Professional Services Accounting ARTICLE -
It’s All in the Details - Postmerger Planning

Target Audience: Law Firm Professionals, Lawyers, Law Firm Associates

You’ve spent almost a year negotiating a merger and now the transaction is finally complete. Time to relax??? No! The real work is just beginning. Most of the time and energy expended during the negotiation and due diligence periods revolve around partner compensation, client control and whose name is going to wind up on the door. All worthy tasks, but, now that those are done, it’s time to integrate the two firms.

Start Early and Plan Well

The integration planning process should start as early as feasible during the negotiations. While there’s a risk that the work could go for naught if the merger fails, if you don’t plan ahead you’ll likely end up with a dysfunctional — albeit larger — firm.

Your integration plan should be a team collaboration that assigns responsibilities and includes target dates for completing them. Break down the plan into major activity categories, such as practice management (with each department or practice area as a subgroup) and administration and support services (again with several subgroups, such as accounting, human resources, marketing, facilities and IT).

Responsibility for creating and monitoring the various parts of the integration plan should rest with integration teams from each major category. Team members should be drawn from both firms involved in the merger and possibly from outside consultants. For example, the accounting and finance team may wish to have their CPA firm participate or the HR team may need input from a benefits consultant as it struggles to combine insurance and retirement plans.

An important byproduct of setting up transition teams is that it gives the groups an opportunity to work together and begin merging the two firm cultures into one. While there will always be an inclination toward “we don’t do it that way” kind of thinking, it’s important for the transition teams to put aside those tendencies so the firm can move forward.

Merge Practice Management With Care

While each major category is important to a successful integration, the practice management category carries the most weight. After all, the merger’s success or failure rests with the partners’ ability to combine their practices, work together and develop new business opportunities.

Evaluating the strengths, weaknesses, opportunities and needs of the combined group should be a part of premerger due diligence and postmerger transition strategies. The practice management transition team should therefore evaluate these key areas:

• Lawyer experience, expertise and training needs,
  
• Attorney workloads, and
  
• Practice group management and reporting structures.

Information from this assessment should be disseminated throughout the new firm so that everyone becomes familiar with what the combined group now brings to the table.

The evaluation will help practice management understand how to shift casework from one group to another. It may be slow going at first, but knowing who has available time and what the attorney’s skill set is will help facilitate this tricky phase of the process. For example, because clients may not like to have new people “sprung” on them, an attorney in the practice group who has available time could spend a lot of unbillable time attending client meetings and getting up to speed on client history before real work can be transitioned.

Depending on the size of the combining practice groups, the best initial management and reporting structure is often a management committee made up of the lead partners from both firms. This will give them the opportunity to work as a team rather than trying to stake out their own territories.

Don’t Neglect Administration and Support

These groups are also critical to the overall success of any merger. So, don’t neglect or short shrift any of these areas — it could undo all the hard work and efforts expended in the other categories.

You will undoubtedly have duplicate positions after the merger. While mergers in many industries are used to help reduce costs and combine like functions, the savings derived from a typical law firm merger are few and far between. You may find that redeploying your resources is more effective than eliminating jobs.

For example, if the merger results in two receptionists, the extra receptionist may be redeployed as a secretary, accounting clerk or library administrator, depending upon the person’s existing skill set, the firm’s needs and the amount of training necessary. The point is that the internally focused transition teams should be more concerned with serving the lawyers and other departments within the firm and reworking processes and procedures than with trying to cut costs through job eliminations.

It’s critical for the transition team to establish one set of written guidelines for all internal operations policies and procedures. Here are just a few of the areas to cover:

• Accounting policies, such as expense reimbursement,
  
• Time-keeping standards,
  
• Billing timelines,
  
• Word processing standards,
  
• Paid time off,
  
• Leave of absence guidelines,
  
• Benefit plans, and
  
• Integration of different IT systems and platforms.

Finally, you should develop a marketing strategy for promoting the new entity to both internal and external stakeholders throughout the merger process. For example, consider hosting business or social meetings for interfirm introductions and review of cross-selling opportunities, create new or updated marketing materials, and consult major clients about their views and prepare them for a relationship with the combined firm.

Go for the Gold, but be Patient

So remember, the integration period and process is a marathon, not a sprint. All of the good things that were imagined when merger discussions first started can still happen — but they require a well-thought-out plan and abundant patience.

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