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Ten reasons why a merger between firms fails

Corporate culture, and not economic reasons, is usually the biggest problem in any integration, but more so in a sector like the legal sector, where leadership styles are so personalistic.

Cultural aspects are the most difficult to manage for a merger to be successful.

Traditionally, alliances have been the preferred tool of Spanish law firms to establish their business relationships and attract clients outside the domestic market without entering into competition with foreign rivals. However, the crisis has created a new scenario in which internationalization has been revealed as the great pending issue.
In order to face the challenges posed by this new situation, mergers have taken center stage in the growth strategy of law firms, especially outside their natural borders. Although not widely used, this formula is not new for law firms either, as demonstrated by historical unions, such as those of Cuatrecasas with Gonçalves Pereira or Garrigues with Andersen. Even so, there are also many examples of failed marriages, such as that of Dutilh with Vialegis, who separated in less than three years. Management manuals point out that, usually, the main problem with any merger, regardless of the sector in which it is carried out, is that managers focus on the economic aspects, but forget about the corporate culture.
This point is especially important in a sector in which it is common for firms to bear the surname of the founder, who refuses to see it disappear from the corporate image, even if it is to grow. "A business plan that is above individual objectives is key for an integration to prosper," explains María Jesús González Espejo, partner at Emprendelaw. This expert in merger advice in the legal sector is in general favor of using abstract brands "that do not represent the name of the professionals", but emphasizes that this idea is even more important when talking about integrations, since In this way, the risk of conflicts can be much more limited, while "the commitment of the professionals who work in it is increased."
This is the case, for example, of the Spanish firm Maio, which already uses an abstract name and which has just merged with the Mexican firm Sterling.
Shared powerAccording to management experts, another common problem is bicephaly in management. In order not to offend sensitivities, a joint direction is established. Although it may temporarily be a solution, to facilitate the transition, there are few cases of companies that have succeeded with this system by maintaining it over time, since power struggles end up imposing themselves.
Hogan Lovells, for example, used this system for a time, separating the management of the firm on both sides of the Atlantic, until it completed the merger and appointed Steve Immelt as sole CEO. Communication in these cases is also crucial. Experts like to remember that, no matter how much a merger is between equals, in the end, there is always a buyer and an acquired party, which is not the same as a loser. For this reason, explaining the process to employees is essential. Otherwise, the only thing you achieve is giving free rein to rumors. The same thing happens with customers, who if they feel forgotten can easily be tempted by the competition.
Paying attention to cultural aspects does not mean forgetting the economic ones. The first step is not to consider a merger as a way out of the crisis, but as a strategy for growth. The most common mistake is usually to think that the addition of two law firms automatically means multiplying billing and profit by two, without taking into account the expenses and overlaps that occur in an integration.
Sources of conflict1. A union between firms in crisis is a way to multiply the problems by two.
2. Finding the ideal partner is not easy, especially if personality is not taken into account.
3. Not establishing a transparent and realistic business plan is a guaranteed conflict.
4. Paper holds up to anything, so doing thorough due diligence is essential.
5. In personal businesses, pricing a brand is always a challenge.
6. The distribution of power must be clear. Bicephaly rarely works.
7. Mergers between equals do not exist, but that does not mean removing a good manager.
8. Not communicating the plans or objectives of an integration triggers rumors.
9. Hesitation in making decisions leads to dangerous moments of inactivity.
10. It never hurts to have an action protocol in case the marriage goes wrong.

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