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Should your law firm be considering a merger or acquisition? Insights from industry experts 

Category: Blog, Build a Digital-First Culture, Build Better Habits Webinar Series, Implement Continuous Improvement, Practice Management, Webinar / Video 20th February 2025

In the final episode of Series 3 of the Build Better Habits webinars, we were joined by David Sparkes, co-author of “Navigating Law Firm Mergers” and founder of Millborne Ross, and Anne Harnetty, author of “The Future of Legal Practice” and director of Johnson Beaumont. 

Our expert guests shared their insights on the current trends, drivers, planning strategies, and the importance of communication and culture in mergers and acquisitions (M&A). They provided practical advice and guidance on navigating M&A to ensure long-term success for law firms. 

This episode covered: 

  • Current trends in M&A 
  • Key drivers for considering M&A 
  • Effective planning strategies to ensure success for M&A 
  • The role of communication and culture when integrating teams in M&A 
  • Common challenges and solutions in M&A 

Current trends in M&A 

Understanding the current trends in M&A is crucial for law firms looking to navigate this complex landscape. The legal sector has seen a significant reduction in the number of law firms over the past decade, driven by various factors including economic pressures and the need for greater efficiency. 

David highlighted the ongoing trend of consolidation in the legal sector. “The number of law firms has consistently declined by about 2 to 3% a year,” he explained, emphasising the trend towards consolidation. He shared data showing that many firms are experiencing low or no growth, driving the need for M&A as a strategy for sustainability. “Firms are looking to merge to achieve economies of scale and to remain competitive in a challenging market,” he added. 

Anne expanded on this by noting, “One of the other significant trends we’ve seen over several years for many firms is that low growth or no growth.” She pointed out that many firms are considering M&A to scale and remain competitive. “It’s not just about survival; it’s about positioning your firm for future growth and success,” she said. 

Key drivers for M&A 

Several factors can influence your firm’s decision to pursue mergers or acquisitions, including succession planning, regulatory burdens, and the need to attract and retain talent. 

Anne discussed several key drivers for M&A, including succession planning, regulatory burdens, professional indemnity insurance costs, and the need to attract and retain talent. “Succession planning is a genuine concern for many firms,” she noted, highlighting the ageing population of equity partners and the lack of appetite among younger lawyers to take over equity. “Firms need to think about their long-term future and how they will continue to thrive,” she added. 

David emphasised the impact of regulatory burdens and professional indemnity insurance costs. “The overwhelming regulatory responsibilities and significantly increased PII costs become central to their thoughts in planning for the future,” he said, noting that these factors often drive firms to consider M&A. “It’s about finding ways to manage these costs effectively while still delivering high-quality services to clients,” he explained. 

Effective planning strategies for M&A 

Effective planning is essential for successful M&A. A well-thought-out strategy can help firms navigate the complexities of mergers and acquisitions, ensuring that they achieve their strategic goals. 

Strategy 

David outlined the importance of having a clear M&A strategy. “It’s really important to have a deep understanding of that value proposition,” he advised. This involves knowing what makes your firm attractive to potential partners and how you can leverage your strengths in the M&A process. “Your strategy should be aligned with your firm’s overall goals and objectives,” he added. 

Value Proposition 

Understanding your firm’s value proposition is crucial. “You need to debate everything, and you need to debate it vigorously,” Anne emphasised. This means thoroughly understanding what your firm brings to the table and how it can benefit from a merger or acquisition. “It’s about identifying your unique strengths and how they can complement those of a potential partner,” she explained. 

Methodology 

Developing a methodology for generating conversations and opportunities is the final piece of the puzzle. David stressed the importance of having a structured approach to M&A. “You need to have a methodology for generating conversations and opportunities,” he said, highlighting the need for a proactive and deliberate approach. “This involves identifying potential partners, conducting due diligence, and engaging in meaningful discussions,” he added. 

The role of communication and culture in M&A 

Communication and culture play a critical role in the success of M&A. Ensuring that all stakeholders are informed and engaged can help mitigate risks and foster a positive integration process. 

Anne emphasised the critical role of communication in the M&A process. “Your people need to trust you at every step of the M&A process, or you will fail,” she said. She advised that firms should be transparent and proactive in their communication to build trust and manage expectations. “Clear and consistent communication is key to ensuring everyone is on the same page,” she added. 

David highlighted the importance of aligning cultures and managing the integration process carefully to avoid conflicts and ensure a smooth transition. “It’s best to have difficult conversations right at the start of the process,” he noted, stressing the need for clear and open communication from the outset. “Cultural alignment is crucial for the long-term success of the merger,” he explained. 

Common challenges and solutions in M&A 

Navigating the challenges of M&A requires careful consideration and strategic solutions. Common challenges include resistance to change, loss of key staff, and cultural clashes. 

The panellists discussed these challenges and provided practical solutions. Anne emphasised the importance of thorough due diligence, effective communication, and involving staff in the process to gain their buy-in and support. “Don’t assume that staff are going to be happy,” she warned, emphasising the need to address staff concerns proactively. “Engage with your team early and often to ensure they feel valued and heard,” she advised. 

David added, “If you’re not prepared to invest enough time into the conversation, we generally say, don’t start the conversation.” He stressed the importance of dedicating sufficient time and resources to the M&A process to ensure its success. “It’s about being thorough and methodical in your approach to avoid any surprises down the line,” he explained. 

Future-proofing your law firm with smart M&A strategies 

Mergers and acquisitions can be a powerful strategy for law firms to ensure long-term success, but they require careful planning, clear communication, and effective management of cultural integration. By understanding the current trends, identifying key drivers, and adopting best practices for planning and communication, law firms can navigate the complexities of M&A and achieve their strategic goals. 

For more exclusive advice and first-hand stories on navigating mergers and acquisitions, watch the full episode on-demand now. You’ll hear David and Anne share their experiences and expertise on effective M&A strategies. 

Implementing continuous improvement is one of the four fundamental habits we’ve outlined that all modern law firms should adopt for long-term success. We’ve covered all four habits in our Build Better Habits webinar series, which you can watch on-demand now. 

Meet the experts 

David Sparkes is the founder of Melbourne Ross, a legal sector specialist M&A broker working primarily with law firms and legal tech companies. 

Anne Harnetty is the founder and director of Johnson Beaumont, a search and selection firm specialising in placing the C-suite in law firms. She also works with Melbourne Ross on the M&A side.