The Successful Merger of Two Professional Firms

"Preserving Traditions While Maximizing Results"

Identified Need:

The managing partners of two architectural/engineering firms were discussing a potential merger. Previously competitors, the firms believed that significant changes in their industry necessitated an increase in size and scope of services. The firms each had rich traditions (each was founded over 60 years ago) and strong values, which they both wanted to maintain. The managing partners recognized the inherent challenges of trying to focus the merger conversations: maintaining objectivity while trying to reach consensus on critical issues. Therefore, they hired BCG to facilitate the merger discussions.

Recommendations:

We recommended a series of exploratory meetings with senior leaders of the two firms, coordinated by BCG. Six leaders from each firm were selected, using the following guidelines:

· Well-respected
· Open-minded
· Reflective of his or her particular firm's values
· Willing to share their views yet listen to others
· Diverse in opinion and role.

The team identified agenda topics, and set a six-month time period for the exploratory process, at which time a decision would be reached regarding merger. The policy committees of both firms retained the right to decide whether to move forward with the merger.

Actions:

We used a dialogue process in the first meetings in order to focus on team members becoming acquainted with one another as individuals and representatives of their firms.

For BCG, "dialogue" literally means "flow of meaning," a process to engage people in significant, deep conversation from three perspectives: mutual purpose, mutual respect, and mutual understanding.

At the first meeting, members of the exploratory team provided a brief overview of their personal life and professional history. This was followed by the history of each firm, focused upon heritage, traditions, mission, values, vision, and strategy. At the conclusion of these introductions, the team examined similarities and differences.

We scheduled significant conversation time on the overall rationale of the merger, including advantages and disadvantages. With BCG's guidance, the group focused particular attention on the implications and ramifications for staff and clients. In the next few months, the group delved into the following issues:

I. Governance
....- Ownership
....- Valuation/Distribution
II. Organizational structure
....- Board of Directors
....- Leadership/management roles
III. Services
....- Scope
....- Industry focus
IV. Human resources
....- Philosophy
....- Policies and procedures
....- Compensation/benefits
V. Name (for the new firm)
....- Corporate identity
VI. Technology
....- Operating system (i.e. software and hardware)
VII. Marketing
VIII. Undiscussables
....- Deal breakers
IX. Implementation Plan
....- Communication strategy
....- Next Steps

- Defining the current reality
- Creating a desired future vision if the merger was accomplished
- Identifying factors that would increase acceptance of the merger both within the firm and among clients and prospects
- Exploring resistance forces that would impede success.

Results:

At the conclusion of the six months, the team unanimously agreed to move forward with the merger. The level of excitement regarding the merger exceeded any of the team members' initial expectations. The process of dialogue, especially the chance to get to know one another as individuals, was believed to be the single most important aspect of the entire experience.

Shortly after the above process, the two firms merged. The level of acceptance by staff and clients was extremely positive. Prior to the public announcement, the team developed a comprehensive communication plan, including sharing the decision with staff and clients. This attention greatly enhanced staff acceptance of the merger (no critical staff left the firm after the merger). Clients unanimously responded in a positive fashion, and the business results after one year reflected increases in work with existing clients as well as new opportunities.

The new firm continues to experience significant growth and success and is an admired firm by its clients and competitors.

BCG Services:

Any major change in an organization is very risky. Mergers, in particular, involve multiples of risk. BCG can help your organization navigate the critical aspects of a potential merger and greatly enhance the anticipated positive results.