A friend of mine always dreamed of owning a restaurant.  When a particularly popular bistro came on the market, he quickly bought it and went about “improving” the menu, “fixing” the service and “rejuvenating” the atmosphere. Within six months, my friend had succeeded in driving a previously successful restaurant out of business. We both learned from the experience.  He would say he learned that the way to make a small fortune in the restaurant business is to start with a large fortune.  I would say I learned that when you acquire something that works well, leave well enough alone.

Without doubt, every law firm possesses a distinct organizational culture, and that culture influences the firm’s success.  Therefore, if two law firms merge, the manner in which their cultures merge also dramatically influences the merger’s potential for success. Appropriately, conventional wisdom advises to consolidate the cultures of merging firms as quickly as possible.  Indeed, in some circumstances, this importance of merging cultures may be accurate.  However, in other circumstances, consolidating firms’ cultures may produce disastrous affects.

Exactly how a newly merged law firm handles cultural issues depends largely on the strategy used to justify the merger. Notice the differing rationale in the following two merger strategies: One strategy involves creating critical mass, strengthening dominant practice areas and enhancing the firm’s role as a player in existing legal markets.  For example, a firm with a strong intellectual property practice may merge with an IP boutique in order to strengthen its patent prosecution capability. This could be called a dominance merger because it is designed to create or strengthen dominant practice areas or geographic markets.  A second strategy involves expanding into new areas of practice or new geographic markets.  For example, a regional firm may merge with a California firm to create a national presence.  This could be called a scope merger because it is designed to expand the scope of the two firms by adding new practice areas or entering new geographic markets.

When to Combine Cultures
Dominance mergers, designed to become stronger in specific targeted practice areas or geographic markets, are built around the goal of presenting to the marketplace a single cohesive firm with dominant capability. Realistically, this usually means one of the merging firms must impose its culture on the other.  Logically, it would seem to follow that the firm with the more dominant culture would do the imposing. However, when two firms vary greatly in size, it is the larger firm, not necessarily the firm with the more dominant culture, that does the imposing.

On the other hand, scope mergers, designed to expand the scope of the firm into new areas, may produce disastrous results when cultures are merged.  Several years ago, I was involved in the merger of a large Midwestern firm and a mid-sized Southwestern firm.  Although termed a merger, the consolidation was from all appearances an acquisition for the larger Midwestern firm, and it went about trying to install its decidedly conservative Midwestern culture onto the casual atmosphere of its merger partner.  For example, every Friday afternoon, the Midwestern firm traditionally held a TGIF beer and peanut party.  By long tradition, everyone gathered in the attorney dining room where the firm had beer on tap and a wooden floor on which to throw peanut shells.  It was a time when all attorneys were equals, and everyone talked about their week’s work while they waited for the traffic to clear.  This culture was so important to the firm they actually installed a wooden floor and a beer tap in one of their merger partner’s conference rooms.  Unfortunately, the southwestern office was filled with lawyers who wanted to get on with their weekend plans.  Besides, they were more wine and cheese kind of people.  The room with the wooden floor became a joke and a symbol of the colonial atmosphere the acquired firm felt.  Merging cultures in geographically dispersed offices is tough.

The goal of creating a single, unified culture throughout a law firm sounds inherently logical, but it actually could defeat some of the very benefits the merger was envisioned to provide.  Cultures not only support the creation of practice strengths, they are also a creature of those strengths.  The culture of a corporate boutique is typically much different than a litigation firm.  Cultures of New York City firms differ from Chicago firms.  Not only would the homogenizing of diverse cultures be extremely difficult, it also could negatively influence the success of an office or practice in its market.

Making Mixed Cultures Work
Three key ideas are central to accepting cultural differences: understanding the culture of each firm, identifying the cultural elements significant in each firm’s historic success, and permitting those elements to survive in the merged culture.  Merged firms need not cobble together cultures like a quilt.  Certain elements of culture are essential to the success of each of the merging firms.  Other elements are simply differences of historic evolution.

Firms can readily identify the elements of culture significant to success, but these elements vary so dramatically from firm to firm that it is impossible to create a definitive list for all firms. Typically, the important aspects of culture involve the manner in which attorneys practice law.  Aspects such as team orientation, availability of associates and paralegals, and the manner in which firms charge clients for services, can fundamentally change a merged firm’s competition and business model.  Rituals also are important.  Every office or practice area differs to some degree on the kind of holiday party and or type of practice group meeting held.  Client service and business development are among the most important aspects of culture.  Nothing kills an entrepreneurial culture faster than the need to seek pre-approval from someone in the headquarters office before a partner can take a client to lunch.

As important as maintaining the core culture of each merging law firm is, some aspects of those cultures must merge in order to operate effectively.  Obviously, the firm must adhere to the same ethical standards (including a single conflicts checking and clearance system), the same standards for partnership consideration, and the same standards for lawyer quality and professional development.  And, of course, all partners should fall under the same compensation system.

Creating a New Culture
The peaceful coexistence of cultures works best when cultures overlap minimally.  Realistically, however, many mergers blend aspects of both dominance mergers and scope mergers.  In these situations, the best strategy may be to create a new culture derived from the best aspects of the two existing cultures, while allowing for cultural deviations in specific offices or practices where it makes sense.  This strategy requires significant planning, effort and adherence to three rules:
1. Identify the culture of each office and practice group, how they differ from the combined firm as a whole and what aspects justify being maintained as an exception.
2. Go overboard in involving people. Often, members of an office or practice group will give up a cultural deviation if they feel consulted.
3. Do it quickly.  Preferably, firms should make cultural decisions before the merger takes effect.

The moral to all of this is, like most other things dealing with cultural issues, if it seems to make sense – do it.  (And, the friend I told you about who went out of the restaurant business…a couple of months later he sold the property to a developer for a Hooters and ended up turning a profit on the whole deal.)