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PETER SCOTT CONSULTING

Merging law firms – the essentials for success Peter Scott Peter Scott Consulting www.peterscottconsult.co.uk. PETER SCOTT CONSULTING. The scope of today’s session. Selecting a merger partner Negotiating a merger Dealing with potential deal-breakers Due diligence

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PETER SCOTT CONSULTING

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  1. Merging law firms – the essentials for success Peter Scott Peter Scott Consulting www.peterscottconsult.co.uk PETER SCOTT CONSULTING

  2. The scope of today’s session • Selecting a merger partner • Negotiating a merger • Dealing with potential deal-breakers • Due diligence • Post-merger integration

  3. The merger process needs to be managed

  4. The steps to merger PETER SCOTT CONSULTING

  5. Merge for the right reasons Merger is not a strategy – it is a means to an end – to gain competitive advantage Merger can help build RESOURCE – to enable a firm to provide its clients with what they want PETER SCOTT CONSULTING

  6. Selecting a merger partner • Can you trust your market knowledge? • Complement existing strengths, or fill the gaps? • Using other advisers • Geographical issues • Bigger / smaller, richer / poorer • Culture?

  7. Develop a vision Before you approach your target Look beyond what each firm now represents and consider what the two firms together could build To excite and enthuse both sets of partners The leaders of both firms need to be ‘ad idem’ on the vision PETER SCOTT CONSULTING

  8. Merger partner criteria • Culture? • A business fit? • A financial case? • The “Wow” factor – how will clients react? • Others?

  9. Ensure CULTURES are compatible Compatible – not necessarily the same – the laws of magnetism! Are we like them? Do we have the same work ethos? Can we see ourselves working well together? Do we like them? If not – walk away PETER SCOTT CONSULTING

  10. Develop a strong business case Merger is not a strategy – it is a means to an end Develop a tested business case - will it be good for clients? - will it have the ‘wow’ factor? Will merger help you win more and better quality work from existing clients and new work from potential clients, that neither legacy firm could hope to win individually? PETER SCOTT CONSULTING

  11. Develop a strong financial case A merger - with a strong business case - if well implemented - should achieve greater profitability But – inevitable disruption of merger will mean even greater financial management is required Carry out a financial evaluation covering first [2] years based on realistic and prudent assumptions NB – do not believe your own hype! PETER SCOTT CONSULTING

  12. Negotiating a merger • Understanding the process • Selecting your negotiating team • The extent to which other partners should be involved • Secrecy and confidentiality agreements • Timescales and deadlines • Negotiating styles and tactics

  13. Communicate, communicate, communicate Internally - What will it mean for me? Externally - Will the market place give our merger the thumbs up? Ideally, use external professional advice PETER SCOTT CONSULTING

  14. Dealing with potential ‘deal breakers’ PETER SCOTT CONSULTING

  15. Potential ‘deal breakers’ Partners Name Goodwill Profit sharing Capital Management positions Others? PETER SCOTT CONSULTING

  16. Partners Both sides to ask themselves and the other side… “How many of your equity partners are you going to bring into the merged firm?” (i.e. how many of your partners should really be equity partners?) PETER SCOTT CONSULTING

  17. Partners Managing their - insecurities - ambitions PETER SCOTT CONSULTING

  18. Name The goodwill of your firm is likely to reside in the abilities and reputation of your partners as a group, rather than in your firm’s name. PETER SCOTT CONSULTING

  19. Goodwill If goodwill exists then someone will most likely have to bear the pain of writing off goodwill as the price of achieving the merger PETER SCOTT CONSULTING

  20. Profit sharing An opportunity to make a new start Can reflect different ‘cultures’ May need a transition to a different system A part of managing future performance PETER SCOTT CONSULTING

  21. Capital • What will be the working capital requirement of the new firm? • How is this to be provided?

  22. Management positions How is the new firm to be managed? Managing the ambitions of partners The leaders of each need to be ‘ad idem’ PETER SCOTT CONSULTING

  23. Due diligence • Use of advisers • The need for a high level financial evaluation • Financial assets and liabilities • Turnover and profitability • People • Premises

  24. Post-merger implementation • The beginning not the end • Sweating the assets – making 2 + 2 = 5 • Identifying strengths of the new organisation • How is the firm to be managed? - identifying a management structure to meet the needs of the new firm - Selecting a management team • How to manage performance in the new firm?

  25. Management and implementation Learning from each other How can we incorporate the best of our respective firms into the new firm? How are we going to manage performance in the new firm? How are we going to change things? PETER SCOTT CONSULTING

  26. Management and implementation The hard work begins once the merger agreement is signed! Management and implementation are key to success PETER SCOTT CONSULTING

  27. Management and implementation Do we have a MANAGEMENT TEAM capable of successfully taking forward our new firm to achieve our vision? Do we have the required skills? Do we have the leadership required? PETER SCOTT CONSULTING

  28. Management and implementation Assemble the best possible TEAMS to manage integration of the two firms and longer term management: - to manage groups / offices / projects - to manage - finance - HR - marketing - IT - facilities - other functions PETER SCOTT CONSULTING

  29. The merger process needs to be managed

  30. Communicate, communicate, communicate PETER SCOTT CONSULTING

  31. Mergers can deliver their promises – if those involved never lose sight of the real objective –to build a more competitive and profitable firm

  32. Any questions? PETER SCOTT CONSULTING

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