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Mergers and acquisitions: Key risk considerations before signing on the dotted line

If you’re becoming the successor practice or assuming additional liabilities as part of a merger or acquisition, taking time to plan properly can help avoid costly regrets. Miller shares top tips and key areas to consider before proceeding

Calum MacLean, risk manager|Miller|

Mergers and acquisitions continue to be a popular growth strategy for law firms seeking economies of scale in a highly competitive market. Since early 2023, there have been 235 mergers in England and Wales, with no sign of decline, according to SRA data.

However, failed mergers — like the collapse of ‘aggregator’ firms such as Axiom Ince — highlight the risks. The SRA has since issued a warning notice urging caution in such deals.

Insurers are also cautious. Even insurers that understand your business well may reassess risk post-merger, especially if financial stability is in question. They may also factor in the uncertainty of the merged entity’s claims history.

Taking time to plan properly can help avoid costly regrets. Below are some top tips and key areas to consider before proceeding.

Engage with your insurance broker early

Be open and transparent about your plans and the reason behind the potential deal.

Share the target firm’s latest proposal form, full claims history and financials for an initial risk assessment. This helps evaluate the impact on your risk profile, anticipate insurer questions and explore alternative options if needed.

Areas of practice

Understand the target firm’s practice areas and assess their compatibility with yours. Consider how the merged work split will look and the potential impact on your insurance coverage.

Due diligence

Even if you know the firm well, thorough due diligence is essential. Understand their intention for merging, review financials and assess file quality. Look for high-value or complex matters that could pose future claims risk. Small firms may lack centralised records, while in larger firms, that absence is a red flag. Conduct pre-transfer audits — especially on any open matters you plan to inherit.

Claims, circumstances and complaints history

Upon succession, you’ll inherit the firm’s claims history, so it’s vital to review past claims, complaints and any patterns. Understand the circumstances, claim values and steps taken to prevent recurrence.

Risk management

Evaluate the firm’s risk and compliance culture — systems and processes, supervision, file audits, client selection procedures, conflicts of interest and training. Successful integration depends on alignment in these areas.

Finances

Assess the financial health of both firms individually and combined. A stable balance sheet is key to insurer confidence.

New structure

Plan how the merged firm will operate. Will all partners join? Are retirements or consultancy roles planned? Cultural alignment and clear expectations are critical to long-term success.

Notifying insurers

Once both sides agree to proceed, notify your insurer. Expect questions around risk profile, premium impact, and renewal terms. A broker-led face-to-face meeting, facilitated by your broker, can help form a solid foundation for future engagement.

We’re here to help

If you’re becoming the successor practice or assuming additional liabilities as part of a merger or acquisition, Miller can help. Our team brings extensive experience, detailed checklists, and insight into what insurers want — helping you present your merger in the best light.

For more information, contact Miller’s risk manager Calum MacLean at calum.maclean@miller-insurance.com

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