Friday, November 15, 2013

Half of All Law Firm Mergers Fail

From Larry Bodine’s Law Marketing blog:

"Yet a look at history reveals that about 50% of all mergers subsequently fail," says the contrarian voice of Robert Denney in his November RDA Communique. He first raised this point in 2011. "In many cases the reason(s) for the eventual failures were issues that were evident beforehand and should have raised red flags about proceeding with the merger."

Denney identifies 15 red flags that are often issues that can never be resolved. They include post-merger client departures, wide differences in partner incomes, and contrasting work ethics. The list goes on to include one firm having substantial debt or an unfunded pension liability, practices that do not fit and conflicts that cause a major rainmaker to leave.

The statistic conforms to what I see. Members in a law firm are comfortable in their professional lives. A merger means change. The merger might require them to work harder and for longer hours. It may result in smaller paychecks and a reduced celebrity status. It may force them to work with people they don’t like.  They don’t like the change and depart.

We might advise our students that the world of law practice is a volatile one and may lead them to change jobs with some frequency.


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