Kim Carr
A2: Achieving progress through
mergers and lateral hires
Kim Carr, Managing Partner
FBC Manby Bowdler
  Why me?
    Largest law firm in Wolverhampton
    Offices in Wolverhampton, Willenhall, Telford, Shrewsbury & Bridgnorth
    Created through five mergers
    35 partners
    Looked at two mergers in last five years and
decided not to proceed
    Several Partner level lateral hires
  Background
    Slater & Gordon/Quindell buying PI firms
    42% of firms report a drop in turnover
    Cobbetts, Blakemores, Atteys etc
  Can 2 + 2 = 5?
    She says no
    Thinks you can create a profitable firm
from two that are perhaps not so profitable?
    What is the business case for merging?
    Perhaps it helps you retain a big client who might
be outgrowing you?
    Existing clients served by additional locations?
    New clients might look at a larger firm differently
    The benefits
      Economies of scale
      Elimate some people costs
      Eliminate some software costs
      Saving on space costs if you can
consolidate locations
    Downsides
      Clients might be lost through conflict
      Cannot keep all the referrers happy
      Lawyers & practice areas might be lost
  Due Diligence
    It must be done & done properly
    Existing & previous clients
    Does one person/team bring in a disproportionate
amount of income compared to other people/teams
    Claims record from PI insurance firm
    Other insurances
    Technology platforms
    What warranties have been given by the other firm?
    Lease arrangements
    Financial
      Any risky sources of income
      What are their borrowings
      Any banking covenants
      Expenses? Leased or owned cars?
      How is their marketing budget spent?
      How do they use funding & capital?
      Is WIP not billed fast enough?
      What is their cash flow?
      Balance sheet calculations must be mirrored in each firm
  Merger or Takeover?
    Not all mergers are equal
    Lots of platitudes in the press release
    Strength is not always about size
    What is the new name going to be?
    How does the new management structure look?
    The numbers need to be within 10-20% of each other
e.g. PEP for a successful merger
  Integration Issues
    Financial management e.g. debtor days
    Drawings policy (conservatively or every penny?)
    HR/people issues
    IT
      We all sit on a goldmine in our client databases
      Need to "mine" the combined database
    File management & administration
    There will be SRA hoops e.g. one firm is Lexcel, one is not
  Lateral Hires
    Can be expensive
    They need to generate more income
    Is it part of succession planning?
    Must drive profitability
    Are they used to an open plan office?
    What software are they used to using?
  Maintaining momentum
    It's a marathon not a sprint
    Have a small celebration on the day it starts
    But mergers can take two years to settle down
    There will be setbacks
    There will be unintended consequences