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Most ‘opportunistic’ law firm mergers ‘a huge waste of time’

Firms are failing to resolve key issues early in merger discussions, research finds

21 March 2014

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By Manju Manglani, Editor (@ManjuManglani)

Law firms are wasting time on opportunistic mergers that fail to address the key issues early in the process.

That's according to research into 102 top-250 UK law firms, including 14 from the top 30 rankings.

It found that more than half (56 per cent) of merger discussions ended in failure, with a third spending in excess of three months in negotiations before deciding to halt talks.

Fifteen per cent of respondents reported spending more than six months in merger discussions that came to nothing.

"Too often, merger discussions are described, perhaps politely, as 'opportunistic', essentially meaning a chance meeting between two firms who only, fortuitously, would be a good fit," said Giles Murphy, head of professional practices at Smith & Williamson, which conducted the research.

"Unsurprisingly, most of these discussions fail, but our research suggests that finding this out takes an unnecessarily long time.

"Whether initial discussions are opportunistic or clearly targeted, firms need to identify early in the process the key issues that must be resolved. Rather than let these drift, they need to be addressed by both parties and, if a resolution cannot be found, talks should end promptly, avoiding an unnecessary waste of effort."

A third of respondents said they saw merger as a means to improve their firms' finances, suggesting that their efforts were being driven more by financial necessity than strategic objectives.

"Too often, firms see merger as a strategy in itself. But firms need to plan properly how they are going to develop their business and, if they believe organic growth or lateral hires will be insufficient, merger may be a solution," commented Murphy.

"Although some very high profile mergers were announced during 2013, the high level of failure and the time it takes firms to reach that conclusion represents a huge waste of time, emotion and energy for management teams."

Merger aspirations remain high, with almost two in ten respondents expecting to merge with another firm in the coming year. A further one in ten said they are seeking a merger partner.

Eight respondents in top-30 firms reported failed mergers in recent years, with two of these practices spending more than six months in negotiations.

Four in ten respondents said their firms had completed mergers in recent years. Half of them said they had spent more than six months in talks.

102 UK law firms took part in the research, of which 14 were in the top 30 rankings, 22 were from the top 50 and 46 were in the top 100.

 

 

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