Mergers should accelerate the delivery of an organisation's strategic goals. They can bring greater economies of scale, better geographic coverage and greater dominance of a market segment. But they are not without risk and the effort required to put firms together can undermine client value rather than enhance it.
Take the recent merger between Dentons and Dacheng. It is only the second major merger with a Chinese firm but clearly a significant one as it creates the world’s largest law firm with over 6,500 attorneys, 50% more than Baker & McKenzie. Dentons clearly believe that to become one of the world’s leading global firms it has to be big in China. It can expect some integration challenges though as only last year the Chairman of Dacheng said “there is still a huge gap between Chinese and international firms”. Despite this Dentons are now said to be in talks with McKenna Long that would add another 575 lawyers and further layers of complexity to the integration process.
The risk of any merger is that the effort required to bring the firms together will distract the leadership team from the real challenge of improving efficiency and productivity, a challenge that clients believe is essential for law firms to tackle and overcome in order to provide better value. Integration, particularly where there are significant financial, cultural and communication difficulties as might be expected in the Dentons and Dacheng deal, can not only be distracting but also resource hungry, expensive and time consuming. The challenge for the leadership team in the period immediately after an acquisition, therefore, is not to let the firm become less efficient and less productive as this will undermine the value offer perceived by clients. To mitigate this risk productivity and efficiency should be made a priority after any merger to signal to ever more sophisticated clients that size really can bring them the benefits economies of scale and market domination imply, rather than higher fees to cover the costs of integration. That way everyone wins.