Canadian Lawyer

OPINION Back Page By Jim Middlemiss When it comes to mergers, buyers beware F oreign law firms looking to merge with Canadian firms better remember the old Latin term caveat emptor — let the buyer beware — given recent developments at two key mergers that have had legal tongues wagging. No doubt there was some European head-shaking at Norton Rose Group when its Calgary office was called out by police and a search warrant executed in a corruption probe over junior oil and gas firm Griffiths Energy, which admitted to paying bribes to land oil leases in Chad. According to reports, police were trying to recover founder shares in the company. Norton Rose co-operated with the search and had the shares because it was Griffiths's former legal adviser. Now, having your law firm mentioned in media reports in the same breath as a corruption probe is never good for the global legal brand and law firms don't normally take search warrants lightly, so there must have been an interesting discussion among the firm's executive management about its Calgary merger partner. Then there was the three-way merger between Salans LLP, Fraser Milner Casgrain LLP, and SNR Denton, which came with a few surprises. The ink barely dried on that deal when a group of litigators in Calgary left to start their own boutique, citing conflicts as a driving force. Shortly after, a half-dozen key mining lawyers from FMC's Toronto office went to Bennett Jones. Not good for a merged firm touting natural resources as a main pillar. Among the departed was John Sabine. He told Canadian Lawyer there is value to a global brand and FMC "didn't want to be left in the dust" in the global consolidation of law firms. However, he noted the TSX is a mining capital. "We can operate worldwide as we do without having a global brand in the sense of a branch in every country. What we do is worldwide. We don't think we need a global brand to do 46 M ay 2013 www.CANADIAN it." A big turnoff was the expectation that in an international firm, the lawyers will route work to the other offices "as opposed to someone you worked with for a decade. It was a big issue for us." Now, moving 500-plus lawyers in any single direction is never an easy task, and mergers of any sort trigger departures, so FMC losing less than three per cent of its lawyer complement is probably reasonable. The question will be does the bleeding stop there? (When Fasken & Calvin merged with Campbell Godfrey there was much ensuing turnover, but that firm prospered and spawned some of the top litigation boutiques in Toronto.) Nary a law firm merger takes place where there isn't some type of blowback. (Remember Torys merger with New York's Haythe & Curley? That merger barely survived the closing party after Thomas Haythe was accused of sexually harassing female partygoers. He left the firm shortly after.) And some mergers don't go the distance. Take the recent flameout of Dewey & LeBoeuf LLP; one of the biggest firm bankruptcies ever, with $562-million in claims. Academic literature suggests most mergers in the corporate world are a bust. In a 2006 paper entitled, Why do Mergers Fail? What Can Be Done to Improve their Chances of Success? management consultant Rita Salame notes between 60 to 80 per cent of corporate mergers are considered financial failures, less than half achieve L a w ye r m a g . c o m their cost-cutting goals, 58 per cent fail to achieve stated goals, 47 per cent of senior management leave in the first year, 50 per cent experience a drop in productivity in the first six to eight months, and only 42 per cent of global mergers result in the company outperforming its competitors two years post-merger. Is it any surprise law firm mergers stumble in the initial phase? Salame identifies eight reasons mergers fail. They provide a checklist for law firms to follow in order to reduce merger risk in the consolidating legal world. Here is my version modified for the legal profession: • Communicate like hell: Tell everyone in the firm what is going on at all times; keep them informed, good and bad. • Involve HR and operations: Integration is critical. Make sure your operations people are brought in early to identify red flags. • Spend money on training: There will be new systems and processes. Prepare. • Retain key people: Turnover of productive employees kills companies. Consider incentives and give key employees, not just lawyers, a reason to stay. • Nurture your clients: Don't make your merger struggles their headache. Make sure key clients are kept abreast of important developments. • Clash of cultures: Spend most of your due diligence making sure your firms are not oil and vinegar. Salame suggests a cultural audit. • Avoid power politics: Law firms are cesspools of politics. Make sure it's clear how the firm will operate post merger, who will be in charge, and how decision are made. • Plan, plan plan: Make sure you have a solid implementation plan, which includes core teams from the different firms. Law firm mergers have risk, but the rewards can be high if it works successfully. Just remember, caveat emptor. Jim Middlemiss blogs about the legal profession at WebNewsManagement.com. You can follow him on Twitter @JimMiddlemiss.

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