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Cultural due diligence is only as good as the planning which is then drawn up on the back of it.
What do you do when external disrupters threaten the stability of your firm? Do you raise the drawbridge, looking to retain existing clients albeit with increased charges; do you look to change your offering, dropping unprofitable services and becoming more innovative with the delivery of those which remain; or do you seek to achieve economies of scale, looking to merge with other practices for mutual gain?
Well, yes you may aim for a combined approach but it is certainly true that the past few years have seen a considerable number of legal firms set off down the merger route and the trend seems set to continue. Indeed a report in January 2015 revealed that 95% of the top 200 firms expected to see significant consolidation within the sector in the next two years. But whilst some mergers deliver the synergies expected, far more end in failure. In fact, many potential mergers don’t even get off the ground. The same report revealed that 64% of merger discussions fell apart with insufficient due diligence and internal communication failures being cited as key factors.So why do M&As typically fail to deliver the expected synergies? Sadly time and time again it comes down to a lack of robust planning which follows on from insufficient attention being paid to cultural due diligence. In far too many instances, whilst the accountants pour over the minutiae of invoicing procedures and book valuations and the legal experts spend hours in examining contracts and partnership agreements, the people who will make or break the merger, ie the employees and the customers, are left out of the consideration matrix. The solution is to carry out a cultural due diligence exercise which is every bit as rigorous as that carried out on other areas of the business.
However, cultural due diligence is only as good as the planning which is then drawn up on the back of it. It is one thing to identify that partners in one practice make a point of phoning clients on a monthly basis whereas those in the other practice leave it for clients to contact them but what is the approach going to be in the combined practice? More importantly, moving deeper into the culture, what are the values, beliefs and behaviours of each firm; how do they manifest in day to day interactions and approaches; what expectations do clients have of the way in which they can interact with employees; what expectations do employees and partners have of the way in which they can act on their own initiative or who they can collaborate with on cases?
All of these considerations and more will come out of a thorough and robust due diligence. The next stage is to work on a cultural integration plan which will take account not only of the values evidenced in the old firms, but also of a new value set which will drive the integrated firm forward. This plan may include drawing up a new set of values, behaviours and competencies; creating a communication plan; identifying key personnel to act as change champions and ensuring the buy-in of the executive team.
The world is changing and legal practices have no option but to change with it. Sometimes that may mean looking towards a merger to take full advantage of new outlooks and delivery methods. By ensuring that a full cultural due diligence exercise is carried out and that an integration plan is then scoped on the back of the exercise firms may have a chance to create something new which is greater than the sum of its parts.