When we discuss attorney “transitions” we generally mean of two types of transactions: growth or exit. Attorneys looking to grow may choose to (a) merge with or into another law firm, or (b) purchase another existing law practice. Attorneys looking to exit the practice of law – often to retire – may choose to either (a) sell their practice to an existing law firm, or (b) wind down by joining another law firm in an of-counsel role. In this post, we discuss four reasons to consider growth via merger or purchase.
You may want to merge into, or purchase, another law firm for some or all of the following reasons:
- Gain market share by strategically acquiring another law firm’s clients. Client acquisition is one of the largest expense/cost items for most law firms. Generally, the ability to acquire clients via acquisition of another law practice will significantly reduce the new firm’s overall “cost per client”.
- Combine skill sets to increase client base and fee revenue. Merging with, or purchasing, another law practice is an excellent way to expand your law firm’s practice coverage. You may be adding a new area of law or adding deeper expertise to an already-existing practice area.
- Combine operations to reduce costs and increase profit margins. Combining law firms can be an excellent way to add clients – both volume and revenue – into a funnel that already exists. By leveraging operations that already exist, a law firm should be able to significantly increase profit margins.
- Relative ease of purchasing a firm. Purchasing an existing practice often does not require a significant cash payment upfront. This is especially the case when purchasing a contingency fee practice, where the lifecycle of a typical case is set up nicely for a purchaser to pay a seller at a later point in time (when the cases resolve). Further, most states’ ethics rules allow lawyers to share fees, which allows a purchaser to defer payment until such time as revenues are collected.
If you are an attorney that is interested in transitioning by either growing your firm, or by exiting your practice, then please reach out to us so we can discuss your options, and ways we may be able to help you achieve your transitioning goals.
For assistance with any legal needs related to your business or estate planning, contact Fournier Legal Services at firstname.lastname@example.org or 860.670.3535.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.