Merger mania: who says size matters?
16 March 2012
A quarter of a century ago I strode into my first ever partners’ meeting. The highlight of the meeting was to be a presentation from what in those days passed as law firm consultants. They had done a strategic review of our position in the marketplace and it was with a warm sense of anticipation that I sat down to hear how wonderful and perfectly formed we were.
To be told instead that we were too small to survive in the post big-bang world and that to avoid a slow and painful death by a thousand cuts, we needed to get on and merge was a bit of a let down. Mergers were unheard of in those days. Why us? But shortly thereafter, Clifford Turner and Coward Chance got together and a steady trickle of mergers have followed ever since. Hardly enough to justify the oceans of ink, forests of trees and balloonfuls of hot air expended on the subject over the years, but a steady trickle nonetheless.
The long predicted wave of consolidation in what still remains a remarkably fragmented industry where the largest firm has only 2 per cent of the world market never really materialised and mergers proceeded only at a fairly leisurely pace. Until now, that is. As we know, many of the winds driving consolidation are now blowing in the same direction at the same time. I had lunch with a well known consultant last week and the talk was of little else. Mergers, mergers, mergers. Mergers in the City, mergers with Americans, mergers with Canadians, mergers with Australians, mergers between the Chinese and Australians. And more mergers in the pipeline.
Are all these mergers a good idea? So far as one can judge from the outside, some seem to have sound strategic foundations. Others seem to smack more of desperation. And do these mergers actually add to the sum of human happiness among the partners of the two merged entities? Lawyers hate change, hate being told what to do, loathe red tape, like to be left to their own devices, like to have control over their own destiny and like to have the ear of the management. Most mergers seem to offer the precise opposite. They lead to huge disruption, massive change, more rules, more procedures, more red tape, more top-down directives, less influence and less control of your own destiny. Most mergers are, in fact, take-overs and not mergers and, while a lucky few of the acquired firm will gain from the larger platform of the merged entity, many will gain nothing and others will be casualties and either be demoted or lose their jobs altogether.
There is another set of casualties, but they probably care rather less since most of them are no longer with us. They are the founding partners of the merged firms, whose pre-merger firms once carried their name. In a sense, these people were imbued with the same sense of entrepreneurial drive and spirit of adventure when setting up their firms many years ago as their successors who are now taking their firms to all corners of the globe. But their names no longer form part of the legal landscape - casualties of all this merger malarkey. So here’s to all those entrepreneurial law firm leaders whose names have fallen by the wayside since my first partner meeting all those years ago - Messrs Alsopp, Arnold, Burgin, Biddle, Coward, Cholmeley, Curtis, Cooper, Davies, Dibb, Edge, Ellison, Garrett, Graham, Goulden, Hammond, Hill, Hinds, Joynson, Jones, King, Markby, Nicholson, Suddard, Simpson, Sainer, Sapte, Titmuss, White, Wilde and Young. May your names rest in peace.
And we, for our part? We never did get round to taking the advice of those consultants all those years ago and, I have to say, I am rather glad we didn’t.
Chris Carroll is senior partner at Travers Smith