Risk Update

Conflicts — Analysis and Commentary on Navigating Merger Conflicts

Posted Dan Bressler

“Last-Minute Merger Cancellation Unusual But Not Unheard Of, Analysts Say” –

  • “Nelson Mullins Riley & Scarborough and Redgrave announced on Nov. 17 their intention to merge, with a Dec. 1 effective date. Redgrave had planned to merge with Nelson Mullins’ wholly owned Encompass subsidiary to create one of the largest information governance and e-discovery law practices. This week, the firms confirmed their deal didn’t actually go forward, citing client ‘conflict-related issues.'”
  • “That the deal, which would have created a governance and e-discovery practice with 130 lawyers, technologists and data managers worth more than $70 million in revenue, fell through due to conflicts is not out of the ordinary, legal-world consultants said, but it is odd that it fell through at such an advanced stage — after the firms announced their merger intention.”
  • “Lisa Smith, a principal at Washington, D.C.-based Fairfax Associates, estimated that maybe one out of 10, or one out of every 15 combination discussions actually advances to the merger stage. The top reason so many don’t go further? Conflicts, she said.”
  • “He wrote that key client lists from each side are one of the first pieces of information to be shared, ‘if not the first.’ ‘This must be done early because a horrible outcome for a potential merger is a deal that gains excitement and momentum and then succumbs to a deal-killing conflict,” wrote Short, who was not available for comment. “Spare both parties from the related emotional let-down and get after this task immediately.'”
  • “The market is already full of consolidation, so there is generally a declining number of viable combination partners, said Michael Short, a principal at legal consultancy LawVision, in a September report.”
  • “Short said of those combinations he analyzed that did not combine, conflict was identified as a common reason, but not based on a specific client. ‘Once we got into the details, we found a serious incompatibility in the type of clients each firm represented in a particular practice area.'”