This what the principal of a major legal recruitment consultancy said to me last week.  If it is true - and I've no reason to disbelieve him - why?  Is it a desire to control the merger - to be the buyer rather than the seller - or is it because every firm has a tight, well-structured strategy and plan which it is loath to abandon?

It's certainly not driven by most firms' strategy.  Firms have a general belief that "bigger is better, because it enables economy of scale".  But that isn't a strategy.  True, mergers can cut expenses - people, property and PI cover - could be reduced in many cases, but if that all the merger is you will be pushed to make 2+2=5. 

The biggest potential benefit from merger is in fact a synergy of business - clients, sectors & industries.  For this to occur requires an end to the buyer/seller mentality.  It requires a vision for "NewCo" which is built on the best of both, not the momentum of tradition.  GK Chesterton said "tradition is the truest form of democracy: even the dead get a vote".  What a new firm needs is not tradition, but metamorphis, something which is recognised by the external investors circling the arena. 

What attracts the external investors?  The prospect of a major dislocation in which the old model is incapable of changing to meet the new challenges.  They see parallels in the demise of Kodak as an example of where a company - despite dominating the market and seeing the digital tsunami coming were unable to turn away from its high-margin film business to address the low margin digital world.  Kodak dabbled in the new world - with the first digital camera, and a highly rated investment business - but weren't able to turn the ship around.  It's now in Chapter 11.

Your firm is considerably smaller than Kodak, but a legal groupthink combined with conservative practice can produce a similar mind-set.  "We can keep on going as we have until things become clearer.  All we need to do is get more work and do it more profitably." 

To overcome this tendency, firms who would consider merger - which is more firms than not - need to look for firms with cultural synergy, a desire for change and a willingness to do things completely differently.  Financial equivalence is a factor, but not the decisive one.  The big catlyst for change will be NewCo's managment - and leadership.  ABS funders will often call in external management who have an equity stake in the business to drive NewCo, but firms can do this themselves if they have the vision and the drive. 

If you don't have vision and drive, there's no point contemplating merger anyway.  Without vision and drive merger becomes an exercise in joining together wounded soldiers in the hope that they will become an effective army.  

They won't.