FAQ’s – Selling Your Business

Business brokers are essentially estate agents for the sale and purchase of businesses. This is probably making it sound a lot more basic than it actually is, but this is the role of the broker. We source sellers and we find buyers. We match buyers to sellers and, if both sides like each other, we help facilitate a deal.

There are a lot of differing types of broker and a lot break down into “Seller-Side Brokers” or “Buyer-Side Brokers”. Seller-side brokers act in the best interests of the seller, their client, and buyer-side brokers do the same for the buyer. In both circumstances the broker will very often charge a percentage success fee – usually based on the overall value of the business for sale or the purchase price.

Although we get paid by buyers if a deal occurs, we do not act for one side or the other in any deal. Instead we work as impartial advisers to both sides, giving confidential advice & assistance where needed. This is a fairly unique service – we recognised the need after hearing so many horror stories about other business brokers getting up to all sorts of things; buyer-side brokers telling sellers their businesses were worthless so they or a connected third party could acquire them for nothing, seller-side brokers giving ridiculous valuations to entice sellers to pay exorbitant up-front fees to market them. We set a fixed price at the outset; once a buyer agrees the fee we do not change it.

Yes, but very rare to see in reality. Most law firm buyers do not want to acquire part of a business – they want the lot. Small business owners rely on huge amounts of trust between them in order to trade. Without trust it is virtually impossible to run a successful business, and a new buyer coming in would have to take an awful lot on face value to agree to take only some of the equity.

We have had a lot of interest in listings where firms have indicated a willingness to take on a partner who then looks to acquire the whole firm in due course. It is very rare to see anyone interested in a 50% share of a firm on an ongoing basis. Owner-managed businesses will always struggle in these circumstances. It is partly why law firms with partner disputes or issues between owners tend to have a low value on the open market, and it is often best to resolve any such issues where possible before selling a firm.

If you have any questions regarding your law firm, future acquisition plans or valuations, please get in touch – full contact info available at https://jonathanfagan.co.uk/contact/

Firstly because buyers sit on the beach in August thinking about expansion plans and then decide to do something about it when they get back from holiday. We see this on an annual basis!

Secondly, because September and October is PII renewal season for a lot of firms, and brokers will be telling their clients things like “the market isn’t great and I am afraid your premium has gone up by 150%.” Happily trading businesses suddenly find themselves in a difficult position of having their profits wiped out by random PII premium increases.

One solution for some seems to be to go out and look to start again with a new SRA regulated entity (see above). Similarly other firms will find out that the relatively minor claim in one department has resulted in a huge increase in premiums and no possibility of continuing to trade in their current form so consider other options.

We have had a few buyers try to register in the past few weeks and it tends to involve a keen interest in looking around at law firms who can sell or do a deal quickly.

Thirdly, new entrants to market often get through their first bits of form filling etc in the summer, speak with PII brokers and realise to their horror that the premium to open a conveyancing practice (for example) will wipe out their profits for the first 5 years of trading! Plan B is very often to look around for an existing practice to take over and use their trading history and PII in order to circumvent the efforts of the insurers to restrict access to the market.

Finally there are occasions when firms look to separate out different parts of their business, particularly in relation to conveyancing, and then seek to acquire another firm in order to achieve this. Not a very common occurrence but we do see an increase in interest on this basis in September every year.

Talk to us first. If you have a clean PII record, a trading history and no major issues then assuming you have the time to go to market (ie you don’t need to close within a matter of days) your business almost certainly has a value, particularly at this time of year when there tends to be a surge in buyers looking for ‘shell law firms’ (a business without any clients, staff or much else). Shell law firms can sell for up to £50k in the right circumstances, although the price varies widely depending on circumstances and market conditions. This leads into the next query:

If you have any questions regarding your law firm, future acquisition plans or valuations, please get in touch – full contact info available at https://jonathanfagan.co.uk/contact/

No, I am afraid not.

Slightly longer answer here: https://jonathanfagan.co.uk/a-business-broker-has-told-me-that-my-sme-law-firm-is-worth-3-times-turnover-is-this-true/

Please get in touch for an impartial valuation based on real life figures and market rates.

This is a very difficult question to answer, but in a nutshell, firms can take as little as two to three weeks to agree a sale, and as long as three or four years, if not longer than that.

There are a whole host of reasons for this, and achieving a sale depends on a huge amount of factors, including luck, circumstances, the economic climate, your geographical location, your profit margins, the number of staff, the types of law, the structure of the business, the property used or owned by the business, your website, plus many random things you would never think of (and neither would anyone else other than the buyer!).

Timing and luck

Selling a firm is very often a question of coincidence – coincidence that a buyer just happens to be looking specifically in an area, and you happen to be looking to sell specifically in that area. Although of course there are lots of things you can do to improve your chances of success, the answer to the question how long does it take, is just that it really depends on the circumstances of your firm.

Realistic prices

One thing that influences sales dramatically of course is the expectation on price a seller may have. Sellers with unrealistic expectations for the business they have for sale tend to find it considerably harder to sell quickly, if at all, and often sellers who have very unrealistic expectations will either never sell or take a very long time to sell, usually up to the point when they decide to drop their expectations down and be more realistic in the price they are expecting.

Law firms remain fresh

It does not really matter to a certain extent how long it takes to sell when it comes to a price – the sale price of a law firm will not depend on how long it has been on the market for in the same way that a house sale does. Firm sales do not become stale, so it does not really matter if you decide to put your firm up for sale but then do not sell for a couple of years. Every buyer coming into the business will be in the same position as looking at it from afresh.

Yes, if possible. Full article here: https://jonathanfagan.co.uk/should-i-convert-my-sole-practitioner-or-partnership-law-firm-to-a-limited-company/

There is no good or bad time to sell a business.

