How to get your firm merger ready

As a managing partner, you never know when that right merger approach might come through. At least half of the firms we work with did not actively plan to merge but each approach offers different opportunities and sometimes these can be compelling enough to change the strategy. Only the most blinkered firm would turn down such an opportunity, so why not get ready in any case? By running this process you will look at your firm through an outsider’s eyes which is good practice and often leads to improvements in any case.

So, at your next partner’s conference why not consider the following:

  1. Commitment. If your partners want to merge or are at least open to the idea, check that they are committed. Often the group seems committed but there is a saboteur in there who will derail any eventual deal so find out who they are early, what their objections are and overcome these.
  2. Agree what would be a successful outcome. As managing partner you need your brief so you can deliver on it or else you will waste time and will never get agreement once you have delivered what you thought they wanted.
  3. Prey or Predator. A large part of the process is this simple question. Naturally most firms want to be the predator, it is more comfortable and allows you to largely impose your culture on the merged firm, but this depends on the size of your firm and what you are looking to achieve. If you run a £300,000 turnover firm, firms smaller than yours tend to be lifestyle businesses and often the clients are very loyal to the current partner but might not be to an acquirer so you might want to be prey. Or if your aim is to access larger clients or a wider geography this will only be achieved by your firm being the prey.
  4. Choose a tight team. The merger process is really interesting and lots of people will want to be involved. This distracts them from the day job and leads to lots of voices and opinions trying to be heard. From the other side, this looks disorganised and confused. So, ideally you should agree a small negotiating team, consisting of the managing partner, the FD and one of the younger partners. This might seem strange but the younger partner has a longer future in the firm than you do and their voice should be heard. Then agree how you are going to report back to the partner group and stick to this. If you give regular and detailed feedback you maintain their buy-in and prevent them all popping in to see how things are going.
  5. Confidentiality. You must keep any discussions as confidential as possible. Always refer to the deal by a project name (e.g. Project Indigo or Project Samson) and ideally use external email accounts such as Gmail to deal with the project correspondence. This is not to say staff will be indiscreet but again this is an interesting process and if the staff are aware of it, it will be discussed and news will soon spread outside of the firm.

So, once you have your merger plan, or have agreed parameters to assess whether a merger approach would be interesting, what information will you need to collate to be ready? This should be updated regularly, but once a pack is ready this should be a pretty simple task. You could also use the headings in your pack as a questionnaire for the other side so that you both have comparable information.

What should be in a merger pack?

Nowadays with insurance risk and run-off determining many mergers, the first thing in the pack should be 3 years PII applications and your cover details plus details of any claims. You will also need the last 3 years accounts and up to date management accounts to show how the firm is running as a business. The third element are details of any leases. In our experience firms do not like taking leases from current partners, especially where one side does not own the office and the other does. To avoid problems, consideration of break clauses or even selling the property or taking it into a SIPP can help.

Staff are a key asset and so you will need all staff contacts, but more important to the health of the firm are details of significant leavers or joiners with notes as to their significance and reason for exit or hire. Partner demographics are also important, ideally showing a nice spread of equity partners in their 30s through to 60s rather than a host of 60 somethings with no succession. If there are any future stars in the firm who are not yet partners have their CVs to hand as well.

The other key asset is clients and a simple anonymous analysis, showing the top 10 clients in each department over 3 years and how much they contribute to overall turnover is very useful.

This is quite a weight of information but it can be summarised in a 2-3-page memorandum which can easily be swapped with the other side during the first stages. Finally, we would always recommend using a non-disclosure agreement which should include non-poaching clauses for both staff and clients. Whether these are fully enforceable is open to discussion but they do serve to put the discussions on a professional basis and in our experience most firms play fair and respect the confidences that inevitably are disclosed.

The author of this article is Andrew Roberts of Ampersand Legal. Andrew can be contacted at or 07956 961404. Other members of ALFMA can be contacted here.

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