By Chris Johnson, From The Am Law Daily

Just over a week after Greenberg Traurig terminated its merger talks with London-based Berwin Leighton Paisner, a new report has been published that claims that the majority of law firm mergers fail to deliver benefits to clients and risk damaging partnership value.

The study by Gulland Padfield, a London-based professional services consultancy, found that most law firms merge for defensive rather than strategic reasons, and then poorly manage the integration process by focusing too heavily on areas such as systems and technology at the expense of clients.

“Merging is a highly disruptive process, and the majority of law firms only do it if they absolutely have to,” said James Edsberg, a partner at Gulland Padfield and one of the report’s authors. “It can be genuinely transformational, if you take a more proactive and strategic approach, such as to develop practice or industry expertise globally, but just wanting to be bigger or paper over the cracks in a weak strategy is not going to work.”

In addition to analyzing the business and strategic objectives of recent law firm mergers, Gulland Padfield interviewed management team members at 20 global and U.K. firms that have combined in the past 18 months to discuss their experience of the negotiation and integration process.

The report found that the majority of law firm mergers fail or run into difficulty because of a lack of a coherent plan to capitalize on the combined client relationships. Management efforts pre- and postmerger are instead typically too narrowly focused on integrating operational aspects such as technology platforms and billing systems.

“Making sure that everyone has the same email address isn’t what will determine whether a merger is successful,” said Edsberg, a lawyer turned consultant who spent six years as an attorney at Freshfields Bruckhaus Deringer. “The litmus test of any merger should be whether the combined firm can bring value to clients in a way that the old firms couldn’t on their own.”

“It’s mind-bogglingly obvious, but often gets lost in the mix,” Edsberg added. “Apart from checking that there aren’t any conflicts, clients are rarely put at the heart of these mergers.”

The law firm managers interviewed by Gulland Padfield identified a number of other factors that, with hindsight, they recognized as useful indicators of whether merging firms are well paired. These include partner remuneration systems; client billing rates and policies; the quality of non-fee-earning functions, such as business development and finance; each firm’s attitude to nonbillable time; employee diversity; the approach to pro bono and citizenship; and communication levels between the partnership and the rest of the firm.

The report follows a spate of unconsummated law firm courtships. Two major potential combinations were called off in November, when Foley & Lardner and U.K.-based Eversheds ended talks and Pillsbury Winthrop Shaw Pittman and Chadbourne & Parke went their separate ways. A potential Dickstein Shapiro merger with Bryan Cave collapsed in December, despite Dickstein’s partnership having voted to approve the deal.

Most recently, Greenberg Traurig chose to end its merger talks with BLP earlier this month. Several people close to the discussions told The American Lawyer that Greenberg Traurig called a halt to proceedings amid concerns about the U.K. firm’s practice mix and culture, and after becoming disillusioned with BLP’s management.

Despite these deals breaking down, there were still a record 91 law firm combinations in 2015, according to consultancy Altman Weil.

For more on this story go to: http://www.americanlawyer.com/id=1202753538416/Law-Firm-Mergers-Dont-Benefit-Clients-Report-Finds#ixzz44PU0urqF