What Every Partner Should Know About the Costs of a Merger
A merger is an investment and should be accretive to a law firm’s net income per partner. The costs of a merger or acquisition appear in these areas: transaction, integration and revenue impact. This article will deal with the first two areas. The transactional costs of a merger can and do cause a dilutive situation short and possibly long-term. Experienced merger and acquisition professionals know that transaction costs, in the business community, can range between 6% and 8% of the gross revenues of the organizations. Few law firms are experienced enough to closely estimate these costs and, therefore, most often underestimate them – resulting in a dilution of partner profits.
I hope that the more than two decades of experience I have had dealing with law firm mergers will help lawyers and law firms better understand how to assess the costs (or investment, if you will) of mergers. Merging is difficult and risky at the best of times. Understanding the costs better will help any organization in the decision-making and in guiding the combination once the merger is completed.
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