Post-Merger Revenue Growth and CRM

April 30, 2004

The legal industry has undergone tremendous change over the past decade. Among the most notable trends has been the movement towards consolidation – namely mergers and acquisitions. Indeed, according to Hildebrandt International, a leading legal consulting firm, over 150 law firm mergers have taken place over the past two years in Europe and the United States. Hildebrandt predicts the pace of business combinations to accelerate during 2004 as the economy’s pace quickens.

In light of this ongoing trend, it is surprising to learn that few business combinations ultimately succeed in delivering the value and benefits envisioned. Consulting firm, McKinsey & Co., conducted an eye-opening study of 193 mergers that took place between 1990 and 1997 and found that a dismal 12% succeeded in maintaining revenue growth in line with their non-merged peers (“Why Mergers Fail,” Matthias M. Bekier, Anna J. Bogardus, and Tim Oldham, The McKinsey Quarterly, 2001 Number 4). The reason? McKinsey cited an over-emphasis placed on post-merger cost-cutting and an under-emphasis on revenue generation. The report concludes that success is determined by an organisation’s ability to protect and generate revenue growth just after the merger.

Shift in Emphasis

The implication for law firms of the McKinsey study is evident. Undertaking efforts to cut costs and increase efficiencies will always be a necessary element of post-merger activity. After all, redundancies in fixed overhead costs, such as administrative services, result when two organisations combine. However, the ultimate success of the newly merged entity will not hinge upon how quickly and thoroughly efficiency gains can be measured. Rather, it will depend upon how effective the firm is at leveraging its strategic assets in revenue generating activities.

This of course begs the question, what assets do law firms have at their disposal that can be exerted towards new business development? They fall into two categories – Knowledge Assets: what lawyers know; and Relationship Intelligence – who lawyers know.

By placing primary emphasis on maximising a firm’s knowledge and relationship assets, firms will see the greatest bottom-line revenue impacts following a merger or acquisition. To support these activities, firms will require the correct IT infrastructure to support these activities. And as will be discussed at length below, client relationship management (CRM) systems have taken centre stage as the technology that best facilitates revenue generation in a post-merger law firm.

Uncovering Strategic Relationships

The business of law always has and always will be centred upon personal relationships. Regardless of how sophisticated marketing and business development programmes become, clients ultimately retain a law firm and remain with it based upon the quality of relationships that they forge with their lawyers and of the service that they receive from them.

Historically, as part of their “rainmaking” duties, lawyers involve themselves with religious, business, civic, charitable and social institutions as a means of networking and ultimately building their practices. Over time, their network of relationships becomes an ongoing source of referrals and new business. After a law firm merger, however, a major disconnect immediately emerges because the relationship networks between the two formerly independent firms are not integrated. For example, in a common scenario a business development team might be in the process of a tender to win a new FTSE 100 client. Part of the process would naturally include internal queries to uncover whether any other lawyers within the firm possess relationships with the prospective client that could potentially benefit the outcome of the tender. But in most instances immediately after a merger, individuals are not well acquainted with the new lawyers that now comprise their firm, let alone the relationships that they possess that could be instrumental in business development. Yet, it is precisely a firm’s ability to capture and track these additional relationship networks that will determine how successful the merger will be.

At many successful law firms, CRM software capable of managing and tracking Relationship Intelligence, has been put in place to help leverage the collective relationship networks of all lawyers within the organisation. CRM software can also play a pivotal role in quickly linking together the relationship networks of all the lawyers within the newly combined entity.

Through social networking functions built into these systems, users can instantly view who else within the firm has a relationship with, for example, a prospective client. Some systems also offer relationship-mapping capabilities, providing a lawyer with a relationship pathway to a prospect via intermediary relationships. So, for instance, using this CRM functionality I might discover that two lawyers with whom I am not personally acquainted but who are now colleagues might be in a position to broker an introduction with the FTSE 100 prospective company I am trying to win as a client.

By employing strategies and IT tools capable of integrating a firm’s Relationship Intelligence, law firms can quickly and efficiently harness their hybrid network of relationships in a manner that can deliver value quickly to the firm.


Most law firms merge with or acquire other firms not simply to obtain the clients of the target firm. Doing so would be of marginal value, as the firm is also taking on the overhead of additional lawyers, support staff and other fixed costs. Rather, the Holy Grail of mergers is the hope of leveraging expanded staff and capabilities to enhance cross-selling opportunities, thus increasing per-client revenues and profits.

Two challenges immediately confront a merged law firm seeking to increase cross-selling opportunities: visibility into internal experience and expertise and obtaining a shared, 360-degree client view. For example, to cross-sell more effectively, client development teams must necessarily know who the clients of the firm are, understand their business, and the past work that has already been done for those clients. Without access to this information, analysis into potential cross-selling opportunities is virtually impossible. The challenge is even more daunting in a post-merger situation where an entirely new and unfamiliar client base is being assimilated.