Your own thoughts on the state of the economy, the prospects of your business making or losing money at a set time, and the future prospects of your business are completely irrelevant for the purposes of the sale of a business. This is because the buyer has their own reasons for making a purchase, and these reasons will be very different to your reasons for selling. Sellers often fail to appreciate this when it comes to looking at potential buyers, as they very often put their own set of values, opinions and prejudices first before considering the buyer.

I use the word ‘prejudices’ in a sense that we will have, for example, buyers who will get in touch to say that they intend to speed up the conveyancing process, and to do this they need to purchase a law firm. We will contact a target law firm on our books to ask for permission to release details to the buyer, and the seller will immediately refuse on the basis that they feel offended that the buyer thinks they can speed up the conveyancing process, when the seller knows that in reality this is virtually impossible to do in the current system. What the seller has failed to appreciate is that it is irrelevant for the purposes of achieving a sale at a set price to a buyer, as to what the buyer’s intentions are.

This gets into the whole issue of whether or not there is a good time to make a sale, because if a buyer has decided they need to purchase a business in order to achieve a goal, or to implement a system, then there is not going to be a good or bad time to do this, but simply a time. This time can be in a completely different world to the one being currently occupied by the business they are purchasing, and sometimes sellers find it really hard to get their heads around this.

Take an example of a firm that is not struggling, but not particularly making a lot of money in a difficult market.

The seller wants to get out, because they are fed up of doing the same work for very little money, and are looking for a buyer to take over. In their minds, they think that it is impossible to make any money from the work they are doing at the moment, and cannot imagine why anyone would want to purchase their business.

The buyer however, has completely different plans, because they have work to put through a firm for a completely different source to the current sources of work the seller has. All they need is an existing business to take over, in order to achieve their goals.

To the one party, the seller, the market is awful and chances of making any money are very limited, but to the other party, the buyer, there are huge potential sources of work which they want to tap into, if only they were able to purchase the business the seller is disposing of.

So, one person’s difficult market is another person’s prosperous market, and it is very rare that the two actually meet at the same time.

As I write this FAQ we have been through a sustained period of growth in the property market, and conveyancing law firms have enjoyed boom times, with increased profits, difficulty recruiting new staff because of shortages, hugely increased turnover, and great prospects for anyone in the sector. However, it has not been particularly easy to sell conveyancing law firms, because buyers can see that the current market is at capacity, and buyers are waiting for the market to drop. As and when the market drops, we anticipate there being an increased interest in conveyancing businesses, but while the business is booming we don’t think there is as much interest, and that is borne out by the numbers of buyers we see coming into the business.

Buyers are looking for a business they can add value to. They want to take over a business where it is possible to grow, increase profits, generate more turnover, and expand teams.

If you take the opposite extreme of a small business in a sector that’s not particularly busy, generating a small amount of profit from a relatively low turnover without much marketing and limited staff numbers, but possessing the right structure and offering a buyer huge potential to increase turnover and generate profit, then a lot more buyers are going to be interested in the latter business than they are the former.

In a way, I guess this kind of answers the question in terms of whether or not there is a good time to sell a business, or when is a good time to sell a business, because to a certain extent, as your business goes on its journey from inception through to disposal, it changes in shape and size. There will be different types of buyers interested at different stages of the life of a business, and it is true that there are certain types of business that are  a lot easier to sell than others. However, there is no good time to sell in terms of external factors. For the reasons given above, you just never know when a buyer is going to come along and why a buyer is looking to make a ‘good’ offer.

In terms of other factors affecting a time to sell, which can include your own situation, then things are very different.

For example, it is never a good idea to try to sell just before you plan to retire or close a business down. Buyers will have a very good guess that a 75-year-old looking to dispose of a business is not going to be hanging around for a long period of time if they are unable to sell, and so are likely to be in a much weaker position when it comes to negotiation. If that same 75-year-old had looked around when they were 60 years old, things may have been very different indeed.

We offer exit strategy advice and assistance as paid service, because it is so complex at any point in the life span of a business. Everyone has different plans for the future, and for their businesses and personal life, and they all intertwine, which makes exit strategy planning all the more important.

Summary

The short answer to this lengthy article is that there is never a good time to sell a business. You don’t know the path a buyer is taking, in the same way that they don’t know your own circumstances. External market forces may be affecting your trading, but a buyer may see it completely differently. Do not foist your own opinions onto a reason for the sale or purchase of a company, because it always seems to end in the wrong decision being made.

If you would like further assistance in relation to timings, exit strategies or the sale of your business, please drop us a line or give us a call.

No, not at all. If your practice is one that somebody wants to purchase, then it will not matter how long it’s been on the market for, because any buyer will still want to look at it, and the length of time it has been listed for makes no difference at all.

It is not like a house, where everyone can see your home advertised for sale and after a while wonders if there is something wrong with it. If you list with a broker, then the only person who knows your business is up for sale is you, plus any of the buyers you have consented to a release of information to.

For example, if you look at our list of firms for sale, then the majority have been up for sale for less than two years. There are a couple that have been on the market longer than this, usually because there are issues particularly affecting their sale. I doubt some of these will ever sell and some will take quite a long time to shift, as the sellers lower their expectations.

However, nobody knows who these firms are, and other than the reference numbers (which we adjust over time), there is no indication as to the date a business was first listed, because it does not really make any difference.

Furthermore, buyers and sellers change their expectations over time, and quite often we find firms list with us for sale at one price and with one set of conditions, only for everything to change within six months and the firm suddenly has a different set of expectations, and the price has altered.

This can be both up and down – we have had sellers who have increased their price because the business is doing exceptionally well and they have expanded, and similarly we have had sellers who have got into financial trouble and needed to shift their business quickly in order to preserve it.

