Professional Practices Podcasts

Professional Practices Part 2 – Mergers

“The only constant is change” is particularly appropriate to legal firms with the implications of the Legal Services Act and the impact of the SRA on how practices will operate in future. However all professions face similar change and such change provides opportunities – a significant one being the potential for merger. Merger is an option for the majority of practices and many embarking on this route lose sight of the fact that a merger must increase profits, whether in fact they are the acquirer or the target and the strategic reason for doing so. The majority of those that embark on merger discussions fail to reach agreement and there are many reasons for this, the most important of which is the lack of an appropriate “people fit”.

If this is right many of the other potential deal breakers such as financial disparities surrounding the value of assets, the level of profits, capital contributions and level of bank gearing can be overcome. Finding an appropriate merger partner can be difficult and it is often appropriate to use external advisers such as ourselves to help identify those firms and to then make confidential approaches or if seeking a “sale” to manage a formal process. Once a deal has been agreed we then work alongside our clients to implement the merger and in particular to address the practical issues. Do remember as a rule of thumb if negotiations take more than six months a deal is unlikely to be concluded.

Next in the Series: Profit sharing regime and capital structures