M&A for law firms in the current climate – Part 1: For firms who are currently in discussions.
Before the lockdown happened in late March we were happily working on 13 different M&A deals of various sizes and aspects but within a few days, every single one of these deals was on ice because a major part of M&A work is the cultural fit and blending the teams together.
It is very difficult to get a feel for a firm’s culture from a zoom call with the managing partner in their home office and of course, with social distancing it is not possible to blend the teams and help people get to know each other. The deals are all still there and viable, if they were good before there is no reason why they shouldn’t be good afterwards, but the question is what can the firms do now to make sure that once we get through this period they can get discussions back on track?
The obvious first stage is to keep talking to each other. Depending on where the discussions had reached, the 2 managing partners should hold regular calls or video conferences to keep the pilot light lit or, if discussions were more advanced, the various heads of department heads could be talking to devise joint business plans and the various heads of the support departments such as IT or HR could use this period to put policies in place.
This is also an ideal time to do any desktop DD such as supplier contracts, leases, PII quotes and even file reviews in secure data rooms. For smaller firms with physical files, there is no reason why a storage company cannot deliver files to the other COLP to review.
Finally, it is also a good time to negotiate the finer aspects of the merger agreement and following on from this the ongoing partnership agreement, consultancy agreements or employment contracts.
Once we are out of lockdown, and depending on what that looks like, we suggest that both firms agree on a roadmap of tasks to complete with a tight timescale to re-inject momentum. For instance, if things start to ease in June/July, aiming to beat the PII renewal on Oct 1st would make a lot of sense.
So to conclude, whilst this is a difficult time, it is also a great opportunity to complete proper DD and business planning so that when the eventual merger happens the merged firm has the best chance of success. Next week I will suggest what firms should do if they wish to start the merger process after lockdown.