Exit Strategy for Selling your Law Firm
Selling or merging a business you have spent many years building is a significant undertaking with several financial and legal aspects to consider. For some, this might be an employee or management buyout and for others putting a plan in place for family succession. Whatever the reason, it is important to minimise dramatic changes to the practice structure or operation as much as possible.
Whether you have formed a robust exit strategy or are unsure as to your goal, Law Mergers & Acquisitions will listen, provide guidance, and advise you about the steps you need to take. We will make sure all areas are covered, and risks to you, your firm and employees are minimised, leaving you in the strongest position to move forward, wherever that may take you.
Working with expert advisors can make a real difference to the success of an exit or sale and the value you receive. In every case, it is essential you allow sufficient time to prepare your firm for the transition, and, if you are planning a sale, to maximise its market value.
Regardless of how you choose to exit, preparing for the change is critical. If you are looking towards selling, an optimal price will depend on how well the practice has performed in the period approaching the sale. It cannot be stressed enough the importance of planning ahead as far as you can, because being able to evidence good financial standing, profitability and stable operations will improve the prospect of a sale and the potential value of the business. Forward planning helps minimise the risks associated with a sale and retains a greater degree of control over the sale process.
You will also need to consider the future management of your practice. If your departure results in a change of management, your responsibilities should be transferred progressively in accordance with a full succession plan to guarantee a seamless change that leaves the practice in the best position. No two exit strategy situations are the same, so when we work with you on how this occurs, we will advise on the preparations that best suit your objectives.
The right time to sell
If you have a deadline in mind, you should carefully consider the timing to secure the best deal and promote the smoothest transaction. Generally, it is a good idea to sell your practice when profits are high in order to attract buyers. You may also want to sell the firm when financial markets are expanding and there is more appetite for deals. At the moment, we are seeing an increasing demand for law firm acquisitions and mergers than ever before.
Ideally, you should really aim to prepare your firm for sale two years in advance to give you the best opportunity to get your accounts in order, build a strong team and expand your client base, which are all factors that will help you achieve a higher price.
A successful sale is reliant on expertise, value, and commercial awareness. If you are planning to sell your practice, you will need to get an accurate and fair valuation. Under or overvaluing your law firm will affect a sale, so it is vital to cover all angles – from obvious areas such as fixed assets, to areas that are more difficult to measure, like staff experience, Intellectual Property and potential for future growth.
Leaving your firm is the endgame, but a good exit strategy occurs gradually, is well-planned and involves a period of transition. In most situations, you will maintain your involvement in the practice during your exit and in some sale agreements. This can or more so should form part of the contract. It is important for you to remember that the expertise you have is likely to be of great benefit to the new owners or management, and they will probably be keen to make good use of it.