Friday, October 21, 2011

The Worst Legal Publishing Merger - Can the Virtuous Circle be Un-broken?

Years ago I was introduced to the concept of the Virtuous Circle at a meeting with Brian Hall, the first post-Merger CEO of ThomsonWest. In Hall's presentation, "The Virtuous Circle" was  all about  what I would call the "karma of client relations."  Treating  your customers fairly  will create loyal customers who will spend ever more money and help you to develop better products which deliver ever  more value to your customers who will then pay more money.....

The Virtuous Circle in Legal Publishing
According to the Legal Information Buyers Guide and Reference Manual,  between 1995 (the year before the Thomson acquisition)  and 2008 West's print prices increased 232%. During that same period Lexis/Matthew Bender print prices increased a mere 70%.

The unprecedented and inexplicable print price increases were the overwhelming factor cited in defining the Thomson-West merger as the "worst legal publishing merger." It is hard to understand how anyone at West could "square" the post-merger print  pricing strategy with Hall's vision of the Virtuous Circle.
  Qualities of the bad legal publishing mergers:
  • Dramatic price increases (West, Aspen, Dialog)
  • Failure to integrate the products (CCH – both aspen & Loislaw)
  • Eliminating pay as you go option / change in pricing structure (GSI, Losilaw)
  • Loss of customer focus 
  • Loss of client loyalty 
  • Decline in quality 
  • Loss of competition (West)
  • Destruction of a great product (GSI) 
  • Decline in usability (GSI)  
  • Strict focus on profits
Is the Thomson West Merger Also a Metaphor for Something Else?

There was an under current of "longing for things past" in the comments submitted by readers. Criticisms of the Thomson-West deal decried the changing culture of the legal publishing industry and emergence of new market forces. Loss of old and familiar brands, endless growth and globalization, decreased focus on personal relationships, increased emphasis on profits.... Sound familiar? These comments describe not only changes in the legal publishing industry but also echo the changes we have experienced in the law firms where many of us work.

 West Publishing as a Fading Landmark. West’s history also represents a significant chapter in the evolution of American law. West was a uniquely American company which developed a taxonomy and classification system for weaving together the complex tapestry that is American caselaw. The West Brothers were "American originals." As  the Wright Brothers were unschooled in engineering, but conquered flight. the West Brothers were not lawyers but enterprising stationery salesmen who virtually invented a uniquely American process of legal research.

The history of West Publishing which used the now somewhat ironic slogan – “Forever Associated with the Practice of Law” is all but obliterated from the Thomson Reuters’ company timeline. There are only 3 major events noted : 1872, the founding of West Publishing; 1996, the acquisition by Thomson and 2010 the release of WestlawNext. There is no narrative reflecting the deep impact West had on the development of American legal research analysis and practice.

You will on the other hand learn riveting  trivia: In 1851 Paul Julius Reuter arrived in London from Aachen Germany where he developed a news business “leveraging” the a fleet of 200 carrier pigeons as part of it’s information dissemination platform. He soon began integrating the emerging telegraph technology and coined the motto “follow the cable” which has presumably now been updated to "follow the money."

It is noted that the use of emerging technology “helped Reuter establish an enviable reputation for speed accuracy, integrity and impartiality.”

Gee sounds like it could have described West Publishing to me, but there isn’t a hint of what West represented to the legal profession in America to be found in the Thomson Reuters timeline. A more enthusiastic history of the company was published by a small Minnesota newspaper… Westlaw Rises to Legal Publishing Fame by Selling Free Information

Thomson West Marked The End of Competition. Really?
The Thomson West deal, has not prevented new entrants to the market. Innovative new products keep emerging: Law 360, Intelligize, Mergermarket,  and  Fastcase demonstrate that there is still a healthy environment for competition. Who would have expected a major new player Bloomberg Law to break into a head to head competition with Lexis and Westlaw in this mature online research market? See also, Greg Lambert's 3 Geeks and a Law blog Could Thomson Reuters be in Trouble? and consider if we may see a divesiture of West by ThomsonReuters and the possible market impact.

Would the Old West Have Thrived in the 21st Century?
I suspect not. In the early 1990's a very senior West executive commented to me that he didn't think that lawyers would ever want to have  personal computers at home. This struck me as strangely disconnected from emerging trends. Young lawyers had carried laptops to class, law firms were experimenting with flexible work schedules, and then there was the ever present pressure of the billable hour. I give the West executives credit - they understood that the economics of their industry was changing, they would need capital infusion to improve their infrastructure to remain competitive. Had West not been purchased by Thomson we might have seen the company targeted by a Godon Gekko and sold off in parts.  Innovation is expensive. A walk around the exhibit hall this summer at AALL revealed how few legal publishers were up to the task of developing eBooks, only the "big players" Lexis and Westlaw had taken on the eBook challenge.

