Growing law firms
Despite today’s economy, some law firms are growing … by merger and acquisition.
In fact, I had lunch with such a law firm just this last week. They are an 100 lawyers firm that is seeking to grow. They are interested in acquiring my client, a substantial boutique that would add a significant presence for them both in the relevant practice area as well as the geographic area.
We couldn’t seem to connect, however. I made it very clear that my client was talking about selling his firm. Their offer suggested that they were interested in "merging." The reason was simple: No capital outlay was needed for a merger. The "offer" was structured in a way that would pay my client several hundred thousand dollars more than he is currently earning. And 100% of the payment to my client would be tax deductible as an ordinary expense, not a capital expenditure. They structured the offer this way also in order to be sure that the "book of business" follows my client for several years. This, was not what we wanted … we are not looking to become partners in the acquiring firm.
During our conversation, it became clear why we were communicating at different levels…
…I believe our "firm" has goodwill that is transferable. The "buyer" believes that the "book" follows the lawyer. By the time we finished lunch, we understood the perspective of the other. There are ways to assure the buyer gets the essence of the bargain. For example, we are willing to guarantee the revenue stream as long as the buyer is willing to offer a fixed sum, with a substantial down payment and a short payout with collateral to support the payment schedule. And compensation for the added effort of my client during the extended period he remains.
Bottom line, we will meet again and approach the conversation from the same side of the table.
Suggestions for successful acquisitions:
• Eschew ‘ego-driven’ acquisitions; ensure they are strategy-led.
• Successful acquisitions require senior leadership involvement.
• Integration of both management teams and members of impacted practice areas is essential.
• 1+1=7 or more – you must stretch the business and have clear success targets; this requires a delivery road map with crystal-clear accountabilities.
• Pace is everything in delivering the benefits – don’t delay; complete the integration quickly, perhaps in 100-days;
• People issues are critical to ultimate success – telling yours teams that the deal is in the best interests of both firms is essential, and showing how is important.Tags: Cash & Finances, Management
Categorized in: Management