Despite the overwhelming business uncertainty created by recent political events, UK law firms reported increasing UK income in 2016 (PwC, 2016). In the new reality of evolving customer demands, rapid technological change, and disruptive business models, law firms are looking to strengthen their positions in the market, broaden expertise, improve client offerings, and increase geographical presence. In response we have seen a rather strong year of merger and acquisitions activity within the legal sector.

In 2016, UK legal services providers have been involved in 37 M&A deals, about 40% of which are currently pending completion.

Source: Thomson Reuters 2017

Among the most notable developments has been the merger of CMS, Nabarro and Olswang, which once finalised will create UK’s sixth-biggest firm, along with Eversheds’ announcement to be discussing a combination with a US firm Sutherland, potentially creating 61 offices in 29 countries.

Despite the worrying statistics that between 70% and 90% of M&A deals fail (HBR, 2011), law firms are generally keen on combining strengths and acquiring capabilities. In pursuit of greater market share, stronger pipeline of business, and wider geographical footprint, many law firms choose to merge with rivals or acquire peers rather than grow organically. Rapid expansion and quick access to new markets and clients can present a range of valuable opportunities.

Real estate can play an instrumental part in maximising the value from M&A activity. JLL research reveals that 76% of companies involved in a merger or acquisition consider real estate an important or critical factor of success (Successful M&A: capturing value through real estate). A merger or an acquisition can create a perfect setting for reviewing the firm’s real estate strategy, rationalising property related expenses, and improving the operational environment. There are four key real estate aspects that law firms should consider during the M&A process.

1. Gathering all necessary real estate data and insight in advance of the merger or acquisition process can help mitigate operational, financial, and business continuity risks associated with real estate.
2. M&A can create an opportunity for portfolio restructuring, including review of lease terms and locations as well as consolidation or optimisation of space, which can lead to better operational efficiency and cost reduction.
3. A new opportunity to relocate certain functions may emerge, which can help optimise real estate footprint and maximise performance objectives in a newly formed entity.
4. Finally, a successful merger or acquisition is dependent upon a thoroughly planned change management process. Promoting integration and improving or even reinventing the workplace and introducing new ways of working can improve collaboration and talent retention.

Real estate can support successful business integration and cultural compatibility. Aligning the programme for real estate with wider business strategy, HR and IT objectives can help achieve full operational capability on Day 1. Real estate can also be used as a powerful mechanism for driving the transformational process, strengthening the brand, attracting talent, and impressing clients.