There is an old saying in the business brokerage world that there is no such thing as a good time to list your business for sale, and we can agree with this. In fact, the longer you have a business listed for, the more likely you are going to achieve a sale, simply because it’s going to get more exposure to potential buyers that it would not have otherwise had.

For a confidential discussion about listing your business for sale, please get in touch with www.jonathanfagan.co.uk, specialist business brokers for law and accountancy practices.

No, is the short answer. A longer answer can be found here:

This is a guide to the different services offered by Jonathan Fagan Business Brokers Limited for sellers, and hopefully will give you an idea as to which route to opt for.

The guide is broken down into timeframes, and the first of these is short term or quick sale needed.

Short term – immediate sale needed

If you are in a position that requires you to sell a firm very quickly within the next eight weeks, then it is highly likely you are in a position where it does not matter to a certain extent what your practice is worth, or what steps you take prior to a sale, because any sale is going to need to be done to secure the future of your business, rather than to give you any significant monetary gain.

With this in mind, we would usually recommend immediately selecting the Gold Service, our basic premium service which includes a valuation report.

We would not usually recommend getting a valuation done separately first, but simply to get the practice listed as quickly as possible to ensure you get the most enquiries in as short as possible a time.

Short term – 12 months’ timeframe

If you are looking to achieve a sale or disposal in the next 12 months, then your path is going to be slightly different, and we would usually recommend considering signing up for our Gold or Platinum Service. Both of these services include a valuation report, which will be extremely useful to both you and ourselves in the first instance. It will give you an idea at the outset as to the likely deals that will be offered to you, the likely value of the practice, and anything we think you can do in that timeframe to improve your chances of success when it comes to a sale. The valuation report can be done within three to four weeks from start to finish, and in the meantime we can get your practice listed for sale.

Medium term – 12 to 24 months

If you are looking to achieve a sale within the next two years, you will want to use our Platinum or Platinum Plus services. This will include the starting point of our exit strategy advice in the first instance. This service has been set up to provide you with an early warning system; to get the practice into the best possible position prior to commencing the sale or disposal process. We will come and meet with you, discuss your practice, look at all the various figures and documents, provide a valuation, suggested deal structures and most importantly an exit strategy which will include extensive suggestions for improving your chances of success.

Longer term – 24 months +

If you are in a position to consider future options, but are not yet in a position to sell your business, then you want to be thinking about the exit strategy service as a standalone option. This service has been developed in mind to be completely flexible according to the practice we are assisting at any particular time, and can be varied by what we think is going to be of most benefit to you and your business. For example, if you are in your late 30s or early 40s and thinking about a sale in 20 years’ time, then the exit strategy service would be aimed at looking at your business structure now, seeing how it could be improved in relation to a future disposal, but also looking at how it could be improved to achieve higher profits now, as well as in the future. However, if you are in your late 50s and looking to retire in your early 60s, then the exit strategy report is going to be focused much more on the structure of the business and achieving the best price going forwards.

Summary

In summary, which service is going to be best for you will depend very much on the timeframe you are looking at. Short term probably requires you to list the practice as quickly as possible using our Gold Service, in the medium term think about the Platinum Service, and in the long term consider the Exit Strategy Service in the first instance and then go from there in future as and when required.

If you have any questions about the different routes for sellers using our services, please contact by visiting our contact page.

No absolutely not, in our opinion – see here for a detailed explanation – https://jonathanfagan.co.uk/should-i-tell-my-staff-that-i-am-thinking-about-selling-my-business/

Yes it is. We are very happy to provide our services to any sellers or buyers of law firms or accountancy practices, and to act as your adviser on strategy and procedure throughout the process for a fixed price. The service level is the same as our Gold or Platinum Service (or our Platinum Plus Service if you want legal advice & full due diligence), so if you would like us to act as your advisers during a deal, simply sign up for one of our services and we will provide the necessary advice. This can include providing legal advice, assisting with templates where necessary, negotiating on your behalf with the other side, sourcing alternative buyers or sellers if wanted and providing you with a valuation which can be used by both or one party when it comes to setting a price. If you would like to instruct us as your advisers, simply get in touch to discuss with us, or click here to view our sellers’ services.

As little as possible – full article here: https://jonathanfagan.co.uk/law-firm-sales-what-should-i-tell-my-pii-broker/

We have written a full article here on the first steps to take when thinking about selling your firm or planning your exit strategy in advance.

A common question in recent times has been how to calculate net profit when working out the price of a law firm and in particular relating this to the situation where a seller is also working as a fee earner and taking drawings or dividend out of the business.

The key question is usually whether or not to deduct some or all of the drawings/dividend/salary of a partner or owner, and any family members, in the overall net profit calculation.

In terms of a valuation this needs to be adjusted according to the replacement value of the seller and any family members. This is because the vast majority of owners don’t take out an equivalent sum to the level that they would get if they were a normal fee earner in their role.

So, for example, if you have an owner of a law firm taking out £90,000 per year and they undertake conveyancing work and are head of conveyancing, then the calculation ought to be based on the estimated salary you would be paying a fee earner to undertake that work as a head of conveyancing and a conveyancing fee earner, which will probably be more around the £65,000 mark in most cases.

These are the sorts of figures that come up in law firm valuations which we undertake on a regular basis, but we don’t think you can simply deduct the money paid to the owner of the firm and expect to have an accurate figure.

It is an incredibly complicated calculation to make, because you do need an idea as to the sort of salary levels and payments that need to be made to a fee earner to replace the money paid to the owner. This is not a simple calculation to make, and one that you will probably need assistance with. Fortunately, we can provide that assistance through our valuation and deal structure reports, and if you require our help please get in touch.

