Partner Voting on Mergers in Law Firms

Mergers can present opportunities for law firms to expand their reach, incorporate new specialties, and grow their client bases. Establishing the process for law firm elections, including thresholds for a merger to proceed and the weighting allocated to each partner's vote, is crucial for transparency and integrity.

The best practice for any law firm considering holding a vote on a proposed merger is to set out the criteria, time scales, thresholds, and counting system well in advance, avoiding any potential conflict or confusion about the outcome of the vote.

In most cases, regulations for law firm partner voting will be detailed within the practice's governance documentation, policies, and the voting rights assigned to equity partners.

The Importance of Established Voting Rules for Law Firm Mergers

Each law firm might concentrate on a defined area of the law, practice within a specific state or region, or have a different ownership structure. When a firm is considering a merger, every partner with voting rights must understand how, where, and when they are expected to cast their vote and the approval threshold for the merger to go ahead.

Some law firms may have open voting processes, where advocates for either outcome will petition and lobby partners to gain support. In others, voting is confidential, and only the outcomes are circulated without identifying how any individual partner voted.

Much may depend on the equity ownership, where partners have invested in the practice. If one equity partner owns a majority of the firm, their vote may be the deciding factor in a potential merger. Still, salaried partners may also receive equity as part of their remuneration package and hold voting rights. 

In every case, partners should have sufficient time to review documentation, plans, and proposals and have plenty of information to analyze whether they feel the merger would benefit the firm, its clients, and their position. Uncertainty, ambiguity, or perceived unfairness can stall the merger process and even mean partners may be unwilling to participate if they do not believe the firm's management has the authority to hold an unbiased vote.

Creating Clear Law Firm Merger Voting Systems

There are several areas law firms may need to consider when planning a vote against a planned merger:

• How are voting powers allocated? Does every equity partner have an equal say, or is voting power based on ownership proportions, time at the practice, or other aspects?
• The threshold for the merger to proceed: What is the minimum amount of partner approval required to indicate that the merger is acceptable to the majority?
• How information is shared: What proposals will partners need to ensure they feel confident in voting, preventing dissenting partners from blocking the merger?

In most cases, the first step is creating documentation that sets out the merger strategy, the vision for the future of the firm post-merger, and how voting will be held, setting strict, clear thresholds before any consultation begins. Partners may, for example, be based in different offices, have busy schedules with ongoing legal cases or court appearances, or be unable to travel to the same location to cast their votes, attend consultation meetings, or participate in discussions about the pros and cons of a merger.

Having an accessible, transparent, and credible voting system supports these discussions and communications where there is no doubt about the integrity of the way votes are recorded, interpreted, and counted.

Holding a Merger Vote Between Law Firm Partners 

While the details of a vote may be complex, law firms must use voting systems that are simple, accessible, and easy to use. Software-based partner voting is often considered the ideal solution, where partners are not expected to have any specialized technical knowledge, device, or training to be able to cast their vote.

Partner approval votes can also be standardized with contextual text to clarify what their vote indicates. For example, digital voting software might propose three options for partners to select between, such as:

• Yes–I support the proposed merger.
• No–I reject the proposed merger.
• Abstain–I do not wish to submit a vote.

Law firms considering a merger may also have several options, possibly voting for a full, partial, or segmented merger or asking partners to submit their opinions on how the firm should be structured and managed following a merger. Introducing established, trustworthy, and user-friendly voting software can help simplify these multi-faceted voting processes while ensuring partners know how their votes are being cast and counted.