With a huge spike in law firm “mergers” (read: acquisitions), law firms need to stop the madness and start increasing PPP by using existing lawyers to generate new revenue. I bring this to light as a more positive type of madness gets underway: college basketball’s “March Madness” — the road to the Final Four. Reaching the Final Four is a badge of honor that virtually ensures long-lasting success for the four schools’ basketball programs, and comes at the expense of the competition — three-hundred forty-one (341) other teams in Division One.
This is also the twelfth anniversary of the “Final Four” among accounting firms. It was in 2002 when the Enron collapse and ensuing investigation finally led to the demise of Arthur Andersen, leaving a Final Four of Ernst & Young, Deloitte, PwC, and KPMG.
These firms, also known as the “Big 4,” are referred to as the “Final Four” due to the widely held belief that antitrust considerations will prevent further consolidation of the accounting industry AND that other firms will never be able to compete with these industry icons for top-end work, due to a market perception that they are not viable as advisors or auditors to the largest corporations.
Is it a coincidence that law firm merger activity increased 65% from 2010 to 2011, and that pundits believe that “merger mania (is) expected to reshape (the) legal landscape“? While the $2.4 billion revenue numbers of the world’s largest law firm (DLA Piper, which displaced longtime #1 Baker & McKenzie by a marginal $20 million) are roughly one-tenth of the $23.4 billion brought in by KPMG, the smallest of the Final Four, globalization and the economy have made it plausible to envision a world where, in less than a decade, we’ll have a Law Firm Final Four, or, perhaps, an Elite Eight of $20+ billion law firms.
If law firm consolidation activity continues to increase at its current rate, every big law firm has to ask itself the $20 billion question, “Is the day we ‘merge’ going to be the day we eat the bear, or the day the bear eats us?” It’s already difficult enough for merger consultants to match up two compatible firms (in terms of culture, brand, personalities, etc.) that have virtually identical assets, debts, and PPP numbers; consolidation will only thin the field of potential “mates.” Nearly every law firm “merger” these days is, in fact, an acquisition — one where the internal winners and losers will be largely determined by the firm with the better balance sheet.
When that time comes, the only way to ensure your firm is in that position of power is to start increasing your PPP numbers now, using your existing lawyers to increase firm revenue. Done correctly, this can be accomplished sooner than you’d imagine — without bringing in laterals, without cutting partner salaries, and without making any more expense cuts (if you even have any left to make).
RainmakerVT has come up with three revolutionary PPP solutions for issues that every law firm we’ve spoken to, across the country, says matters. Skeptical?
Ask yourself these questions:
1) Has my firm come up with an affordable way to prepare associates to be the next generation of revenue generators?
2) Only about 6% of firms' lawyers are rainmakers, so it makes no sense to invest in training designed to produce rainmakers. But, what is a rainmaker but a consistent contributor above a certain economic threshold. The key word is "contributor." Does my firm have a consistent mechanism to enable individual contributions throughout the lawyer ranks?
3) Do our firm client teams deliver dramatic results? Do these teams function with minimal management overhead? Do our client teams transform the team members into enthusiastic, motivated contributors? Are our relationship partners receiving double or triple the internal leads they received prior to the formation of the teams?
If your response to any of these questions is “No,” contact me via e-mail.
In your e-mail, let me know the questions for which you would emphatically like to turn that “No” into a “Yes.” When we’ve had the chance to explain the innovative approaches we’re using to deal with these issues, one-hundred percent (100%) of the law firms have said these ideas are worth exploring further. Since when have you heard of 100% consensus among law firms — on anything?
My three friends and I can’t even get 100% consensus on where to watch the Final Four games.