Selling your Law Firm - FAQ

Once you’ve made the decision to sell your law firm, start the process as soon as possible. Many buyers will want the current owners to remain in the business in some capacity, even if part-time, for at least a year – leaving it too close to your retirement date will make a disposal more difficult, particularly for a smaller practice.

Start the process from a position of strength when you have just confirmed your PII cover for the whole of the next year. If you leave it to when a PII renewal date is approaching, you may end up committing to another full year of cost for a fraction of the year’s cover, as the cost may not be able to be refunded or transferred to a successor practice policy. Even worse, it may mean that cover is not obtained and we are then into a distress sale situation, which nobody wants.

When it comes to priorities, focus on your clients and don’t try to do too much yourself. You can get too emotionally attached to details that may not impact the bigger picture.

It’s best not to approach potential acquirers before your advisers are in place as they will know the right people to approach. You will also want to avoid having word spread around the market as somebody who wants to sell before you’re ready. To keep a good relationship with a firm you may be joining, leave the difficult conversations to your advisers.

Engage with an adviser at the earliest opportunity. If you speak too much too early with potential acquirers and then bring your advisers in later on, they may be bound by your conversations, when they could have engineered a far better result for you. Agree objectives and parameters. Assuming you appoint the right advisers, they will know the market values, multiples, adjustments, usual treatments etc – they also know what information should be shared and when to get the best results for you.

Legal specialist advisers know how to approach legal sector transactions and have experience in the sale of law firms. Non-specialist advisers will be less likely to know the right acquirers and may miss key matters that are specific to law firms and how they are run.

We’ve seen many occasions when a lot of time and cost has been invested in speaking with only one or two potential acquirers only for them to change strategic direction or pull out for some other reason. This then means that the process has to be started again, repeating steps that have already taken place, adding cost and delaying the entire process. On the other hand, non-specialist corporate finance advisers may use the approach of circulating blind flyers around their networks to as many people as possible, then obtain NDAs and then provide Information Memorandums (more on that below). This will alert the market to your firm being for sale, which will adversely impact staff, clients and value. It may also mean that firms that do not have a cultural and operational match may respond, increasing time wasters and increasing the potential for merging with incompatible firms.

Instead, the right number of specific potential acquirers should be determined by your legal sector-specific advisers, who can approach them on a no-names basis, then exchange NDAs and provide the right information.

Savvy buyers know what they are looking for and value the base information and discussions more highly than elaborate documents that are designed to paint the selling firm in its best light. Non-specialist corporate finance advisers may want to you pay them for an Information Memorandum to circulate at an early stage, as that is what they do in transactions in other sectors – in our experience this is wasted time and cost in the legal sector.