There can be overwhelming commercial arguments in favour of law firms merging, or of one acquiring another. However, as The Brief discovers, it is vital to communicate clearly with staff throughout the process.

There have been mergers of law firms for almost as long as there have been law firms. While many of these transactions have been successful, even creating globally dominant practices, others have sometimes led to the departure en-masse of talented teams.

According to a report by the accountancy practice Saffery (itself the product of a 1982 merger between the accuntancy firms Saffery and Champness, Cowper & Co), there were 69 law firm mergers or acquisitions in the UK in the year to 30 June 2023.

Although law firms still talk almost exclusively in terms of “mergers”, many if not most transactions these days actually involve the acquisition of one firm by another, often after conversion to an Alternative Business Structure, rather than the merger of two equity partnerships.

Even in traditional mergers, there would usually have been a junior party – a relationship made all the clearer when one firm is acquired lock, stock and barrel by another. This, in turn, can have an effect on morale and how staff, particularly of the acquired business, feel about their employer.

Cost pressures

Of the 69 deals highlighted in the Saffery report, the majority of firms acquired had 20 or fewer employees. The main reasons underlying these transactions, as highlighted by Saffery, included cost pressures – particularly PI insurance premium hikes – and a desire to broaden service offerings or achieve economies of scale.

With 92.9 per cent of UK law firms falling into the 20 employees or fewer bracket, the potential for further consolidation in the sector seems clear – which makes it all the more important to get it right.

Across all sectors of the economy, businesses can run into trouble post-M&A as a result of incompatible technology. Differences in processes, remuneration structures etc can also provide significant headaches, and need to be addressed sensitively to bring all staff along.

Communicate clearly

Victoria Moffatt a former lawyer, M&A PR specialist and founder and managing director of the specialist legal PR consultancy LexRex Communications, has experience of broad range of mergers and acquisitions in the legal sector. Law firms are, first and foremost, people businesses, and she emphasises the importance of communication at all stages of the process.

She says, “During an M&A deal between law firms, PR and communications can be easily forgotten. But getting the messaging and delivery right is important both for the firms’ external reputation but also internally for staff, as well as prospective, former and current clients, referrers, and any other key stakeholders across both businesses.

“Careful planning is required, covering a huge range of considerations – including brand and positioning, property, people, culture, technology and IT and compliance. Each of these considerations comes with a great big list of further considerations, many of which usually need to be managed pre-deal.”

Rumour mill

The time around an M&A deal can be a nervous one for staff on both sides of the transaction. Although in some cases “economies of scale” and “complementary strengths” can mean building a powerhouse firm to expand market share, in others it can be shorthand for “redundancies”.

Moffatt continues, “For smaller firms being acquired, the deal can feel more significant for staff than it does for those in an acquisitive practice. It is important to allay staff fears and be up-front and honest.

Employees may be worried about changes the acquiring practice will make including whether they are at risk of potential redundancy or redeployment.

Keeping staff and other stakeholders informed is, therefore, vital, according to Moffatt: “Best practice for good PR around a deal always puts people at the heart of the strategy. Employees of both firms will appreciate honesty and promptness of information.

Information vacuums are dangerous and where there’s a lack of information or a partial release of information, rumours will start to swirl.

While it might be tempting to stick with the status quo for a while post-completion of a transaction, Moffatt says that, “Early integration is key, which includes bringing teams from both practices together as quickly as possible, ensuring that training is provided where there is a requirement to use new technologies, systems and processes, and ensuring there is open and ongoing dialogue.

“People will respond differently, and some will want to ask questions, will need reassurance (sometimes on a repeat basis) and some may find the change involved in moving from one firm into another incredibly difficult. Applying ongoing empathy to all team members, regardless of their seniority can really make a positive difference.”