Best Practices in Law Firm “Business of Law”

Merger Integration

Document Background and Purpose

The LegalShift team has deep experience in the legal industry, including direct experience with a host of legal mergers and acquisitions, including effectively pulling together merging legal organizations (law firms and law departments) across “Business of Law” operations (people, process and technology) vs. the “Practice of Law”.

Based on our experience, we have compiled a handful of key observations for consideration by any law firm considering an M&A transaction. The purpose of this document is to share some of those high-level observations to begin the deeper conversation about how to make your particular transaction deliver the most value.

Business of Law Merger Best Practices

Initial recommendations for leaders beginning to tackle the task of merging two organizations from a “Business of Law” perspective include:

1.  Establish a temporary planning team structure and assign a Business of Law “integration manager”.

Rather than try to manage all integration issues centrally, we recommend setting up a team structure to perform comparison between the firms in each area, recommend a direction and build a transition plan for any changes that must occur.  This structure needs to include a designated executive body responsible for approving recommendations and communicating with the board, a designated “integration manager” to manage the overall effort and identified teams in each critical area of integration.  In a typical merger, a planning structure might be chartered as illustrated in the table below, which is not comprehensive:

Figure 1: Example Team Structure to Support Planning for a Law Firm Merger

Team Members Representative or Typical Scope
Merger Steering Team 3 to 5 members of the combined company board plus the identified “integration manager” ·  Review and approve recommendations from teams

·  Set and manage overall direction and timeline for integration

·  Make decisions on organization structure (with input) and other major issues that cannot be resolved in teams

Practice Management and Cross-Selling One team for each department consisting of leaders from those departments Assess current state and make recommendations within each department for:

·  Target client criteria

·  Fee approach (rates, contingency vs. hourly, etc.)

·  Business development approach

·  Cross-selling opportunities and tracking progress

·  Attorney expectations

Accounting and Finance CFO and Controllers from each firm;

Additional subject matter experts as required

Assess current state and make recommendations on:

·  Account structure, periods and accounting systems (including time and billing)

·  Client billing policies and expense policies

·  Overall combined budgets, including integration costs

·  Invoicing and collections approach and cycles

·  Payroll systems, cycles and policies

·  Financial reporting

HR, Benefits, Recruiting and Training HR leaders from each firm;

Additional subject matter experts as required

Assess current state and make recommendations on:

·  Benefits plans and compensation structures

·  HR policies (e.g., PTO, performance reviews, etc.)

·  Recruiting policies and processes (internships, systems)

·  Training approach

Facilities Chief operating officers from each firm;

Office managers from each office

Assess current state and make recommendations on:

·  Office space plans, occupancies and lease arrangements

·  Facilities-related vendors and vendor contracts

·  Facilities policies (supplies, etc.)

·  Workplace “look and feel” and approach to standardizations

·  Office access policies, physical security, and parking

Information Technology CIOs of each firm

IT Directors from each firm;

Additional subject matter experts as required

Assess current state and make recommendations on:

·  Application strategy/direction

·  Desktop tools, strategy and help desk approach

·  Infrastructure, data and disaster recover policies

Marketing and Brand CMO/Marketing directors from each firm;

Practice representatives

Additional subject matter experts as required

Assess current state and make recommendations on:

·   Combined firm positioning/branding in the market

·   Signage/signage transition plans

·   Internet presence

·   Firm brand standards

Note: May also support overall communications regarding the combination to clients, vendors, internal audiences, and the media

Document Management, Contracts, Records and Conflicts COOs/Executive Directors from each firm;

IT representatives

Conflicts process experts/owners

Other subject matter experts as required

Assess current state and make recommendations on:

·  The process and supporting systems for conflicts (interim and long term)

·  Approach, policies, and technology related to DM

·  Records retention policies and disaster recovery/backup approach

·  Document naming and numbering standards

There are several possible variations to the structure above which can be considered.  A short working session with senior leaders can typically address potential alternatives and finalize a structure right for any specific merger situation. In any case, there are a few best practices associated with this approach. They include:

a)  Assign a single coordinator for each identified team. This does not necessarily imply that the leader for various functional areas needs to be identified in advance of a team starting work, but it can be helpful to have organization decisions at the highest level completed.

b)  Provide teams with a common process and templates. LegalShift’s approach asks teams to define the end-state direction first (in the form of recommendations for approval) followed by the building of detailed plans for transition.

c)  Wherever possible, provide teams guidance by sharing confirmed business decisions with them upfront in the planning process. Any definitive statements (e.g., we will move toward a consistent benefits platform, we will adopt firm x’s practices in these 5 areas, we will not make any office moves until the next fiscal year) that can simplify decision making will be helpful in accelerating progress.

