Why buy a legal practice or law firm?
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There are a number of reasons people choose to buy a legal practice and the motivating factors largely dependent on the buyer. Lawyers who want to operate their own firm often considering buying a legal practice to be a faster route to success than setting up a new firm. The fact that setting up a new business and building a reputation can take years means that buying a legal practice is often a viable alternative. The infrastructure of the business and the staff are already in place and the business can continue to operate with limited downtime, particularly when compared to the difficulties in launching a new, previously unknown firm.It’s relatively common for mergers and takeovers to take place within the legal industry and larger firms will often buy a legal practice or a number of practices in order to expand their own business. Whilst the financial figures will, of course, be of paramount importance when choosing to buy a legal practice, existing firms may have more options available to them compared to independent buyers. For example, an existing well- known firm will not have to work as hard to establish the company and create a reputation if they are known regionally or nationally but this may take significantly more time for an unknown lawyer.
With the changing methods of management and the introduction of ‘alternative business structures’ the market of potential buyers has drastically increased. In addition to qualified lawyers buying legal practices, people without a legal background will be able to buy a legal practice should they wish to.It is clear that any entity (person or business) that opts to buy a legal practice hopes to maximise the result of their investment. There are a number of keys factors that are relevant to each sale (e.g. company turnover) but some crucial factors develop their significance in relation to the specific buyer (or seller). It is evident, therefore, that due consideration must be given to each issue in order to buy a legal practice and operate within the industry successfully.
What you need to consider
One advantage of buying a legal practice compared to starting a firm is that you have access to accounts and figures from previous years. Prior to committing to the purchase of the legal practice the figures can be examined, used to determine projected figures for future years and, crucially, allow you to develop ideas as to how you might increase turnover if you go ahead with the purchase and ultimately buy the legal practice. The availability and accuracy of these figures is a good starting point once you have established the area in which you wish to buy a legal practice. It is worthwhile to consider obtaining expert advice regarding the company accounts in order to ensure you fully understand the financial status of the business and exactly what you are purchasing when you buy the legal practice.
Whilst qualified lawyers generally opt to buy legal practices that operate within the same area, existing businesses that wish to establish another service may choose to buy a legal practice that provides a service they do not currently offer. For example, an independent qualified solicitor who has worked in estate planning for a number of years is likely to look for a firm within this legal field as it highlights their expertise and they have the experience to operate effectively. Conversely a mid-size regional firm who are known for criminal defence work may buy smaller niche firm who specialise in fraud cases in order to expand the services they can offer to clients. Of course, the nature of the firm will be the first thing that a person considers when they decide to buy a law practice and, in many cases, be an obvious and simple decision to make. There will, however, be many more complex and difficult decisions to be made during the course of buying a legal practice.
In addition to analysing the accounts from an objective viewpoint, the buyer must evaluate the company’s figures in relation to the potential purchase and attempt to gauge how a sale would affect the firm. This is difficult to do and it’s generally recommended that people considering buying a legal practice (or any type of business) seek professional assistance. Business Brokers UK is experienced in offering advice and information for those attempting to buy a legal practice and can provide valuable information regarding the purchase process.
Once the nature of the business, geographical location(s) and company accounts have been examined and found to be of interest to the buyer, further consideration must be given to the transferability of the firm and its work. Whilst the business may be thriving and appear to be the ideal legal practice to buy, in reality this may not be the case. Unfortunately for people attempting to buy a legal practice, they do not always lend themselves to being sold, particularly compared to other businesses. For example, if a business sells products then providing you can source the same products you can purchase the business and still offer the same product at potentially the same price and the customer still receives the same item. However, a law firm offers a service and while a service can generally be replicated during a buy out or takeover, this is not the case with law firms. Many clients choose to engage a specific lawyer based on reputation or an existing relationship. If you then buy the business you cannot necessarily replicate the reputation or the trust that has been built up. Whilst the current client base may be providing enough business, once you buy the legal practice this may not be the case. For example, if you choose to buy a firm from one qualified lawyer who is well-known and highly regarded in family law matters, the client trust and loyalty cannot be transferred to you in the same way that tangible assets can. The transferability of the business and the work is of paramount importance when considering whether or not to buy a legal practice.
Getting professional advice
Due to the plethora of factors to consider when deciding to buy a legal practice it is advisable to seek professional advice for some, if not all, of the processes involved. We can provide useful advice regarding how to buy a legal practice and offers assistance via a range of services. For example, you may want to consult with a broker in order to gain an insight into what firms are available for sale, how often legal practices become available etc. Further advice may then be sought in order to obtain an independent valuation of the business or you may want to engage specialists to undertake an assessment of the company’s current financial situation and ensure there are no outstanding debts or potential claims against the firm prior to confirming your interest in the business. Choosing to buy a legal practice can be a daunting experience and the process can be lengthy and time-consuming but there is help available to simplify the purchase and ensure you buy the legal practice most suited to your needs and expertise.Contact us today for a free no obligation discussion into how we might be able to help you. Specialist legal brokers for the legal profession.
