Selling a law firm: How to go about selling your legal practice?
When deciding whether or not to sell a law firm there are a number of things to consider. Anyone who chooses to sell their law firm wants to make as much money as possible from the sale but various factors will have an impact upon the value of the firm and the market and flexibility of the seller can affect the price and sale of the firm.Professionals who want to sell a firm as they are choosing to retire are often in an enviable position as they can make the decision to sell a law firm a significant time before the sale takes place. This affords them the time to make any changes necessary to increase the likelihood of sale and increase the price. For example, the may choose to take on an associate for a number of months or years prior to actually selling the law firm. This potentially increases the value of the firm as clients are familiar with the new owner and are more likely to continue using the firm. The potential transferability of the firm’s work is increased so the value of the firm increases, potentially leading to a higher price when the law firm is sold.
On occasion, small or mid-size practices are approached by other firms and are encouraged to sell their law firms to them or merge the businesses together. An owner may decide to sell a law firm with regional recognition in one country and move to another area in order to establish another firm. Alternatively, partners can decide to sell a law firm due to a decrease in business, an increase in local competitors or other personal reasons that lead to the sale of the firm.
Although there are various reasons owners and partners may decide to sell a law firm, there a numerous factors to be taken in to account prior to completing the sale. These factors generally fall into two areas; when to sell a law firm and how to sell a law firm.
When to sell a law firm
As mentioned above, the seller who can choose when to sell is in an enviable position. In addition to having the time to enhance the prospects of their firm, they are able to sell the law firm when the market is most buoyant for sellers. For others, the issue of when to sell is less of an option. Some are forced to sell due to external reasons and others are approached and may have a time limit set by a potential buyer.
Whilst it’s not always viable to choose the exact time you wish to sell a law firm, it’s essential that you plan ahead where possible. If you plan to retire at 65 then it’s worthwhile considering your options when it comes to selling a law firm many years in advance rather than waiting until you’re ready to retire.
The more preparation you can undertake in order to sell a law firm the higher the price you can hope to obtain. Similarly, aim to be as flexible as possible in terms of timing. If you are able to ride out dips in the market and wait to sell a law firm you are likely to sell on terms which are more favourable to you.
How to sell a law firm
Once you’ve decided to sell a law firm it’s important that you understand the process and what needs to be done in order to facilitate the sale of a law firm. Whilst selling any business can be complex, preparing to sell a law firm can be even more complicated and time intensive.
In order to begin the process, it’s necessary to obtain a valuation of the law firm. Indeed, the valuation itself may give you an indication of whether you want to sell the firm at all. The methods of law firm valuation are varied and complex and it’s wise to seek professional assistance in order to obtain an accurate valuation. The element of goodwill and professional reputation of the firm sets law firms apart from other businesses in terms of sales and can be difficult to quantify. Considering the impact of the valuation, it is well worth seeking expertise from a specialist company. We are experienced in providing the services required in order to sell a law firm and recognises the need for specialist expertise in this area.
Once you’ve obtained an accurate valuation of the firm you can take the next step in the process of selling a law firm. Whilst some firms prefer to provide marketing materials such as sales brochures etc., some prefer to market the firm in other ways. Regardless of whether you choose to advertise the firm via the internet or using a sales brochure, it’s important to remember that your firm is unique and needs to be presented as attractively as possible to the buyers you are attempting to target whilst giving an accurate portrayal of the business. At this point it is useful to consult a specialist legal broker such as our company, who can provide information regarding the market and potential buyers. As experts in their industry we have intricate knowledge of the market and can help you avoid time wasters and put you in touch with genuine potential buyers.
The nature of the sale will depend on how you choose to sell the law firm and to whom you are selling the firm. For example, it may be a straightforward sale to another qualified lawyer, or you may merge the business with another company or you may sell part of the firm to another company under the ‘alternative business structure’ format. You may take on an associate with a future sale agreement or you may decide to sell a law firm to another company and make your continued employment a term in the sale agreement. There are a myriad of ways to sell a law firm and the final details of the sale will depend on the objective of the buyer and seller. Whatever form your buyer takes, it is worth taking the time to find a professional with experience in these particular types of sales. We can advise you regarding the optimum method to sell a law firm based on your firms specifics and provide you with the relevant information to make an informed decision.
Once we’ve found you a buyer, the negotiation process begins and you can discuss terms with your potential buyer(s). This may include final sale price, payment terms and method, a non-competitor agreement etc. If an agreement is reached than the sale can go ahead and be completed.
It should be noted that in order to sell a law firm there is a lot of specialist work that needs to be carried out. Confidentiality and non-disclosure agreements, non-competition agreements, client notifications, client authorisation for the transfer of files and sale agreements are just a few examples of the paperwork that must be completed prior to sale. Some people assume that this can be carried out by any qualified solicitor but that is not always the case. In fact, many solicitors have lost money in the long term buy assuming they do not need to consult external professionals. The sale of a law firm is complex and should not be underestimated. In order to facilitate the best terms and achieve the maximum sale price, it is advisable to consult with experienced professionals when deciding whether to sell a law firm and throughout the sales process. Contact our legal department for a free no obligation discussion of your situation and how we might be able to help you.
