Merging law firms can bring about exciting opportunities for growth and innovation; however, they also present unique challenges—particularly when it comes to handling partner exits. As firms transition into a cohesive entity, the management team must navigate the complexities of retaining top talent while letting go of partners whose performance, practice or outlook may not align with the new direction of the merged firm. Here, we explore effective strategies for managing partner exits during a merger.

Initial preparation: At the outset of a merger, it is crucial for a firm to thoroughly understand the powers, rights, and obligations outlined in its partnership or LLP agreement regarding partner exits. Does the agreement specify grounds for termination, such as underperformance, or does it allow for ‘without cause’ retirements? Establishing performance-based grounds can be challenging, particularly if the firm lacks a rigorous appraisal and performance management process.

Additionally, the agreement should include adequate protections for the firm, such as notice periods, garden leave provisions, restrictive covenants, and non-disparagement clauses, to safeguard against potential risks from departing partners. If these necessary provisions are absent or inadequate, the firm may need to amend its partnership or LLP deed to facilitate such exits. However, addressing these “hygiene” issues can be difficult during a merger. Thus, firms are advised to tackle these concerns proactively, well before a merger is on the horizon.