A MERGER that appears to be financially viable may end in disaster if there is cultural disunity, experts say.

Law firms have an important role in ensuring that clients intending to merge have compatible cultures, else the financial ramifications could be considerable. But this can also be said when law firms are themselves contemplating a merger.

We are all aware of the importance of cultural unity, said Dibbs Barker Gosling (DBG) mergers and acquisitions partner Philip Stevens. But not only do law firms need to ensure there is culture fit between their merging clients, they also need to be sure the cultures are compatible when they themselves merge with other law firms.

Mergers between accountancy and law firms are particularly difficult to manage, he said, mostly because of corporate governance issues, but also because of the very different cultures.

At least two thirds of the 1,500 Australian companies that embarked on mergers and acquisitions last year will fail to deliver the promised financial benefits because of a mismatch in their respective cultures, according to a statement issued by change management companies Gadria and Designed Interventions. This is because law firms and management experts are failing to tackle effectively the employee issues that arise during integration.

The past year’s record $85 billion of M&A activity saw a preoccupation with the numbers and the transaction at the expense of the people and the uniqueness of each workplace, Gadria and Designed Interventions said. As a result, many corporate tie-ups are doomed from the start, meaning that stakeholders are not getting full value from the merger.

Gadria and Designed Interventions recommend firms and corporations undertake a cultural audit early on in negotiations, ideally at the due diligence stage. They should also identify the elements of an organisation’s workplace culture that work and replicate them.

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A transition management team representative of all staff should be established. External advisers should not have full control of the integration process, while transparent, clear management direction with staff consultation should be provided.

No merger will work without a culture synergy, said DBG’s Stevens. From day one through to the end of the “hard core negotiations”, a unity or disunity will be demonstrated, he said. “If the negotiations are too hard, there is a likely chance the cultures are discordant.”

Dibbs Barker Gosling was formed in January 2001 through the merger of Dibbs Crowther & Osborne and Barker Gosling. Later that year, the firm merged with Brisbane firm Barwicks and, in January 2004, with Perth firm McAuliffe Williams & Partners. The firm’s own experience with mergers has demonstrated the importance of a culture synergy, Stevens said.

Firms that have merged often face the issue of profit sharing. This can cause problems as some want a larger share in the partnership. But these matters need to be resolved quickly, Stevens said, and a firm’s ability to do this comes down to cultural issues. “This boils down to the personalities in the practice,” he said.

During the initial negotiations, a small group will “talk commercial”. Then, a larger group of people will assess how the merging firms deal with clients — “however, a difference doesn’t mean a discord, because most firms treat clients as well as possible”. It is important to assess things such as how each firm brings people into the partnership, and how the firms market themselves, he said.

Dibbs Barker Gosling has, from the outset, had regular partner meetings in which any problems can be raised. These meetings are the “true test” of synergy between partners because they take place once a month. National meetings between all partners in the firm also offer an opportunity to discuss problems and plans for the firm. This is all part of maintaining a unified culture in the firm, Stevens said, suggesting this should also occur with the firm’s merged clients.