In a May 31 piece for The Global Legal Post (GlobalLegalPost.com), merger consultant and law firm matchmaker Jeff Zindani (Acquira Professional Services) explored facets of the incipient “merger boom” among U.K. law firms.
In one recent deal, national U.K. firm Shakespeare Martineau announced its merger with Bristol firm G.L. Law. In another, partners at BLM voted to merge with Clyde & Co., creating a colossal £700 million (about $838 million) insurance services firm.
Zindani analyzed in depth the example of AIM-listed (London Stock Exchange) firm Knights, which has greatly expanded over the past ten years through acquisitions. Currently a U.K. top 50 law firm, Knights has annual revenue of more than £120 million (about $143 million) and 19 offices. But only ten years ago, Knights had just two regional offices (Stoke and Chester), 150 attorneys, and roughly £9 million (about $10.8 million) in annual revenue—meaning its annual revenue has increased more than thirteen-fold.
However, Zindani pointed out that Knights shed nearly 55% of its stock price in March. And even though the firm announced in May one of its largest acquisitions to date—£11.5 million (about $13.8 million) for Coffin Mew—it continues to produce lackluster profits and trade at a low share price, while the U.K. legal sector overall is demonstrating healthy profitability and resilience.
In considering these data points, Zindani asserted that “the biggest mistake when it comes to law firm mergers isn’t negotiating a deal, it is blending cultures. As the great American business guru Peter Drucker once said, ‘Culture kills strategy for breakfast.’” Zindani added to this the concept of tight versus loose cultures, based on Michele Gelfand’s book Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World. In Zindani’s cautionary tale, cultural fit must be carefully evaluated in advance if merging firms want to avoid running headlong into what Gelfand calls a “cultural iceberg.”