However, we think it is wrong to include the money paid to the owner, simply because in law firms, the money paid to the owner rarely reflects the income they are generating.

Finding inexpensive or affordable solicitors to act for you in the sale or purchase of a law firm or accountancy practice can be quite difficult.

Solicitors’ firms are set up to do commercial work, but the profitable commercial work is for large businesses and multinational PLCs and definitely not acting for SMEs!

This means that very often you will be quoted hourly rates to complete the legal work needed to make a purchase of somewhere between £350 and £450 per hour, which on a small sale or purchase of a firm valued at around £30-40,000 can actually result in you paying almost half the cost or sale price in legal fees.

You can undertake your own due diligence if the deal is smaller sized and this will almost certainly speed things up dramatically and cut your costs considerably.

Options

We usually offer clients a few alternatives. Firstly, we can recommend a Legal 100 law firm who have extensive SME M&A experience for an hourly rate in the region of £400 per hour. For larger, more complex deals, this can be very good value for money.

We can also recommend a couple of specialist SME M&A lawyers who will charge around £185-300 per hour to provide the requisite advice.

Finally we offer in house lawyers at a rate of £75 per hour.

Conventional Law Firm Option £400 per hour

The first option is to use a conventional law firm with a team of M&A solicitors experienced in the sale and purchase of SMEs and with the manpower to be able to move extremely quickly where required, including on any commercial property purchases, sales or leases to be assigned. The hourly rate for this is often c£400 per hour, possibly higher depending on the deal and the time frame the deal is taking place in. This is with a firm we can recommend you to; compared with other firms and teams of similar size, this is a surprisingly cheap option for using a conventional law firm with the expertise and manpower to be able to assist, and so is probably recommended for larger firm sales where there are complexities and you do need someone who knows what they’re doing with all aspects of the deal. Also relevant where a deal needs to be done quickly. Contact us to request a referral.

SME Specialist Option £185-300 per hour

The second option is to use a specialist for SMEs but someone who will be working on their own as a consultant via a solicitor’s firm. The cost of this is usually somewhere around £185 to £300 per hour. The difference between this one and the first is the time it will take the solicitor to complete the deal. With this arrangement you will be working with a single solicitor and totally dependent on their availability to complete the work. Furthermore, if there are different aspects to the deal that need additional expertise then you will need to pay for those specialists to come on board as well, and this may well slow things down further. If you want to use this service please drop us a line and we will refer you.

Interim Lawyers Platform £75 per hour

The final option is to consider using an in-house lawyer to provide you with legal advice on a non-liability basis. As M&A work is usually non-regulated, you do not need to use a solicitor’s firm to complete it for you. This means that you can actually take advantage of having your own in-house lawyer providing you with advice.

The way this works is that you use our Interim Lawyers Business Lawyer platform, and it is done on a pay as you go basis.

The major catch with this particular option is that you have no recompense if there are any problems with the advice you are given. The lawyer will be acting on an in-house basis and will not accept any liability for the advice they give you. So, in essence, you are sacrificing the ability to be able to sue your professional adviser for negligence in return for low-cost legal advice.

Typical Legal Process for Business Purchases

The process of selling or buying a law firm usually involves the production of the heads of terms and then a subsequent business purchase agreement, asset purchase agreement or share purchase agreement. Each time one of these documents is produced, you simply send it off to the interim lawyers platform and we will provide you with a time estimate. If you are happy with the time estimate for completing that particular review of a legal document, you pay up front for those hours, the lawyer completes the review, and the work is returned to you.

3 Options

So, there we have it – three options for getting legal advice in relation to the sale or purchase of an SME law firm or accountancy practice. Each one is different, and each sale or purchase has separate issues relating to it, which will dictate which one of the options is the most suitable for you.

Any questions? Contact us.

A very common query into Ten Percent Towers – we get calls from partners of law firms asking us for advice on how they get rid of their law firms because they are completely fed up with them!

We hear lots of different reasons for this, but they can be narrowed down into a few categories – money and the stress of having to pay monthly bills out of money generated, regulatory issues and the hassles dealing with the SRA, the ever-increasing cost of professional indemnity insurance, or the incredibly long hours that they are having to work to pay the bills.

Reasons for Being Fed Up

This is a very important discussion to have if you are thinking about getting out of your law firm because you are fed up, because there are so many different things going on here, that quite often what you actually think you want and what you actually should be thinking about are two very different things.

Regulatory Example

Take the regulatory issue for example. If you are getting fed up having to deal with the SRA all the time, and compliance, completing lots of forms and perhaps undertaking your CQS accreditation, or go through your renewal of LEXCEL, then there are other ways of dealing with this other than closing down your practice. In fact, I would go so far and say that in these circumstances closing down your practice is probably a little bit extreme, and you could perhaps think about other things instead.

For example, you could speak to a regulatory and compliance expert (we can recommend a good one) who will do all the regulatory and compliance work for you at a set monthly rate.

Long Hours Example

In relation to the long hours you are working, can you possibly cut down on these by recruiting someone else to help – it does not necessarily have to be a similar high level fee earner, but you could perhaps consider taking on an administration assistant to help you with the more mundane tasks you are undertaking.

Money Stress Example

So far as the money is concerned, do you really need to carry on with the same level of staffing that you currently have, or could the practice be streamlined a little bit? Quite a lot of firms we see seem to pick up staff and keep them for generations, and some of the salaries they end up on appear quite unaffordable for the size of the practice. I think at times partners struggle with a sense of obligation – I know that I have done this in the past myself – and it can be an extremely hard situation to extract yourself from.

Separation is the Key

There are a whole load of different factors that kick in when it comes to thinking about a sale or disposal, but it is important to separate them out in your mind and to see whether or not it is a sale or disposal that you seek and not simply a remedy of one particular problem that your practice has.