As  a "rising tide raises all boats,"  we were the indirect beneficiaries of the advances in legal research technology which drive the marketplace of innovation. Advanced  technologies hold the promise of continuing to offer efficiencies for the practice and business of law. Information professionals will continue to play an important role in introducing and managing these innovations. Mergers are painful affairs, products have a life cycle and sometimes they die. The legal information marketplace will continue to be shaped by   the polar forces of  "information that wants to be free" and technological innovation that comes at a cost.

Related Posts:  Votes Are In Learn Why Lexis Acquisition of  Shepard's Voted Best Legal Publishing Merger. ; Vote Now for the Best and Worst Legal Publishing Merger

Friday, October 14, 2011

The Votes Are In, Learn Why: Lexis Acquistion of Shepard's Voted Best Legal Publishing Merger

Qualities of the best legal publishing mergers: Making 1 + 1 = 3

Back in September I posted a survey asking readers to vote for the best and worst  mergers in the legal publishing industry. This was not a scientific survey nor did I have a way to guarantee against participation by employees of vendors themselves. Nonetheless,  a series of interesting  themes emerged in the commentaries which were contributed by many voters. Since the recent announcement of the Bloomberg-BNA merger, the law librarian community has been awash with speculation on how this merger will play out and whether in 5 years they will  cast votes for  Bloomberg-BNA  in the "best" or "worst" column.

Top Characteristics of Good Mergers
  • Developed a meaningful integration of products from both companies which enhanced the quality of the data, usability and efficiencies delivered to the researchers.
  • Resulted in better products than could have been developed  by either company without the merger.
  • Enhanced the technology of the acquired product. 
  •  Improved customer service.
  •  Provided access to content which researchers would not otherwise have access to because of pricing or complexity of native platform. (Dialog) 
  •  Kept a valuable but small niche product alive. (Loislaw) 
  •  Resulting electronic product is so clearly superior to the print version that there  is virtually no resistance to eliminating redundant print product. (Blogger"s note : Contrast the ease of converting lawyers from print Shepard's to Shepard's Online  with conversion of CCH print users  to CCH online  This conversion  still incomplete almost 20 years after the release of first  CCH online product).
  •  Eliminated a publisher that was difficult to deal with, (Bad customer service, bad billing and updating practices, steep price increases).
  • Infusion of capital resulted in greater innovation.
  • Greater innovation increased competition which brought better products to the legal marketplace.
 Not the Best, Only the “Least Worst”

There was a repeating theme in the comments section  which suggested that a significant subset of the law librarian community regards all mergers as “bad.” Many respondents voted for the “best” merger with the begrudging comment that their vote was only for “the least worst,” the least disruptive, most harmless or had the least impact.

The Winner is: Lexis Acquisition of Shepard's

Requires a Fact Check from the Wayback Machine An overwhelming number of voters indicated that they selected Shepard's because this resulted in the conversion of Shepard's to an electronic format. Well actually… McGraw Hill had digitized the citators and produced Shepard's on CD-ROM . The CD-ROMs  were then updated by a accessing a dial-up bulletin board called "Shepnet. " This was before the World Wide Web! Shepard's Releases The First Shepard's Citation on CD-ROM.

Maybe Also The Weirdest Merger Technically McGraw Hill traded Shepard's to the Times Mirror Company in exchange for educational publications. Separately, Times Mirror, and Reed Elsevier, owner of the Lexis-Nexis then formed a 50-50 joint venture to own and operate Shepard's.

Lexis Acquisition of Shepard's was Good for Westlaw One of the more surprising observations which was echoed in several responses. The Lexis integration of Shepard's content into the caselaw research process triggered a cycle of intense competition and product improvement. It drove West to create the Keycite product which some respondents considered to be superior to Shepard's on Lexis.

Comments on Why Shepard's Won
  • Shepard's citators in print were so cumbersome to use, so difficult to read and interpret in print that  they were completely transformed by digitization and their utility enhanced when integrated with Lexis caselaw.
  •  Easy to convert users from print to electronic
  •  Made a core legal research function quicker more efficient
  •  Competition forced West create a better product
  •  Triggered a cycle of competition and improvement for both market leaders, Lexis and Westlaw which caused the customers to win in the long run.
  • Improved the usability of content on Lexis by integrating citations. 
  In Second Place: A Megamerger - The Thomson Acquisition of West

Given the vast differences of scope of the Lexis acquisition of a single function product like Shepard's and the Thomson-West merger, which  was a game changing colossus, the two transactions are not really suitable comparisons.

Benefits of Thomson West Merger:
  • Cash infusion resulted in greater innovation
  • Merger created a clear market leader
  • Successfully integrated a diverse array of legal, business, news, primary and secondary sources into a single Westlaw platform which enhanced lawyer productivity
  • Created a global platform for legal research
  • Thomson continued acquiring content from smaller publishers which may have preserved products which would not otherwise have survived in the long run.
The most controvertial aspects of the Thomson West merger arose from the  print publishing side of the merger.  Stay tuned for:  Part Two: The Worst of Legal Publishing Mergers, coming next week.
Join the conversation: Friday, October 14, 2011 3:00 PM - 4:30 PM EDT

 Episode 23: Merger Mania: A Discussion of Law Publisher Consolidation – Past and Present



Thursday, October 6, 2011

Is There A Law Firm Merger in Your Future? The Odds Are Increasing....Are You Ready?

