Many UK Law Firm Marriage Proposals Fail; M&A Is A Long, Winding Road - Survey

Tom Burroughes

24 February 2014

Law firms expecting to secure merger deals will find the process can end in failure in many cases, sometimes after months of talks, a survey shows.

Smith & Williamson, the accountancy and investment management business, said over half (56 per cent) of merger discussions between law firms end in failure; a third of firms spend more than three months on negotiations before talks are called off. And some 15 per cent of the firms surveyed (more than 100) said they spend more than six months in talks that prove fruitless.

The survey did not identify law firms by name, so it is not possible at first glance to see if firms with private client practices took part. The survey stated that 46 of the top 100 law firms in the UK took part, so it is highly probable that such practices are included.

The survey sheds light on how this part of the professional services sector can struggle to achieve scale advantages via M&A, given the idiosyncratic nature of these businesses.

“Although some very high profile mergers were announced during 2013, the high level of failure and the time it takes firms to reach that conclusion, represents a huge waste of time, emotion and energy for management teams,” said Giles Murphy, head of professional practices at .

A third of participating firms see merger as a means to improve finances, which suggests that economic need is a key factor in driving merger plans and goes some way to explaining the volume of completed deals between law firms over the last year, despite a general upturn in confidence across the sector, the report said.

“Too often, firms see merger as a strategy in itself. But firms need to plan properly how they are going to develop their business and if they believe organic growth or lateral hires will be insufficient, merger may be a solution,” added Murphy.

Participants included 14 law firms from the UK’s top 30. Eight of these firms report failed mergers in recent years, with two of these practices spending more than six months in negotiation despite the deal hitting the buffers.