should be planned as an urgent part of the post-merger integration plan. Your top clients should be visited within the first few weeks

Each firm is likely to have a number of clients that are highly attractive to the incoming team. Firms which already have a key client development programme should be able to plan the programme of cross-selling via this programme. Otherwise, it will be important to have a managed process to ensure that key clients meet new colleagues in a planned and professional manner, and that partners do not become protective of their firm's clients and block such meetings.

Firm identity

While marketing professionals get very excited about brand, in reality, few clients care about the firm's name anywhere near as much as they care about the progress of their case, the way that they are treated by the firm, and whether they think they are getting value for money. A name alone does not guarantee client loyalty; this is amply demonstrated by the fact that clients often so readily follow rainmakers to their next firm.  [sentence deleted}

Often, the name of the new firm will actually be more contentious internally. Unless you have one clearly dominant brand, then it is likely that the newly merged firm will require a new name, and the chances are that not everyone will be entirely happy with that name.

This is one area where compromise is often required in order to move on rapidly and get all the communications organised. However, once a name has been proposed, do not let time pressures deter you from asking the practical considerations, such as:

  • Could it be confused with your competitors or other businesses?
  • Is it easy for receptionists to pronounce?
  • Is it available as a company and domain name?
  • Does it have any unintended consequences?

Once the decision has been made, the consistent, proactive marketing of a new brand is required to generate profile and sufficient effort will overcome any lack of awareness.

For a firm intent on a strategy of growth via mergers, then ideally, you want a brand strong enough that it be rolled out consistently for each consecutive merger. This achieves considerable efficiencies in the long term, as there is no requirement to develop a fresh brand for each merger.

The launch

Planning, negotiation and post-merger implementation may all take many months; the marketing launch, by contrast, will usually require an intense concentration of activity and expenditure within a very tight timeframe.

The cost of a rebrand can be significant, particularly if the aim is to complete the launch of the corporate identity on the day of the merger, with a potentially short notice period for the marketing team and external providers such as web agencies. A detailed budget is required, covering everything from the new design through to new marketing material, web site(s) and e-communications, corporate gifts and signage, staff and client events. Costs soon add up. While it may be possible for a relatively new website with a content management system to be 're-skinned', two older websites may be better replaced with a new more efficient one. Professional photography will be needed for the merger press release and consistent team profiles. External PR support may also be needed. You will also need a policy regarding the use of social media during the launch, possibly in addition to an existing HR policy.

When it comes to informing the media, make sure your key messages are consistent with those to clients and staff. Make sure you present the facts truthfully. Be realistic about your chances of press coverage, especially if there is nothing particularly unusual about your merger – most media do not consider it to be 'news', and with a growing number of mergers each year, the legal press will be looking for a good reason why yours will be worthy of column inches.

Conclusion

A merger changes everything about a firm's brand positioning, and opens up many new threats and opportunities. How will the firms' strategies be combined? Will customers welcome the move or see conflicts of interest? Can a new culture evolve? What opportunities will your new market position open up?

The danger is that, after the launch ceremony, lawyers may start to focus on internal politics rather than their clients; competitors and recruiters may take advantage; clients may feel confused or neglected.

Careful planning, strong leadership and a long-term commitment to client care and exploiting the market opportunities will help you to avoid those risks.

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