Likewise, once the client-base has been analysed and segmented, a client development team must then match potential revenue opportunities with internal staff capable of delivering the necessary legal services. Often in a post merger environment, it takes a considerable amount of time for lawyers and marketing staff to become acquainted with the new firm members and their practice specialisations and experience. When time is of the essence in business development, this lack of familiarity with the firm’s collective experience and expertise pool can be a considerable threat to garnering cross-selling success.

CRM systems, again, can drastically reduce a firm’s ignorance of its own knowledge resources and increase visibility of the experience and expertise information required in effective cross-selling. For example, CRM systems can integrate with practice management, human resources, contact managers and other back-office systems and combine this Relationship Intelligence to provide a holistic view of clients and their entire relationship with the firm. Once deployed, this allows users instantly to see profiles of all firm clients, who they’ve worked with in the past, on which matters and to what end.

Once a client has been profiled thus, it is then incumbent upon the business development team to determine what areas of opportunity exist for selling additional services to existing clients. This requires access to practice group information as well as the skills and expertise of lawyers that would potentially service a client.

The challenge of manually aggregating this information can be daunting enough for firms even under ordinary circumstances. However, in a post-merger environment, where familiarity with new members of the team is at its lowest, effectively aggregating experience and expertise information and applying this information to existing opportunities can be a near impossible task.

Today, most firms lessen this challenge by implementing CRM packages capable of aggregating and managing experience and expertise data. With quick access to lawyer specialisations, matters worked upon, industry experience, etc., matching lawyers to cross-selling opportunities is greatly simplified.

Client Service

Dangers also present themselves in the weeks and months following a merger. Firms must be aware of these risks and manage them lest they lose the competitive advantages they garnered in the first place by the combination.

Foremost among these dangers is the negative impact that merger activity can have on client service. New lawyers and staff who are unfamiliar with the details of an engagement or the client’s preferences may be brought into existing matters. New responsibilities and administrative duties imposed upon lawyers and administrative staff may reduce the amount of time they normally spend with clients. And the inevitable integration of multiple IT systems can lead to duplicate data and resulting miscommunications to clients.

CRM packages can be most effective in these circumstances to ensure quick, accurate and consistent client communications. Leading CRM packages now have sophisticated built-in data quality and data change management tools. This is critical, because as much as 30-40% of all contact data possessed by the merging entities can be duplicate and/or inconsistent. Without tools to identify potentially inaccurate, duplicate or out of date information, client and prospect communications will suffer, causing unnecessary embarrassment to the firm and client doubts about the firm’s ability to emerge stronger from the business combination.

CRM systems can also be used as tools for client relationship managers who need to ensure consistency amongst all client touch points. For instance, during the tumult of a merger, important client activities can easily be overlooked or forgotten. To minimise these risks, business activity monitoring functionality within the CRM system can be set to notify a lawyer of specific events or non-events warranting his or her attention. Examples include:

· notification of all top clients that have not been communicated with by anyone within the firm for certain periods of time

· alerts when “over-due” billing notifications are sent to key clients

· alerts when other firm members telephone, email or otherwise communicate with top clients

· notifications when client contacts have changed jobs, received promotions or left their companies.

Clients must have confidence that their legal advisors are tuned in and aware of all activities relating to their matter. During a merger or acquisition, lawyers who are already busy can easily overlook an important detail and hence unwittingly do damage to the relationship. CRM systems are now sophisticated enough to serve as back-up ears and eyes, constantly monitoring client interactions and alerting the lawyer when something important has happened (or has failed to happen) that warrants his or her attention.

Combine Strengths, Not Weaknesses

The overwhelming majority of corporate mergers and acquisitions do not bring about the increased revenue and profits that have been envisioned. This is so because the merged entity fails adequately to leverage the strengths of the combining organisations. In the case of law firms, the most important strengths are the knowledge and relationship assets of professionals.

CRM systems have already proven themselves in the marketplace as the most effective tools for managing a firm’s Relationship Intelligence and helping lawyers leverage who and what they know for competitive advantage. In a post-merger environment, the need for a centralised CRM system emerges as critical to enabling the firm to capitalise on the strengths of the combined entity while enabling consistent high levels of client care. Any firm considering a business combination of this sort should think twice if they do not have the CRM infrastructure already in place to ensure revenue growth and consistent client service. Otherwise the success of the merger can be placed in peril.

Barry Solomon is a lawyer and executive vice president of Interface Software, the CRM solution for law firms. He can be reached at the company’s Oak Brook, IL headquarters at 630.371.4560 or via email: