How To Evaluate A Candidate For A Merger

by Joel A. Rose

Finding a merger candidate or responding to an offer from another group of attorneys can be a somewhat difficult process. Initially the firm will need to determine whether a merger is necessary or beneficial. If the firm decides to pursue a merger, the options include acquisition of a smaller practice, combining with a firm of the same size, or being acquired by a larger firm. Once a suitable candidate has been identified the task before the firm entails establishing the feasibility of a merger or acquisition. The following items should be considered by the firm with a view to obtaining an informed opinion of its own and the candidate firm's strengths and weaknesses, and the potential configuration of the proposed entity. In any effort to integrate the practices of two firms, the leadership of both must focus on determining as many solutions as possible in advance of the actual merger. This process will help weed out the unlikely candidates. To this end, the following presents a series of questions which may be used as a discussion guide in preliminary meetings between firms considering a merger.


This involves examining the candidate firm's clients together with a brief description of the nature of the work done for each client and the fees received. The following points should be established.

1. Are there any potential conflicts of interest?

2. Is there a potential for significant diminution in business because of the volume of business done with one or more large clients?

3. Are there possibilities for cross-selling among the clients?

4. Does the candidate firm have clients which might affect the firm's reputation either in a positive or negative way?

5. Does the candidate firm have any governmental clients that would be susceptible to changes brought about by future elections?

Practice Management and Specialization

In the course of securing information about the clients and assessing the capabilities and expertise of the partners and associates, the firm's areas of specialization should be profiled.

1. Does the candidate firm offer areas of specialization which are not present in your firm?

2. Has the candidate firm achieved prominence in particular areas of specialization which may serve to enhance this practice area in your firm?

3. Does the candidate firm have political or governmental entrees which could be beneficial to some of the firm's clients?

Personalities and Related Attributes

Since the merger will involve bringing together lawyers from two different groups, serious consideration should be given to the personalities and other attributes that would be acceptable. 1. Is the candidate firm's overall philosophy similar to your firm? What is the firm's position concerning pursuits outside the scope of normal law practice such as academic or public service activities?

2. Is the firm's style of practice considerably different? For example, do attorneys take a pragmatic approach to practicing law such as expending a minimal amount on background or research as opposed to being scholarly and theoretical?

3. Will the lawyers' ages and their experience fit within the structure of your firm?

4. Will the influx of lawyers distort the firm's partner/associate ratio?

5. Will the personalities of the incoming lawyers blend with those in your firm?

6. Will the incoming associates create unwarranted competition for partnership with your associates?

7. Does the incoming group include older lawyers for whom retirement obligations can impose an undue burden on your firm?

8. Does your firm have rules concerning nepotism, marriage within the firm, etc. that are breached by any of the incoming lawyers?

9. Does the quality of the lawyers' educational background blend with your firm?

10. Have any of the incoming lawyers participated in extracurricular activities which may help to enhance the image of the combined organization?

Governance and Internal Management

The candidate firm's method of governance and internal management procedures become important because in the course of merging two practices, it may become necessary for one firm to adopt the structure of the other. It must be clearly understood that significant compromises may be required. Since lawyers are creatures of habit and tradition, this aspect of merger negotiations is quite important.

1. Is management of the candidate firm centralized in a management committee or managing partner?

2. To what extent is the management group responsible to the total partnership? What kind of decisions are left to the full partnership?

3. If the candidate firm employs an administrator or executive director, what are this individual's responsibility and authority?

4. Would you characterize one firm as "unmanaged" and the other as highly organized? How do you propose to reconcile this disparity?

5. Are your partners willing to modify their method of governance to accommodate the lawyers in the candidate firm if their process is significantly different?

6. What is the candidate firm's practice concerning non-lawyer staffing of functions previously performed by lawyers? How does this compare to your firm?

7. In combining the two entities, to what extent can economy be created in administration? (In many mergers, the opportunity for administrative efficiency and savings has been one of the impelling factors. This opportunity should be carefully examined.)

8. What are the candidate firm's philosophies about marketing legal services? How does the other firm's commitment of lawyers' time and the firm resources to marketing legal services compare to those of your firm


The relative income levels of attorneys in the two groups and other economic factors are of paramount importance.

1. How do the income levels of partners and associates in the candidate firm compare with your firm? A candidate with significantly different levels may prove difficult to integrate with your firm.