Help is at Hand!

We can assist if you would like us to look at any issues like this and provide you with advice. For details of our services, please visit www.jonathanfagan.co.uk.

Yes we do – our valuations are based on current deal experiences and suggested deal structures. We recommend having a valuation prior to listing your firm for sale. It can be completed within 2 weeks for most businesses.

Who buys law firms and accountancy practices?

Law Firms

Law firm buyers fall into a few categories. Large investors buying into the sector, family buyers – purchasing for family members to take over and run a law firm, lawtech companies buying into the actual transactional side of the industry and companies in related sectors looking to run their own legal operations. We get some solicitors who look to establish their own companies by buying another business, but they are the exception to the norm.

One glaring exception is the local rival law firms. Our experience to date is that the vast majority of enquiries we get from local rivals or firms based locally looking to expand by takeover are making the enquiries to either a) get intel on the operations of a local rival or b) looking to try and acquire a local rival without needing to spend any money.

Looking at our list of successful sales, those we have had involving local firms have mostly been retirement arrangements, where the seller became a consultant for the buyer’s firm, the buyer’s firm became a successor practice and no money changed hands.

A lot of sellers have a fairly romantic notion that they will set up a firm, work in it and on it for over 40 years, find a young, enthusiastic solicitor just starting out who wants to spend £250k on a law firm, sell it to them and depart to enjoy retirement. Unfortunately reality is very different. Most younger solicitors see how easy it is to set up their own firms and don’t see the point in purchasing an existing practice, particularly one that may have antiquated systems and methods of operation. It is rare to find firms managing to find a younger partner who comes on board with a view to acquiring the equity after a set period of time.

Accountancy Firms

Very different types of buyers. Most buyers of accountancy firms and gross recurring fees are other accountancy firms and accountants. Just about every deal we see or are involved in will be with another accountancy firm, probably quite local, looking to pay a set multiple for the gross recurring fees. We don’t see many alternative types of buyer and there doesn’t seem to be the consolidation that occurs in the legal profession – accountancy firms on the whole are either 1-4 partners or large multi-partner operations with multiple offices across the country, if not the world.  

Generally there are so many different types of potential buyer for businesses it can be hard to categorise them, but the above is a general snapshot of the buyers we see on a day to day basis making enquiries about the law firms and accountancy practices we have for sale.

Yes, no and it depends on the circumstances is our answer!

If a buyer purchases your law firm, becomes a director of the firm and the law firm carries on as before then there is no successor business because the law firm has continued to trade and no-one has become a successor and inherited the liabilities. The original firm still has the liabilities because it still exists and is still trading.

If the buyer takes over your law firm and merges it into his/her existing law firm so that the new law firm is Smith & Co incorporating Old Firm & Co, then the new firm is the successor practice. The old firm has ceased to exist and is now part of the new firm structure.

I think this is the easiest way of distinguishing between a law firm sale where a successor practice is involved and a law firm sale where investors have purchased it and the practice is continuing as before.

Please get in touch if you would like to expand on this advice or clarify it further – always happy to add extra information to the FAQs..

Run Off Cover

There are all kinds of issues involving PII run off cover when it comes to law firm sales. The upshot is that while run off cover is a major stress for sellers to be worried about it tends not to be a major issue in the actual sale or disposal of your business because if you do achieve a sale or disposal of a practice it is highly unlikely you are going to need to pay run off cover. Some brokers still try to have their cake and eat it and try to make the seller pay run off cover even though their practice has been acquired by a successor firm. There are situations where run off cover comes into play because a buyer has simply bought the structure and not the clients of a firm, or vice versa, which in some circumstances still means that run off cover needs to be purchased in order to protect the seller when they retire.

In relation to law firms, by far an easy sale is one where the seller has a realistic idea as to the sort of price a practice is worth. Not only that, they have also communicated quickly each time an enquiry has been made, they have got all the paperwork together ready to go each time a new buyer enquiry gets sent over and they are easy for everyone to deal with.

Accountancy practices tend to have everything ready at the outset and we don’t have so much of a problem collating everything together for these deals.

So many deals happen because of synergy between the buyer and the seller rather than any particular feature of a firm for sale.

Deals often break down because one of the parties gets a bit awkward or doesn’t communicate well with the other side and things start to go off the boil rapidly. Furthermore, if a seller does not respond to a request for further information quickly, then a buyer can quite often decide it’s not for them and walk away.

Quite a few sellers put their firms on the market and take a very long time to respond to queries when they come through from potential buyers, which gets the buyers frustrated and they move on to new targets. The seller then contacts us to ask why no enquiries are coming through (!).

Key factors that will make a sale happen or more likely to happen are a willingness to provide information quickly from both sides, a willingness to discuss and negotiate on prices, and a good spirit throughout discussions.

This is a nightmare situation for just about everybody concerned, whether you are the staff in that particular practice or the partner who has the problem with the other partner.

It is an occurrence we come across fairly regularly, with partners having mental health problems, turning to alcohol or drugs or simply deciding they don’t want to work anymore and wreaking havoc for their fellow partners.

We have come across practices that have been highly profitable and well established who are in great danger of collapse because one of the partners has ‘gone rogue’.

This is not an easy situation to extract yourself from and there are no simple solutions. One way of sorting this out is to try and get rid of the problematical partner as quietly and quickly as possible so that you can salvage some value from the remainder of the business and not let that particular person affect your work or the work of your colleagues anymore.

This is extremely difficult of course, because partners who fall out tend not to be on speaking terms and want to be as awkward as possible to each other, in the same way as a divorcing couple, which means that discussions are never easy to have. The partner you are trying to oust may not think there is anything wrong at all and wonder why the other partners are trying to get rid of them. Similarly, the partners remaining may find it quite hard to get out of the situation without damaging their work because of the potential for litigation.

