Law Times

Law TiMes • May 16, 2011 FOCUS How do law firm mergers work? Those who've done it explain the fine details behind recent deals BY ROBERT TODD Law Times sion recently, lawyers might be wondering just what goes into the biggest strategic deci- sion a fi rm can make. While those who have been there ad- mit each merger deal is diff er- ent and calls for a unique ap- proach, there are several com- mon threads to be aware of. Gerald Courage, chairman W of Miller Th omson LLP and whose fi rm linked up with Sas- katchewan's Balfour Moss LLP in December, says it has ad- opted a similar approach to the long list of mergers it has en- gaged in over the past decade. He says one of the fi rst ques- tions a fi rm must ask is wheth- er it needs a broader presence in a particular jurisdiction. In answering that question, it will likely be useful to consider the strength of the local economy, client needs, and the fi rm's stra- tegic goals. Courage says his fi rm will then begin researching possible target fi rms. It will look at lists of fi rms within a particular city along with their web sites and make discreet inquiries in the community of interest about who's operating there. It may also seek information from law- yers internally who may have knowledge of the legal market- place in the particular city. An initial meeting consisting of a small group from both fi rms is typically the next step, with confi dentiality being a key con- cern. Courage describes this type of meeting as "fairly exploratory, focusing on three things primari- ly: potential synergies, what's the appetite to do anything — do they have the vision to see that there could be benefi ts — and some attempt right from the outset to assess the cultural fi t between the two fi rms." Following that comes an exchange of information in which the parties further ex- plore the potential synergies and the other fi rm's econom- ics and policies. Th ey typically reveal fi nancial statements, accounts receivable history, major policies, compensation system details, client lists, and partnership agreements at this point, Courage says. "Inevitably at that point, a confi dentiality agreement is signed," says Courage. "You would look at their warts and say, 'Are those warts fi xable? Are there deal-breakers that we need to talk about right off the bat to see if we're wasting our time?' Largely, the focus is on looking for a positive outcome." Next comes a series of meet- ings where progressively more detailed talks take place. A wider circle of players will also gradu- ally come into the process, some- thing Courage says is important to do as soon as possible. Untitled-5 1 ith all the talk of law fi rm mergers within the profes- "Our mergers have been very successful, and we've done a good job of saying no where we ought to say no, and getting groups of people together helps you assess whether there's a good cultural fi t," he notes. Th is idea of a cultural fi t, a common phrase you'll hear from any managing partner following a merger, is at the top of Courage's list of deal- breakers. "Do I want to have these people as my partners? Are my partners going to want to have these people as their partners? If you can't satisfy yourself on those questions, I think you're just buying trouble down the road," he says, noting that a willing- ness to adapt is perhaps equally as important. Once the parties have laid out a broad agreement, typically via a term sheet, an additional group of lawyers will come in to negotiate the offi cial documentation. "You're looking for syner- gies to believe that you can make one and one to be more than two," Courage says of the overall process. Of course there's plenty more work to do after fi nal- izing the deal, says Bernie Miller, managing partner of McInnes Cooper. His fi rm completed a merger with Haynes Law in Halifax in March. "Th at's really where the real work begins, and that's probably where people get off track on mergers the most is by thinking that once they get to the announcement of the merger, the work is done," says Miller. "Th at's really about fi ve per cent of the work. Ninety-fi ve per cent is afterwards because there is an important acclima- tization [or] cultural shift that occurs when there's a merger, and that can take a long time to work through." Miller believes communi- cation is a key consideration at this stage. It's important for lawyers to be able to dis- cuss the merger and work out what the fi rm needs to fi ne-tune in order to make the deal work more eff ec- tively. For Courage, it's also vital to get new colleagues together in a face-to-face forum as soon as possible. Miller Th omson, for exam- ple, has scheduled a retreat this month that will bring many members of its new Saskatchewan offi ce togeth- er with the rest of its law- yers for the fi rst time since the merger. PAGE 11 Miller Thomson has been willing to say no to merger proposals in the past, says Gerald Courage. www.lawtimesnews.com 5/10/11 4:05:30 PM

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