2. Define a set of “Business of Law Guiding Principles” and memorialize the definition of “Business Operation Integration Complete.”

LegalShift has found it extremely beneficial for the combined board of merging firms to spend time defining the strategy for integration. Two techniques that we have specifically found helpful are a set of “Guiding Principles” and a definition of what constitutes “Integration Complete.”

Guiding Principles are a set of agreed statements that help define priorities for the combination. At the highest level, Guiding Principles can help ensure time is not wasted on the more trivial issues that always arise during firm combinations (e.g., do we standardize coffee machines in each office location?) at the expense of the more critical issues that truly impact a firm’s success (e.g., what process do we use to identify and address conflicts going forward?).  A sample set of Guiding Principles is shown in the diagram below:

Figure 2: Example Business of Law Guiding Principles for a Merger

Integrate from outside in. We will focus first on those elements of the combination that have immediate impact and benefits to existing and prospective clients and then address those items that impact efficiencies and internal policies.

Any decision is usually better than no decision. We recognize that our success depends on clear direction and wherever possible we will make decisions quickly, valuing clarity over the need to be 100% correct.

Demonstrate respect for people. We will do our best to communicate candidly about expected changes in how we operate, especially when they impact our attorneys, associates and employees

In addition to a clearly communicated set of Business of Law Guiding Principles, LegalShift believes there is benefit in discussing a list of conditions that will bound the integration – that is, those things we need to accomplish in order to call the integration of the two firms complete.  This provides two major benefits. First, it helps the organization ensure that integration is prioritized over optimization. In too many mergers, people begin to completely rebuild processes from the ground up rather than choosing one of the approaches currently in use and standardizing on that approach. Second, it helps the combined leadership agree on the key priorities for integration of the firms (e.g., is standardizing office look and feel really an integration item or is that something that is lower priority and can be handled over time after integration is complete?).

 As an example, a discussion of Integration Complete, might yield statements such as:

 Our business operations will be integrated when….

 …. All physical office space has been consolidated and we are realizing savings from our space plan

 …. The administrative organizational structure, roles and responsibilities for all employees has been determined and communicated

 …. We are operating on one network, email system and time and billing system across the firm

 As a best practice, we recommend that no more than 10 to 15 such statements be identified and tracked through to completion of the integration effort.

3.  Address culture and issues head on.

Culture clashes are often blamed for merger failures. The truth (despite much of the writing on the topic) is that culture issues are not as complicated as some would have you believe. The key in our experience is to identify a handful of shared beliefs and then break culture down into those elements of the business that drive what people call “culture.” Once that is done, operations executives can discuss what specific behaviors or observable traits they want in each area for the combined firm.

4.  Take a holistic approach.

Often, law firms will focus on a particular area and lose the forest for the trees.  For instance, we have seen firm’s integrate new technologies but not consider people and training.  Other times they implement policy changes without thinking about the implications of supporting processes and compliance programs.

Figure 3:  Holistic Context for Merger Planning

A holistic approach requires an understanding of the intertwined relationships between people, process and technology.  Our integration planning and execution methodology contemplates all aspects, but all within the context of business goals and objectives and guiding principles.

Conclusion

In conclusion, law firm mergers can quickly become complex and difficult to manage. LegalShift’s proven approach streamlines the process for decision making and integration and ensures the value of the deal is fully captured, costly retention issues are avoided, and distractions from client delivery are minimized.

LegalShift is available for further conversations to dive deeper into what works and what doesn’t, and we offer practical knowledge on common merger hot spots like cross-selling, communications, and business of law operations integration.

Please contact us to help you optimize your recent change!

For further information please contact us at:

LegalShift LLC
Dan Safran
President/CEO
dsafran@legalshift.com
312.560.8932
844.Shift Us
(844.744.3887)