There tend to be a few options, but one of them is definitely not that you can simply sell your share of the partnership to someone else. Whilst I guess this is theoretically possible, I have yet to see anybody who would want to go into partnership in a situation where the partners have fallen out and there is not much communication going on between them.

From the other partner’s perspective, why would they want to go into business with someone they hardly know? It is an impossible situation from both angles. Speak to your legal advisers about extracting yourself or dissolving the partnership and then give it a little while before looking to sell your part of the business.

I appreciate this is probably not the advice that you want to read but this is not an easy situation to be in.

Yes it is. We have been involved in transactions for the sale of sole practitioner law firms on numerous occasions and whilst they are not for everybody the firms do still have a value.

A couple of things you could consider doing to increase the chances of sale:

a) convert your business into a limited company and b) make sure there are other fee earners in the business as well as yourself.

Both easier said than done, but the limited company point is particularly important. It is much easier for a buyer to purchase a limited company than it is to take over a sole practitioner’s business – if you are a limited company the buyer can simply enter into a Share Purchase Agreement and become or appoint a director.

If possible, have a think about converting, although we would usually recommend taking the usual tax and legal advice to ensure that this is the solution for you.

In summary – yes sole practitioner SRA regulated law firms do have a value and it is possible to sell them, but they are harder than other entities to sell – usually because the business will lack specific assets (eg other fee earners) rather than because you are a sole practitioner per se.

This is a question we often get asked because in some professional indemnity insurance contracts there seems to be a clause that states that if you are considering the disposal of your firm, you are in the process of selling it or planning to fundamentally alter it you need to notify your insurers. Because solicitors quite rightly want to adhere to the terms of their contract, quite a few partners query at what stage they need to notify their insurers that they are looking for a sale.

Vague Advice

I am afraid that our advice on this is going to be a bit wishy-washy because whilst one could question why a professional indemnity insurance broker needs to know about a sale of a law firm prior to it going through as it is really none of their business, some of these clauses are worded in a way that mean there almost seems to be an obligation to notify in these circumstances.

The most common way for buyers to acquire a law firm is to either join as partners if it’s a partnership or directors if it’s a limited company and then for the sellers to simply resign and the buyers carry on. This then gives continuity to the practice, which has not closed down and the buyers have not become a successor practice because the practice still exists and is trading still.

Unless there is something particularly bad about the buyers then in theory the insurance should remain much the same because nothing will have changed, other than there will be new owners. Naturally if the types of work change or new works coming through, or there are new fee earners joining, then this will substantially alter the terms of the professional indemnity insurance policy and the potential risk, but if the practice is carrying on in the same areas of law, the location is the same and there is no further risk, then there is little to worry any professional indemnity insurance brokers because everything is the same and they still get paid their money every year.

However, things never seem to work out quite so smoothly as that, and unfortunately the insurance industry has its talons well and truly into the solicitors profession. There seems to be a plan by insurers to charge an extra fee at any point they see the opportunity to do so.. I suspect that the clause in relation to notifying them if you are thinking of a sale simply relates to a chance to charge more money for the privilege of the brokers considering the fact that you are considering a sale.

So whilst we cannot advise you to go against any contractual terms you may have, we think you need to question why a PII broker would need to know that you are thinking about a sale and how on earth they would ever know about a potential sale prior to it actually occurring if you are just in discussions with potential buyers. You will need to make your own judgement call.

I’m pretty sure I know what I would do in the circumstances but I think it does have to be an individual decision.

There do not appear to be the same issues arising for accountants in relation to professional indemnity insurance.

Very simple – select the level of service you want to use – Bronze, Gold, Platinum or Platinum Plus, and then place your order. Full information here.

Next Steps

We will make contact with you to progress. This usually involves providing us with a range of information including your most recent accounts.

Paragraph of Sale

Once we have received the first batch of information, we will put together a proposed paragraph of sale, which will be the only information that is released to third parties without your express consent. This is usually brief and quite vague. If you have a look at our list of firms for sale (click here) you will see that some descriptions are extremely vague as to location, which of course anonymises your listing.

Marketing

Once you have approved the paragraph of information we list your firm on our system for sale and notify our buyers that a new practice has gone live. If you have opted for our premium services, we will ensure you get priority in our regular weekly law firm for sale updates, and also our monthly newsletters which for law firms go out to 17,000 law firms & solicitors and for accountancy practices c8,500 accountants. For Platinum and Platinum Plus Sellers we will also commence advertising on various professional broker sites and in the Law Society Gazette (for law firms).

At all times we keep you updated with any new buyer enquiries that come through about your practice. Buyers will never know your identity without your express consent each time.

Click here to choose your Seller Service Level.

We have been working with UK law firms and accountancy practices of all shapes and sizes on recruitment and business sales for over 20 years. The information we give in relation to values of businesses is very specific to our experiences of previous and current deals and is always tailored to an individual business. Our specialist valuation services are available on a standalone basis or as part of our seller packages. Unlike other brokerage services we are specialists for law firms & accountancy practices and we offer transparent fee structures for buyers and sellers alike. We want to help you achieve a satisfactory deal.

The answer to this question is more complicated than a simple yes. We do a background check on everybody who comes our way and we also keep records as to previous conduct by potential buyers in relation to other firms they have enquired about. We notify our sellers of everything that we know about a potential buyer, so that you can make a decision as to whether or not you want to give consent for your information to be released to them. We do not release any information about a firm for sale unless the seller has given us specific consent to release it.

