Why do I need a legal practice broker?
If you’re considering buying or selling a law firm it’s likely you’ve considered using a legal practice broker. It can be a common assumption that the use of a legal practice broker is not essential to a transaction, particularly if the buyer and seller are both experienced solicitors. However, many experienced professionals have lost money by opting to conduct a sale without a law firm broker. As experts in their field, legal practice brokers can provide invaluable advice and assistance when you are considering buying or selling a legal practice.It goes without saying that if you’re selling your business you want to sell at the highest price possible and if you’re buying a business you want to buy at the lowest price possible. Although these two figures may not always tally, the use of a legal practice broker can help you avoid common mistakes and ensure you achieve the best possible deal.
What will a legal practice broker do?
A legal practice broker, such as our company, can provide a variety of services depending on your requirements and the nature of the transaction. Whilst a number of clients will employ the services of a legal practice broker right the way through the sale or purchase process, some clients prefer to engage a legal practice broker for specific elements of the transaction. Whilst it can be tempting reduce costs and limit the use of a legal practice broker this can be costly in the long term. It is prudent to pay for the appropriate advice before making a more costly mistake rather than paying for the advice after you’ve made the mistake!
The range of services offered by a legal practice broker varies considerably and will be dependent on the type of sale or purchase you are facilitating and the type of business that is at the heart of the transaction. Legal practice brokers will often compile all the requisite information and present the material to you for your consideration. This aids the sale or purchase process by allowing you to assess the information following firm valuations, appraisals etc. and presents the data in a clear and concise format. If attempting to sell your law firm a legal practice broker may market the business and ensure it is visible to potential buyers. Equally, if you are looking to buy or invest in a firm a legal practice broker may undertake appropriate marketing activity so sellers are aware of your interest. Legal practice brokers often undertake interviews and negotiations with potential buyers or sellers which can drastically reduce the amount of time you need to spend with interested parties or potential buyers prior to them formalising their interest. In addition to this, legal practice brokers can ensure communication is upheld between the buyer, seller and the various legal and business representatives involved in the transaction.
Whilst the services that a legal practice broker can offer are of value in themselves, their experience and range of contacts can also prove to be invaluable when sourcing a buyer or seller for your law firm. A legal practice broker generally has an established network of contacts and in-depth knowledge of the market that cannot be easily replicated. This could make the difference between a sale taking place and missing out on a transaction. It’s likely that an established law firm broker will also have a network of professionals who operate within the field. If there is a task that they are unable to carry out then we will often be able to recommend a reputable professional or company who can be engaged to complete the task.
Conducting a transaction without the use of a legal practice broker can be done and may appear to be cost effective in the short term. However, the relatively small expenditure on a legal practice broker can pay for itself in terms of savings on a potential purchase or increase in sale price of a potential sale. Anyone considering entering into the purchase or sale of a law firm should consider the use of a legal practice broker in order to achieve the most advantageous terms possible.
How do I find the right legal practice broker?
Whilst many recognise the need for a legal practice broker, it can be somewhat difficult to identify and locate an appropriate one, particularly if you’ve never used one before. Prior experience with a legal practice broker obviously gives you in advantage, providing you were happy with their services. If they do not specialise in the area in which the business in question operates then the chances are they will be able to recommend a legal practice broker that does. Alternatively, recommendations from trusted friends and colleagues can be a good place to start when looking for a specialist broker.
If neither of these options is available then a potential buyer or seller must find an alternative method of locating a broker. It may seem logical that any business broker could facilitate a transaction involving a law firm and whilst this may technically be true, it is advisable to engage the services of a legal practice broker as opposed to a business broker. There are aspects of legal practice that set it apart from other businesses, both in terms of formation and running of the business, that require someone experienced in brokering legal practice transactions rather than purely business transactions. For example, the difficulty in valuing a law firm compared to a standard business due to the value of the professional goodwill may not initially be recognised by a business broker. In turn, they may not adequately convey the value of the professional goodwill to a potential buyer which could lessen the chances of a sale or lower an offer. An experienced legal practice broker would not have this issue and would be familiar with law firm valuations and the value of professional goodwill in relation to the sale and purchase of law firms.
Of course, legal practice brokers themselves work across a variety of areas and it is worth consulting with a broker who has experience in the area of the business you are hoping to buy or sell. For example, a broker may have extensive expertise in transactions involving family law practices but may not be familiar with criminal law practice transactions. It is advisable to spend time finding the right legal practice broker for your needs to ensure you achieve the best available deal.
Some people consider it important that a legal practice or business broker has experience in business ownership in order to fully comprehend the issues in owning, running, buying and selling a business. Although some people put a lot of value of the business ownership history of a broker, others consider the experience of the legal practice broker to be of up most importance rather than their ownership interests. Whilst business ownership can be indicative of a good legal practice broker it is by no means a pre-requisite or a guarantee. As you are engaging them as a legal practice broker it is their experience and success in this field that will have most impact on their success at brokering your transaction.
There are a number of factors potential buyers and sellers should contemplate when obtaining the services of a legal practice broker. Experience, cost, reputation and expertise are all elements which should be considered, amongst others. However, it is advisable that potential buyers and sellers do consult a legal practice broker during the course of their purchase or sale should they want to obtain the best price and terms possible and facilitate an effective transaction.