2. Are you willing to adopt the candidate firm's system for perquisites if your method is inconsistent with their plan? If perquisites are significantly different between the two groups, this may involve elimination of all perks to create uniformity.

3. If your firm does not have any type of pension or profit sharing plan, a candidate firm may either require that you adopt one or both groups may elect to terminate existing plans.

4. Are the hourly rates charged by the candidate firm consistent with your billing practice? If there is disparity can changes or compromises be effected on either side without disrupting client relationships?

5. If the manner of allocating net income is significantly different, will either firm be willing to adopt the other's method or can any compromise be effected? If your firm utilizes an allocation committee, how will the candidate firm be represented, if at all? Would your partners be willing to accept representatives of the new firm for this purpose?

6. If your firm limits access to the financial information available to its partners, will the candidate firm be willing to accept the same limitation?

7. If your firm has significant capital, will the candidate firm be willing to provide similar amounts of capital?

8. What obligations are you willing to accept for death and retirement benefits for the candidate firm's attorneys, particularly if these are inconsistent with your firm's practices?

9. Will you require the candidate firm to contribute work in process and accounts receivable upon commencing the merger?


Since the merger involves integrating the associates into the process, serious consideration must be given to the impact that this will have on your associate group.

1. Are the candidate firm's practices with reference to recruiting and summer programs similar to yours? What kind of commitments have been made by the candidate firm for future hires?

2. How similar, if at all, is the process of training, supervising and utilizing associates? How many years are expected before consideration for partnership?

3. What are the expectations of the associates relating to, and requirements for, extracurricular activities?

4. Are the candidate firm's criteria for partnership consideration significantly different from those of your firm?


In addition to integrating the attorneys, a modern law office has a number of administrative and staffing aspects which must be effectively combined in a merger.

1. Are there differences in the compensation levels and benefits of the nonlegal staffs? Will the differences require significant modification in your scales?

2. Are the office procedures such as filing, timekeeping, reproduction, data processing, etc. significantly different? Will a major financial investment be required to achieve compatibility in systems and procedures?

3. If the candidate firm is either located in a different geographic area or has branch offices, have you considered the administrative aspects of handling the potential problems?

4. If your practices for hiring, training and evaluating staff are significantly different, can the candidate firm accept these procedures?

5. Is the ratio of secretaries to lawyers, etc. consistent in both firms?


In an effective merger, bringing all of the lawyers together under one roof, or at least within one city, is preferable. The best mergers are achieved by rapid integration. To accomplish this requires adequate space in which to house the combined group.

1. Do your firm's physical facilities enable you to add lawyers to your existing space? Is adjacent space available? How many lawyers can you accommodate?

2. If you cannot combine operations immediately, do you have a contingency plan for operating in multiple locations?

3. Does the candidate firm have leasehold obligations which will prevent rapid integration? If the market is depressed, this may prove to be a real problem.

4. Generally, leasehold obligations must be funded by the firm giving up the space or no merger will occur. It is difficult to conceive of the combined firm agreeing to bear the cost of leasehold obligations if the space is not to be used or is relet at a loss.

Malpractice and Disciplinary Actions

Some potential problem areas to address before considering a merger include issues regarding malpractice and disciplinary proceedings.

1. Have any of the lawyers in the incoming group been subject to disciplinary proceedings in the past? Any potential problems known to the firm?

2. Are there any outstanding malpractice claims? Have there been any claims in the past?

3. What is the coverage for professional liability insurance (this is applicable to both firms)? To cover any occurrences in previous practice, is the candidate firm in a position to purchase the "tail" on its professional liability insurance? Would your firm be able to do the same?

Firm Name

The new firm name must be resolved at the outset because if this cannot be solved--no matter what else can be agreed upon--a merger will not take place. This is particularly true in cases where a merger is being considered, as opposed to an acquisition. Since the issue will be seen as involving status, both firms will be particularly sensitive to being represented in the new firm name.

1. Both firms should attempt to avoid justifying use of a name by asserting that clients will be affected by a particular choice.

2. Consider the individual partners who may feel they have a claim in having their name in the firm--this may be the occasion for reasserting the claim. Does your firm have such a partner?

3. The problem may be particularly difficult where one or both of the merging firms have operated for many years under their present names. How do you propose to address this?

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