The only information any buyers will ever know about your firm is the agreed paragraph of information which is the detail we use to market your firm and put together your listing. When a new buyer comes through we do ask them for quite a bit of information about themselves and their company, and we will always undertake a background check on the company and the person before we send out details to our sellers. If anything comes from that then we will notify the sellers.

For anyone who has been involved in the sale of businesses, you will know that there are a number of reasons why buyers are looking to purchase, and a significant proportion of these are buyers who have an issue which require them to purchase another business in order to carry on trading. This does not necessarily rule them out as potential buyers, but it does require extra caution.

If we know anything about a buyer based on previous behaviour when they have been dealing with other sellers, we always tell the sellers. So for example if we have a buyer who has wasted everyone’s time on numerous occasions and then makes a new enquiry about another business, we will notify the seller that we have had problems with them before. The service we provide as business brokers is not just to effect sales and purchases of businesses – we act as an intermediary wherever possible and provide impartial and confidential advice to both sides of the transaction, even though it is the buyer who contracts with us to pay our fees. Buyers and sellers who have used our service in the past have expressed surprise at how honest and open we are when it comes to potential deals, and how little we try to sell anything to anybody. We think this is of great help to anybody who is looking for a sale or purchase and simply wants a broker to be there to provide a sounding board and advice.

This is the first question we always get asked by everyone who lists their business on the Jonathan Fagan website. It is quite an easy question to answer because it is pretty much always ‘how long is a piece of string’.

Law Firm Sales

The usual length of a law firm sale depends on a number of factors. Firstly, if you are a retiring solicitor with a practice that consists of yourself, perhaps your partner and a couple of support staff, coupled with a turnover of about £200k and a mainly conveyancing and wills & probate practice, then it is quite possible it will take between one and three years to sell your firm. This is not always the case, and our fastest sale in this category is six weeks, but similarly we have law firms listed with us who have been registered with us for over two years, and despite various conversations with potential buyers they are still up for sale.

If you are a law firm with very few clients and essentially selling as a shell, then it is possible that your practice will sell in less than three months.

If your firm has a turnover of more than £500k and less than £2,000,000 then it may well take between two and four years to find a potential buyer.

Our fastest deal ever has been three weeks and our longest one took two and a half years to go through the process from start to finish. The process of selling a firm does not just end when you find a potential buyer. The next process is due diligence and whether or not you manage to get through this process as well as the agreement to sell is another matter entirely.

In the first instance you need to be aware that there are a number of factors affecting how long it takes to sell your firm, which can include whether or not your practice has claims against it, the price you are looking for in order to affect a sale and also the information you have available to any potential buyer in order to progress the sale once discussions have started.

Firms that tend to be listed with us for a long time tend to have particular problems with the information they have available to provide to potential buyers. Quite often partners who have been in the same firm for many years and have never embraced case management systems find it very difficult to collate the information together that any potential buyer is looking for. Buyers want details of just about everything and they want to be able to access it easily without having to trawl through copious amounts of paperwork dating back many years. One sale we have come across was with a firm where everything was paper based and the buyer had estimated that he needed to actually employ someone to go through and deal with the paper files in order to make the business function once he had taken over.

A practice that uses case management software, has all the clients readily accessible and perhaps also in a spreadsheet, has details of everything from staff numbers through to the photocopying contract in one place for the buyer to see, will find it a lot easier to sell their practice than somebody who has no information available or very little, and is unable or unwilling to provide answers to questions when asked.

Accountancy Practices

Accountancy practices are very different. There is at the moment a huge market for the buying and selling of accountancy firms and practices do not tend to stay on the market for lengthy periods of time. We would expect for most firms to have offers in place from at least 3 potential buyers within a matter of days, if not a few weeks. Again it will very much depend on your willingness to be active and respond swiftly to queries and requests. Offers are usually quick to come in and most buyers do not waste time in getting to a reasonable package. This is an extremely busy market with lots of active buyers out there with money to spend.

Summary

So if you want to know how long your practice is going to take to sell then the answer is anything from three weeks through to about four years, but depends very much on your specific circumstances, the size of your firm and the information you have available to potential buyers. Accountancy practices should usually sell virtually immediately but law firms really depend.

We do not usually recommend indicating a sale price unless you have something very specific in mind. Law firms in particular are notoriously difficult to gauge a price for, because they do not have the same realisable assets that an accountancy firm for example has.

Accountancy practices tend to be valued on the number of repeat clients who come back year after year to get their annual accounts completed and receive advice in the interim. An accountant tends to know what recurring fees they have coming in, or what likely recurring fees they have coming in, but a solicitors’ firm rarely does.

Solicitors’ firms may have regular clients who, if they have a legal problem, will use them, but they never know how often those legal problems are going to arise, which means that they are unable to give a recurring fee valuation. The only exception to this is when an employment department for example has recurring fees from clients paying subscriptions for ongoing services or business clients are paying an ongoing subscription for their own in-house lawyer provision. Because of this we normally just recommend including the facts about your firm in the listing, and then leaving it up to discussions for a price to be formulated.

The danger of putting a price on the practice on the listing is that you can immediately rule out lots of potential buyers who might look at your price and think it is way too high, or similarly you may rule out higher bids than the price you were thinking of, which surprisingly happens a lot more than you would anticipate.

So in summary, we do not usually recommend including a price on a law firm listing, but to wait until discussions start and then formulating an idea as to the sort of price you want for your business. We offer valuation & exit advice and reports to all sellers and details can be found here – exit strategy advice – and here – valuation services.

Jonathan Fagan Business Brokers have over 20 years experience with the sale and purchase of firms. We came across mergers & acquisitions work through our recruitment business in the legal and finance sectors and in recent years we have expanded our offering to provide specialist business brokerage services. At any time we will be working on at least 15 potential deals and have at least 5 deals going through the process of completing once a price has been agreed. Our company has seen an average of one deal complete per month for the past 12 months although we anticipate this increasing over the next few years to one deal every week.

