Legal case study – Anatomy of a law firm merger (Ross & Craig and DMH Stallard)Posted on: September 27, 2017
In 2015 I interviewed David Leadercramer, the former managing partner and senior partner of Ross & Craig solicitors http://www.rosscraig.com/ about his firm’s decision to merge with DML Stallard http://www.dmhstallard.com/ to gain insight into the merger decision and process. The original interview is below. David was kind enough to reflect recently on what he said at the time and share the lessons learned about merging law firms.
I have a personal interest in this merger story. First, David and Ross & Craig were one of my first law firm clients some 20 years ago. Second, as well as being a leading light in the family law market (and an expert on pre-nuptial arrangements and a trained collaborator and mediator), I was David’s client when he skilfully managed my own rather tricky divorce back in 2004. Third, on occasions I have spoken on the same conference platform as David – most notably at an event a few years back in Copenhagen.
History of Ross & Craig and the 2009 recession
Ross & Craig had been in existence for 38 years – originally from offices in Upper Berkeley Street in the West End. For many years it had eight partners – covering family and private client law as well as commercial and property disciplines.
At its peak it had 11 partners and nearly 50 people. It suffered, like many other law firms, during the recession which hit in 2009 and the firm rationalised with an overhead reduction programme so profitability was restored.
It also improved its risk management processes, achieved the Lexcel accreditation and severed links with its Wills, trust and Probate team. The new leaner practice had eight partners, four other fee-earners and seven other staff.
David was managing partner until 2009 and then became senior partner.
Strategy decisions in 2010
“Three or four years ago we found ourselves with some of our partners being over 60 and a capacity issue – we were turning work away both from commercial and private clients. There were two choices – either we could attempt to bring our own people up to speed quickly to regenerate the business or embark on an expensive lateral recruitment campaign. But the issue here was what would persuade our own or other people to join us when our future vision was unclear? The other option was to merge to achieve critical mass”.
“At the time the long lease to our premises was owned by four of the six equity partners. We considered a sale and leaseback arrangement. We faced a licence renewal in 18 months and wondered whether we could exercise the break clause in a year and move into serviced accommodation until we were clearer about our future plans”.
The decision to merge
“We realised that we needed to merge and ideally with a firm that was just a bit bigger than us. Our initial list of potential merger partners included 23 firms and we set about narrowing that list to around eight or nine during May and June 2015. We met with eight of those firms”.
“I have to say that we liked DMH Stallard immediately when we met them. The culture felt familiar to us. The numbers are rarely a problem when we had these discussions and we knew that having a personal rapport with the partners was a major issue for us”.
“It also became apparent that we could work well together. I liked the “can do” approach to the merger negotiations – there were no disagreements and there was a solutions-based approach to any issues that arose. We were introduced early on to the main teams and there was a good personal chemistry with everyone we met – we really liked the way they got on with each other. There was also a refreshing honesty – if there were any problems, people spoke up so that we could find a solution”.
“We had complementary teams and there were planning teams which we felt would be of great value to our property clients. Our lawyers would benefit from the more advanced infrastructure, training programmes and greater opportunities available from a larger firm. We felt it would inject fresh impetus to our own business development programmes”.
On 15th October 2015 the merger was announced: http://www.dmhstallard.com/site/publications/pressreleases/dmh-stallard-completes-second-merger-of-2015
All of the Ross & Craig team moved to DMH Stallard’s offices in New Street Square (mid town) in March 2016. This tied in nicely with its property commitments so there was no period of double rent payment.
So what was in it for DMH Stallard?
DMH Stallard merged with Guildford firm, AWB Partnership in January 2015, so the firm was clearly on the merger trail to build the firm overall and critical teams.
DMH Stallard benefitted from an influx of highly talented lawyers of various seniorities to integrate with its own teams – with considerably less cost and management time than if it had taken the head hunter or recruitment route. And all Ross & Craig lawyers had their own clients and portfolios so there was little risk.
DMH (which has roots in the Sussex market) was also – through the merger – able to bolster the size, reputation and client and referral base for its London practice with an established and well connected London practice. The 14 Ross & Craig people used existing space in its relatively new London office so there were no additional overhead costs – all partners therefore benefitted from increased profitability. So it really was a Win:Win deal.
After the Ross & Craig merger, DMH Stallard’s London operation had a total of 23 partners and a turnover in excess of £10 million. Overall the firm had 60 partners and a total of 250 staff.
Lessons learned – Two years later
The case study above was prepared nearly two years ago before the merger took place. What has happened post merger and what have been the successes and the failures?
The merger has been a considerable success in all senses which has been recognised by both DMH Stallard LLP partners and their ex Ross & Craig colleagues. Unusually for a merger all partners and lawyers who came across are still with the firm. So what drove the success?
- The merger had an underlying business case for both firms. DMH Stallard LLP wished to enhance its London presence with a well known and respected London firm and Ross & Craig recognised the need to offer clients a wider and more in-depth service.
- Ross & Craig embraced DMH Stallard culture very easily as it was remarkably similar to the prevailing culture albeit in a much bigger firm.
- The management relationships at the top were also maintained so any flashpoints (and there have been very few) were dealt with quickly and effectively.
- There was a “big bang” approach to the merger with Ross & Craig moving into DMH Stallard LLPs offices in New Street Square and adopting all DMH ‘s IT and procedures from day one. This meant a steep learning curve but lead to an integrated approach from the outset.
- DMH Stallard provided good support when the merger took place to ensure that all newly arrived staff and partners did not feel abandoned or isolated if they didn’t understand the new processes and procedures.
- The loss of independence has not been an issue for Ross & Craig. DMH has been excellent in providing information regarding the financial state of the firm and including all the partners in particular in decision making regarding the future of the practice. Of course the former partners of Ross & Craig are not so integrally involved in those decisions but the merger has also meant that it has freed up Ross & Craig partners to focus on client work as they have shed most of their former administrative and management responsibilities.