How to prepare your law firm for a merger or acquisition

Handshake-business

Since the economic recovery began, confidence in ‘investment for growth’ strategies has led to an unprecedented number of mergers in the legal sector.

Managers of small to medium sized law firms now face relentless pressures, both from competition and from clients demanding more for less. With a focus on ‘bigger is better’, M&A has often been seen as a quick solution, consolidating assets to build stronger and more sustainable businesses.

But if your law firm is considering a merger or acquisition, you’ll know that there are many hurdles to overcome before a successful deal can be negotiated. New research shows that two thirds of legal sector merger discussions fail. Just last week, we learned that talks over the high profile transatlantic merger between Eversheds and Foley & Lardner have stalled.

However, with careful and thorough strategic planning, you can give your firm the best chance of  executing a successful deal.

When two firms merge, you’ll need to consider what happens with all the data and business intelligence you both hold. How will two completely different management information systems be able to operate together or integrate after the merger? Which system should you choose and how would data be migrated?

In this post, I hope to answer some of these questions and explain how you can effectively prepare your law firm for a merger in terms of the systems and processes that you both rely on for your day-to-day operations and strategic planning.

Data

 

What happens to law firm data during a merger or acquisition?

How to deal with data when two law firms merge is usually one of the last issues considered by partners or members when negotiating a deal.

I have lost count of the number of IT Managers I have spoken to, tearing their hair out at the completely unrealistic expectations of the firm to plan and deliver a data migration within the short few weeks allocated to complete such a transaction.

I would argue that this needs to be considered well before a deal is agreed, alongside discussions around staffing and other assets.

Here are some of the things you need to consider:

  • Plan a realistic timescale – If the timescale for the transaction is short, then be realistic and accept that the two firms will continue to operate different systems and separate data sets during an interim period.
  • Choose the “right” system going forward – The system that is right for the newly merged firm is not necessarily and automatically the one currently used by the larger party. This should be a conscious and objective decision, not just a visible indication of the dominant player in the deal.
  • Set realistic expectations – Merging data, even where both firms use the same system, is time consuming and expensive. Take a realistic view of what needs to be merged, and what can actually be retained in separate “legacy” systems.

The automatic assumption of many firms is that in order to have consolidated reporting going forward, then all data needs to be in the same system. However this is not necessarily the case.

What benefits can a data warehouse bring during a law firm merger?

A data warehouse can be used, which accumulates and integrates data from a number of different sources. This allows for a single output and reporting mechanism, so you can continue to make effective and well-informed management decisions using all the data available.

One of the benefits of a data warehouse, as in the Katchr solution, is the ability to keep multiple data sets separate for day to day processing, but still produce fully consolidated reports across all aspects of firm activity.

This can act as an interim measure, whilst the newly merged firm carefully assesses their options going forward – in some cases migrating to a newer platform more suitable for the new bigger entity might be appropriate.

In other cases, data warehouses can represent a long-term strategy. Firms on an aggressive acquisition strategy cannot necessarily cope with the disruption and cost of new data migrations for every newly acquired firm. A longer-term policy of running multiple systems with consolidated central reporting might be more appropriate here.

Whatever process and system you choose, the key is to plan ahead, consider all the options, and allow enough time to implement your plan thoroughly and effectively.

If your law firm is considering a merger and you would like an informal discussion about your management information system options, contact us today.

Or to share your insights and experience of law firm mergers, tweet me at @KatchrData

GM
Blog post by Graham Moore, Managing Director at Katchr.

 

Law Firm Practice Management System and Business Intelligence expert. Managing Director of Katchr.

If you’d like to discuss how large or small law firm software and legal financial reporting systems could help you run your practice more profitably, please give me a call on 03333 010 766.