The Wall Street Journal recently highlighted some of the pitfalls law firms may face during a merger. This has become particularly important as of late, as 2013 saw legal mergers reach a six-year peak in the United States, according to data from the legal consulting firm Altman Weil.
But as the article suggests, an increase in these partnerships also means a potential increase in financial insecurities, since the debts businesses create beforehand are still an important issue when firms decide to join together.
Merged firms can also end up fracturing later on, and in some cases, a merger has led to performance dips at some companies after the fact. The Journal's Jennifer Smith noted that the combined performance of both entities in a merger will determine the kind of future they have together, for better or worse.
"Teaming up with a weaker firm can drag down both sides if underlying problems, such as runaway expenses or unproductive partners, aren't addressed quickly," Smith writes. "On the other hand, a merger between two firms with equivalent financial strengths can devolve into power struggles."
Risk could become more prevalent as mergers become more common. The Washington Post also cited information from Altman Weil, which said that 22 firms have already taken part in mergers during the first quarter of this year alone.
Mergers could continue to shape the legal landscape, the source reports, because they might affect the way law firms measure their productivity and combined approach to practice under a new name. For example, it might bring new types of employees into the fold that aren't used to the firm's billing procedures.