Our experience tends to be based on previous deals and negotiations – we know what firms sell for at any time and we try to provide our expertise to both the sellers and buyers on an impartial basis. Buyers and sellers tend to go from one extreme to the other – buyers look to pay as little as possible up front and sellers seek as much cash as they can get at the outset. Buyers want sellers tied in for as long as possible, sellers want out as quickly as possible! Deals occur when a compromise between these two positions can be reached.

Yes we do. We are happy to be as involved as the parties to the deal want us to be. Sometimes we have sellers and buyes who require our full input throughout. The seller will want us to communicate on their behalf with the buyer and their representatives and the buyer may well require us to keep channels of communication open with the seller. For other deals we will have virtually nothing to do with negotiations or communication and both sides will simply notify us once a deal has gone through.

We don’t mind how negotiations take place, although we have found that deals occur more effectively when a) both sides deal politely with other (conversely sellers or buyers who are unnecessarily aggressive or confrontational with each other tend to find that deals collapse) and b) the parties do not change the goalposts every 10 seconds – a common problem with negotiations that take place between the buyer and seller directly and not via 3rd party advisers.

You need to get a full valuation from us in order to answer this question. Click here to request a quote. Our valuations are extremely detailed and include advice on improving value and saleabilty of your business.

Business value tends to be the number one question for just about everyone running a law or accountancy business. If the business is sold as a going concern, what is it worth? You can leap into an internet rabbit hole and start reading about complicated equations and multipliers affecting particular industries or professions. There are so many ways of valuing a business, in particular law firms, that most of the figures based on formulae that professional advisers come up with will contradict a lot of other valuations.

Accountancy firms are fairly simple – there tends to be a very easy valuation technique that works well for most and the industry seem to accept it as the norm. This is to calculate your gross recurring fees and multiply them by a factor. This does very much depend on the quality of the gross recurring fees – obviously 300 recurring fees from clients aged 92 are not going to be worth as much as 300 recurring fees from clients aged 32!

Law firms unfortunately have no such easy solution when it comes to valuations. At varying times we are able to spot a trend – but this depends very much on the market conditions. Sometimes figures plummet to very little indeed, but we do usually recommend ignoring the copious articles available on the web advising sellers that their practices are not worth anything at all. If you look at who writes the articles it does tend to explain why someone would write this (the authors tend to be linked to buyers!).

Of course there is an old saying – valuation is vanity, sterling is sanity. Beware the business broker bearing gifts of ridiculously high valuations to flatter you into giving them business. Contact us today to request a quote for a market valuation.

No is the quick answer and no is the even longer answer. In the UK anyone can set up as a business broker to buy and sell businesses. There are quite literally 100s if not 1000s of individuals, businesses, estate agents, accountants and lawyers who assist with the sale and purchase of businesses. There is no regulation of business brokers at all, although essentially the services most provide are simply advertising and marketing assistance, rather than any actual professional advice.

Click the link below to register your details with us. If you would like to discuss our services before completing the online form give us a call on 01824 780937. We do not charge sellers any fees at any point in the process. All information is provided on a strictly confidential basis.

Sales Procedure – a Rough Outline

A very rough outline of the procedure is as follows:

1. All parties sign confidentiality undertakings.
2. We agree terms with the buyer.
3. The buyer is provided with information about the practice for sale.
4. The parties meet or speak about plans and proposals. Proposals can be as varied as the partners of the selling firm joining the buyer’s practice or the selling partners accepting a lump sum in cash to exit the business.
5. A ‘heads of terms’ (also known as a HoT) is drafted and agreed. This sets out a timetable for the acquisition and specifies who does what and when. It is rarely legally binding – just an outline of the intentions of both parties.
6. A deal is reached and completion takes place. The buyer pays us an introduction fee – this varies according to the sale/purchase in question.

We have a list of questions to ask yourself when you are preparing to sell your law firm: https://www.ten-percent.co.uk/questions-to-ask-yourself-when-preparing-for-the-sale-of-a-law-firm/

As coincidence has it, we have a guide to selling a law firm available right here – no charge! If you have any questions about any of the advice or content, please contact us.

Please click the link below to download our guide.

Yes we do – we specialise in both law firms and accountancy practices and provide market valuations based on current deal experiences and suggested deal structures. Our valuations are used for a wide range of purposes including partnership disputes & divorce proceedings. We recommend getting a valuation done as a first step to considering the sale, merger or disposal of a practice.

Please contact us for further details.

Yes we do, as part of our Platinum Plus service.

We offer very straightforward fees.

Sellers pay no fees unless you use our premium services.

Buyers pay a fixed fee, agreed at the outset, if a deal occurs. No deal, no fee.

And that’s it.

Further Details

Our buyer fees tend to range from around £6k plus VAT up to £15k plus VAT, depending on the size of the firm for sale and the perceived complexity & involvement for us in any deal. We never change the fee once it has been agreed at the outset, even if the deal takes months to conclude.

Sellers pay no fees to list their firm for sale and we do not charge any fees to assist with negotiations, discussions, advice on strategy, verbal valuations or provide information. We do however provide premium seller services – Gold, Platinum & Platinum Plus – which include a wide range of additional services for sellers on top of our standard list and sell service. Details of our seller services are here.

Buyers pay nothing to access our information services online, assistance with negotiations, strategy advice, discussions and anything else we can assist with. We do of course charge a fee if a deal takes place (or you recruit staff from the target firm). List of firms for sale available here.

We provide paid formal law & accountancy firm valuations. These are available to anyone – whether you looking to purchase or sell a firm or simply take on a new partner or raise capital. Click here for details.