The rise of Mergers & Acquisitions: How do corporate transactions affect target firm employees?
While Brexit may be the cause of continual debate and dispute, the uncertainty born from the referendum has served to spark a surge in Merger & Acquisition (M&A) transactions. According to the latest figures from Thomson Reuters, companies looking to “bulk up” in attempt to counter the risks surrounding our exit helped to push the value of UK domestic deals to £50.3 billion in 2017 from £24.6 billion in 2016. During this time, the number of deals between British groups has risen from 1,480 to 1,681 – the highest level 2008.
Against a backdrop of vast technological and economic change, the fast acceleration of M&A activity is likely to continue throughout 2018. Research from Deloitte supports this prediction, with a forecasted increase in the number of deals as well as the size of transactions.
This is already apparent in the legal sector, where half of the top 11-25 firms are expected to undertake M&A activity in the coming year, with many looking to overseas markets for new targets. In fact, nearly half of the law firms mentioned in the 2010 edition of Chambers Student have since either gone bust, undergone a merger or been in merger talks. Whether you’re looking to grow your firm internationally or at home, mergers can offer a cost-effective and far less time-consuming way to propel your firm to national or global player status.
While the list of potential benefits surrounding an attractive M&A deal may be long, significant corporate transactions should not be mistaken as a quick fix solution. The integration of two or more organisations is an undoubtedly complex process, and the opportunities and threats they present will have a definitive impact on a firm’s current and future employees.
Provided a deal and implementation has been managed carefully, mergers and acquisitions can create added value for both law firms and their clients; but how can a corporate transaction impact on the career prospects of solicitors on either side?
Combining forces can offer a number of advantages for law firm employees: new clients, new colleagues, new cases and the opportunity to travel or be transferred to new offices. With a wider pool of resources resulting from the deal, merged firms typically benefit from larger training budgets and greater scope for staff to learn new skills.
This drives the professional development of employees, promoting career progression and presenting the opportunity to work in new practice areas. Talented trainees may find that an acquisitive firm is a perfect fit for their ambitious plans, allowing them to gain valuable experience across a number of areas.
However, when two become one, the fate of certain employees can often fall under threat as firms look to improve efficiency through staff redundancies where a particular function is no longer needed. Naturally, the uncertainty of the merger or acquisition signals risk to target firm employees, so clear communication about how the deal will affect all staff is critical. Staff should be given sufficient time to seek new jobs long before the transaction and the ability to apply for new roles, if any.
The main challenge associated with M&A is the coming together of two company cultures and the impact that this can have on an employee’s motivation, productivity and loyalty. Collaborating with new co-workers and adopting new practices may be plain sailing for some, but the prospect of seamlessly fusing two or more firms together can be make or break for others.
Your success will ultimately depend on the level of communication between the surviving solicitors and their new management: during this difficult time, solicitors should be given support and space to adapt to the change and the opportunity to take advantage of the benefits presented from the transaction.