Integrating merged firms is never easy. But leaders at Norton Rose Fulbright and Arnold & Porter Kaye Scholer may be attempting an especially tricky alchemy.

The allure of Kaye Scholer and Chadbourne & Parke to their respective merger mates is easy to appreciate. They're both venerable, century-old, New York firms of a scale that seems manageable to absorb and with profit per equity partner (PEP) numbers that are accretive to the combined entities.

With Kaye Scholer, Arnold & Porter is combining with a firm less than half its size (96 versus 234 equity partners) and with about 15% higher PEP ($1.4m versus $1.2m). For Norton Rose Fulbright, Chadbourne is about one-tenth its size and has almost twice the PEP.

However, given Norton Rose Fulbright's verein structure, comparison with Fulbright & Jaworksi, the US member of the verein, is perhaps more meaningful. The picture here is essentially unchanged: Chadbourne is roughly 20% the size of Fulbright (63 versus 314 equity partners) and has a 40% higher PEP ($1.1m versus $600,000, based on Fulbright's last pre-combination financial data adjusted for inflation).

However, the combinations face some unusual challenges. One is evidenced by the differences in the business models of the constituent firms. While the smaller firms in both cases operate at the same revenue per lawyer as their merger mates, they do so with considerably higher leverage – Kaye Scholer's leverage is 2.7 versus 2 at Arnold & Porter; Chadbourne's is 4.1 versus 1.5 at Fulbright & Jaworski. This results in the smaller firms having considerably higher revenue per partner than their larger merger mates – $3.9m versus $2.8m for Kaye Scholer/Arnold & Porter, and $3.9m versus $1.9m for Chadbourne & Parke/Fulbright & Jaworski.

These disparities highlight the differences in the merger mates' service offerings – for example, the higher leverage at Kaye Scholer reflects the dominance of the firm's litigation and transactions practices, while the lower leverage at Arnold & Porter reflects the firm's centre of gravity being in regulatory and advisory services.

Merger integration is easiest when firms have large overlap in their service offerings. At a strategic level, such mergers build on a strength and enable the combined entity to leverage the strength to even greater advantage – law is like other markets in that profitability is strongest for players that are dominant in a particular segment. At a human level, the integration is easier because you can cross-staff on matters. Cultural integration too is smoothed – partners tend to be most accepting of partners like them.

When partners say they want more leadership communication, they do not want emails, videos and presentations where the partnership sits mute

Integration at Arnold & Porter Kaye Scholer and Norton Rose will be more of a challenge. Presumably a part of the theory behind the mergers is that the different practices can help each other – for example, a US Food and Drug Administration (FDA) advisory practice can be a natural front-end to life sciences transactions and to government investigation mandates; in the countervailing direction, bringing FDA expertise into transactional and white-collar crime practices can provide a valuable element of differentiation.

Further, bringing together the two areas of expertise creates the potential for the combined firm to identify early, tackle quickly, and thereby own emerging new service areas at the intersection of the firms' separate offerings.

However, these kinds of benefits require intense collaboration between partners, who will naturally be wary of each other. The professional identity of the advisory partners is tied to their thoughtfulness and deep expertise, while that of the transaction partners is tied to their ability to get things done. The power of identity is such that it is not the first instinct of either to be drawn to trust and collaborate effectively with the other.

While combining firms with different practice profiles is a challenge, it is not what marks these combinations as so unusual. Rather, the peculiar aspect of these two mergers is the momentum challenges they face. There are two aspects to this. The first is that the smaller merger mates have been struggling. The Am Law 100 data for both Chadbourne and Kaye Scholer show a clear downward trend in their numbers of partners and of PEP: at Chadbourne, real (i.e. inflation-adjusted) PEP and number of equity partners have been declining at 5.2% and 4.6% respectively since 2010. For Kaye Scholer, the comparable numbers are negative 5.3% (real PPP) and negative 6.6% (equity partners).

This momentum can be hard to arrest. The typical pattern is that the commercially strongest partners leave first, creating economic stress that pressures others to leave in what, left unfettered, can become a self-reinforcing vicious cycle. Hints of this dynamic are evident in the trend-line growth rates at Chadbourne – PEP has been declining faster than the number of partners, meaning the departees are associated with above-average PEP. This is less the case at Kaye Scholer, where it is only in the most recently reported year that PEP contracted markedly more than the number of partners: while the firm's number of partners declined 9%, PEP declined over 26%.

One can imagine that, had the smaller firms not merged, these centrifugal forces would have continued, with partners departing to new homes either in clumps or more separately. Eventually, the original firms would have ceased to operate. Combining with larger entities provides a solidity that doubtlessly helps with stemming the departures; the smaller firms' leaders have a lot of which to be proud.

Clearly, leadership of the larger merger mates had a rationale for combining with the entire smaller firm rather than laterally hiring particular partners and groups of partners. For Arnold & Porter, it may have included adding the Kaye Scholer brand (although, in contrast, Norton Rose will retire the Chadbourne name). For both, it probably involved not wanting to see the smaller firm combine with a competitor.

However, this first aspect of the momentum challenge is not what makes these two mergers so peculiar. After all, most firms would prefer to stay independent and, if all were going well, would not generally be attracted to combine with a considerably larger entity. Rather, it is the second aspect of the momentum challenge that's peculiar: the larger merger mates too are struggling with profitability. While the Am Law 100 on average has seen real PEP grow by more than 10% in the past five years, both Arnold & Porter and Norton Rose Fulbright have seen PEP contract in real terms by more than 20% during the same period. Hence the peculiar alchemy of these mergers: 'PEP-challenged plus PEP-challenged creates PeP turnaround.'

This is a challenging alchemy to pull off in any business, but especially so in people-intensive businesses where emotions hold great sway. Despite how partners like to think of themselves, or perhaps because of how partners like to think of themselves, emotions hold great sway at law firms. The below-market profitability trend at the larger firms is probably making some partners there a little nervous. Add to this the anxiety-inducement on both sides that is a merger, any merger, and you start to appreciate the challenges faced by leadership of the firms.

The combinations can be made to work, but the effort required will need to go beyond the normal. Tactics would include: relocation of senior partners and firm leaders to offices of the other merger mate to show commitment to the joint enterprise; dogged engagement by client team leaders on bringing partners from the newly-joined firms to each other's clients; and seemingly endless in-person communication with firm leadership.

It's vital to remember that when partners say they want more leadership communication, they mean they want leaders to listen to, and engage with, them; they do not want blast emails, videos and presentations where the partnership sits mute. Leaders should not push for cost savings – they'll likely never be realised (the increased complexity will offset any putative cost benefits to increased scale) and their pursuit could scuttle the critical task of creating a whole greater than the sum of the parts through intense interaction and collaboration between partners from the previously separate firms. (Rent savings are an exception as collocating partners quickly helps hugely with integration). In general, immediately post-merger is a time to amp up investment in internal travel, client-teaming, and cross-practice integration.

Just because it's a peculiar alchemy doesn't mean it can't be made to work.

Hugh Simons is a strategist and veteran professional services firm leader. He is a former senior partner, executive committee member and chief financial officer at The Boston Consulting Group and the former chief operating officer at Ropes & Gray. He is currently conducting research for a book on the fundamentals of elite law firm strategy. He can be reached at: [email protected]