According to an Altman and Weil survey released this week, Law Firm  Mergers Surge in 2011, law firm  mergers for the first 9 months of 2011 exceeded the number of mergers for the same period in 2010 by 78%.
There is no shortage of additional sources to support this trend. Keynote Speakers at the two recent PLL Summits in 2010 and 2011, Jim Jones of  Hildebrandt Institute and Peter Zeughauser of Zeughauser Group, outlined the key economic and strategic forces which will continue to drive law firm mergers. Several year's ago an executive from American Lawyer Media told me that they planned to expand ALM coverage of mid-sized law firm financials in order to help law firms identify candidate firms for merger or acquisition. A recent American Lawyer story, Empire Builders quoted a senior partner from Allen & Overy as stating that "There is a very distinct correlation between multi-jurisdictional work and profitability." While this statement was made in the global context, there are parallel multi-jurisdictional and economic issues driving clients to firms with a multi-jurisdictional footprint within the US as well as abroad. Perhaps more ominously the article suggests that firms who have been safely ensconced in the financial centers of New York and London will face serious challenges if  according to the Chief Executive Ted Burke of Freshfields,"this turned out to be the Chinese century or the BRIC century."

It could happen to you. Are you Ready?
During the first months following the merger, firm management will be focused on integrating accounting and IT systems.  Other departments including the library and research services are generally not fast-tracked for integration. However, delaying the selection of a departmental leader and strategy for integrating library resources and services overlooks substantial cost and risks to the firm.

A Note about Co-Leadership
It is not uncommon for firm leadership to defer departmental leadership decisions and to simply make all departmental leaders "Co-Director's" for an indefinite period. This is generally a lose-lose proposition because effectively, no one is in charge, the staff is confused, important decisions are subject to endless debate, critical time is lost making progress on issues critical to lawyer support, cost control and risk management. In the worst of all possible outcomes, co-leaders are "rewarded" for their endurance by being demoted and replaced with an outsider who is given the full authority for decision making that was not given to the legacy leaders.

Have the Courage to Re Apply For Your Job
Frankly the department and the firm would be better off allowing leaders to compete for the leadership positions by having each legacy Director submit a strategic plan for the department and let the best strategy win.

Key Areas of Cost and Risk
  • Online Research Contracts  Contracts with vendors such as Lexis and Westlaw may contain escalation clauses which could substantially increase firm costs. Do not allow the vendor to simply combine the cost of the two contracts and send you a  consolidated bill. Renegotiate the contact and seek to leverage economies of scale.  You should be able to get a better deal post merger if you conduct and effective analysis of historic usage in both firms. 
  • Software Applications Identify administrative software applications such as Integrated Library Systems, Client validation software and web monitoring software. Determine if products are fully deployed and if these products and licenses are scalable to fit the needs of the combined organization.
  • Cost Recovery Each firm may have a different approach to cost recovery and a single approach needs to be adopted and rates recalibrated to account for the additional costs or discounts reflected in a post merger contract. 
  • Electronic Resources and Licenses Inventory and compare all electronic licenses. This exercise can be a real "eye opener" which illustrates how effective or ineffective your negotiation skills are.  Creating a combined inventory listing the cost and the scope ( firm wide or limited access) could illustrate vastly different terms for a single product. Since some vendors restrict sharing of content outside of a licensed office, you need to move quickly to renegotiate licenses which cover post merger workflow needs. See previous post Centralized Licensing as a Risk Management Strategy
  • Research and Cross Training Law firm mergers are often driven by a desire to broaden the range of practice areas offered by the firm. Inventory the skill sets and expertise of research staff and provide opportunities for them to cross train their new colleagues in specialized resources and research techniques.
  • Centralization of Research and Administrative Services One of the most significant ways to demonstrate strategic leadership is to reduce redundant workflow by centralizing work in a single location.  See  previous post: Centralization as a Value Strategy
  • One City - Multiple Offices It is not uncommon for merger's to result multiple offices in one city that will need to be integrated and consolidated.The cost of print collections may  be reduced when offices are combined. If both firms have a fixed fee:Library Maintenance Agreement - the benefits of weeding may be delayed until the contacts end or are renegotiated.
Stay Focused on the Highest and Best Outcome
Recognize that "post merger" you have a new employer and a chance to start again. The success of the merger and firm should be your primary focus.  Maintaining a positive attitude toward the merger and demonstrating collegial respect for your new colleagues is critical to maintaining the morale of your department and bolstering your profile as a true leader in the new firm.