Look where the wrong thinking gets you in an M&A
Updated: Sep 5, 2019
So, another deal falls through. This time it's A&O and O'Melveny showing how lessons continue to be ignored. And how, remarkably, many law firms continue to work in ways that contravene both societal and business trends. For us, the "lessons" talked about remain the same in any proposed M&A deal. They are as valid and important throughout the deal process, as they are after the new entity has emerged.
1. What is the purpose behind the proposed merger?
Any M&A means enormous change. For people to commit to that, they need to have a clear idea of how things are going to be better and why it's worth going through the disruption. Simply "to earn more money" is not the answer now, and certainly not to meet the 'millennial challenge' of motivation. The idea of purpose is gaining strength in all kinds of business, and professional services cannot be immune to that influence; and that is linked to the question of who stands to benefit from this business activity. Again, any deal that is purely inward-looking is going to struggle for appeal and support.
2. Leadership has to show courage.
It's a maddeningly integral part of leadership, to lead. When it comes to M&As, that means defining the purpose we spoke of above, and inspiring people to work towards that vision. It also means taking personal responsibility for the rough times at least as much as the smooth: being visible, 'owning' the process, being accountable. All the way through. And pace is another important aspect in successful M&As, creating a sense of urgency, dynamism and decisiveness that will be tangible in the new entity (another reason to believe it will be better than either of the legacy businesses had been).
3. You have to deliver.
Ultimately, that is the test of any brand, of any leader, and of course of any M&A deal. It's unfortunate that most deals of this kind still fail to deliver the value they promise (and that usually comes down to the so-called ' softer' aspects not being addressed well enough, and to leaders not maintaining the same level of interest and energy post-deal as before). But when two organisations have been told that they're in discussions, that they should be excited about the planned combination, but need to keep 'BAU' in the meantime...and then are informed that it's all come to nothing, there is a real danger of a loss of credibility. Which often manifests itself in a loss of direction, a loss of commitment, and a loss of the best people.
If things were going to be better because of this merger, how are they going to be better for each party, now the deal is dead?
Some of the more publicised difficulties in the A&O and O'Melveny were sadly superficial and predictable. Not because of the firms involved, but because of the sector they're in. Law firms still use the statistics of how much money they make from their clients as a form of competitive positioning; so it's no surprise that this deal struggled to overcome issues of lockstep and exchange rates. Law firms still don't know the difference between 'brand' and 'branding', so it was only to be expected that there would be arguments over the name (and even the role of an apostrophe, allegedly). And law firms still don't know the value of outside-in thinking, through which they might learn lessons from other sectors and other organisations; so it's typical that the potential benefits (or losses, now it's fallen through) to clients of this combination have not been stressed.
"To be different, you have to do different" is an obvious mantra. But it's still rarely applied, especially in this sector. Using the same old measures and priorities to drive business decisions in this modern world simply won't work. The Charisma Index brings new measures and highlights the emerging and real priorities, as a basis for better decisions. A new way of thinking is needed, if firms are going to enjoy the road ahead.