Fitting together: Merging Sprecher Grier Halberstam with Martineau
By Bill Barker
Merging is definitely not for the faint hearted, says Bill Barker, managing partner at recently-merged firm SGH Martineau
Merging is definitely not for the faint hearted, says Bill Barker, managing partner at recently-merged firm SGH Martineau
Key takeaway points:
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Consider the ease with which the merged partner will integrate.
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Decide what you want from the merger. Do you want something that will add to your business by bringing new things to your offering or something that merely complements what you have already?
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Think about the process and mechanisms needed for the merger.
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Ensure there are clear, open communication channels in place for decision makers and keep them informed every step of the way.
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Produce a business plan so that there is a clear vision for the merged firm, with detailed objectives and targets.
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Recognise and appreciate that there will inevitably be costs incurred as part of the merger process.
As a Birmingham-headquartered firm, Martineau wanted to merge with a London law firm that would not result in a shift of gravity from Birmingham to the UK’s capital city. We were therefore looking for a small London firm with a client base and service offering similar but not identical to our Birmingham offering.
Our turnover at that point was around £23m, so we were also looking for a firm with a turnover of around a quarter to a third of ours. At that time, Martineau had 44 partners, with four based in our London office and around 260 staff in total.
Identifying the right firm took much longer than we anticipated and there were a few false starts along the way. Once we found Sprecher Grier Halberstam (SGH), it quickly became obvious that this firm ticked all the right boxes.
With 16 London-based partners SGH was bigger than we were looking for, which it is why it hadn’t been on our radar before. However, we soon realised that a merger between Martineau and SGH would offer a number of benefits, including a larger client base, enhanced sector skills and more practice areas.
The size of SGH London’s office also meant we could transfer staff from Martineau’s New Bridge St office to SGH’s 1 America Square office, which would make combining our two city offices relatively easy.
One of the main attractions of SGH was that it had clients in areas that were similar to Martineau, but not the same. While Martineau had an excellent banking practice, SGH had a strong insolvency practice. Martineau had a real estate team with in-depth transactional experience, while SGH’s real estate team had experts in contentious real estate work.
There were also a number of practice areas that Martineau had that SGH didn’t, such as private client, tax, competition and IP. On the other hand, SGH had reputable leisure and services-to-lenders teams.
This meant there were clear opportunities for both legacy firms. We were also both partner-led firms that were similar in outlook and ambitions.
For us, the reasons for the merger were clear and the fit with SGH was obvious. '¨Both firms were financially fit – Martineau '¨had announced a seven per cent turnover hike for the first half of that financial year '¨(May to October), while SGH reported strong trading. This merger was about two ambitious law firms looking to increase a range of services and offer more strength in depth across those services.
For SGH, the journey was quite a different one. A strategy review in 2010 had resulted in the management board deciding that staying independent was the preferred option. But, when outside consultants informed SGH’s managing partner Emma Shipp that we were looking, she agreed to meet with us to start discussions.
Key challenges
Once the decision had been made to embark on the merger process, there were a number of challenges to face.
Fear of the unknown was the biggest worry, as Martineau had not been through a merger since 1987 – around 25 years ago – when Ryland Martineau joined with Johnson & Co. Since then, Martineau had grown into a very independent-minded firm and the thought of merging with another to become '¨a £30m turnover firm overnight was a big step forward.
The merger process in itself was complicated and lengthy. The two legacy firms were in discussion for over a year, with many confidential business planning meetings and conversations taking place during that time. This was not an easy task.
It was decided quite early on that Martineau would join the SGH limited liability partnership, making the combined firm a top-70 UK law firm with 62 partners and more than 200 fee earners.
It was essential to get internal buy in from the executive boards and agreement from key decision makers to make the process as smooth as possible, although we knew this was likely to be a long and, at times, painful journey.
One of the biggest lessons learnt was the need for regular communication. While we had a merger team negotiating the union, we didn’t communicate with partners until things were agreed, some decisions were made and we had something to say. If and when we undertake a similar process, I would communicate more regularly even if I had nothing definite to tell people.
The decision-making process was difficult – although because SGH was a smaller equity partnership, it could decide more quickly and easily than Martineau.
Deciding on the equity structure and firm leadership was also not an easy task. While I became managing partner of the merged firm, Martineau’s senior partner Andrew Whitehead became senior partner of SGH Martineau. SGH’s managing partner, Emma Shipp, and head of litigation, David Bailey, joined the executive team to help drive our growth strategy '¨and ensure the smooth integration of the '¨two businesses.
The merged firm’s starting strategy '¨was laid out in the business plan that we wrote as part of the merger proposal. '¨We will continue to adopt a chosen sector approach, as both legacy firms had built up strong reputations in those sectors. '¨By analysing key growth areas, we '¨saw that there was potential to increase our turnover to £40m in the not too '¨distant future.
Choosing the right merger partner
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Do you share the same or similar aspirations?
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Will the two firms be a good fit and together will they achieve the ambitions and vision set out at the start?
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Don’t select a firm on the basis of their client list – you will not get a true picture of the relationship with that client, which may not be secure.
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Can you identify markets that you want to target together?
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Do you share common ground when it comes to your corporate culture?
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Do you genuinely think you can work with these people?
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What opportunities exist for the firm and for individuals?
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What problems exist at the outset and are those obstacles surmountable?
Assessing the impact
Three months on, I can say that the merger has been a very positive move for both legacy firms. SGH Martineau is a new and different entity; the move has given everyone a boost and we’re all looking forward to exciting times ahead.
A number of new opportunities have arisen for both legacy firms. We have been invited to pitch for clients as a result of an increased presence in Birmingham and London, and we eagerly await the results of those pitches. It’s rewarding to see the perceived merger benefits in individual practice areas, with work already referred across both offices.
It’s still early days and we’re ensuring everyone in the organisation is settled into routines and practices and are working together to convert the opportunities we’ve identified in the business plan.
Many firms that merge lose people in the first few months, either as a result of internal politics, an aversion to change or due to a perceived decrease or withdrawal of opportunities. To date, we haven’t lost anyone. What everyone seems to now understand and appreciate is that this merger means more opportunities for everyone, at all levels of the business.
The merger firm also offers advantages when it comes to lateral hires, as we’re now a more attractive option. We expect to see many more lateral hires taking place in this financial year. It’s onwards and upwards for SGH Martineau and I know the whole firm is excited to see what the coming year will bring.
william.barker@sghmartineau.com