October 18, 2022
If we could create or put forward the most perfect law firm for sale, it would be one quite similar to a company I recently valued.
The Perfect Firm for Sale
The law firm had a team of c35-50 staff who had been with the practice for a substantial amount of time (but still mainly early and mid-career), the owner of the business had very limited involvement in either management or fee earning of the practice, the business premises were owned by the partners and leased to the business, the professional indemnity insurance premiums were well within five percent of turnover, the sellers have no need to dispose of the business quickly, the business has regular and repeat customers coming from a range of sources and the staff wage packet is at affordable levels.
Negatives? location and type of law
This type of business has pretty much everything that a serious buyer is looking for. The only downside to this particular business was its location, which was not in the southeast of England or London, or the northwest of England, which tend to be the popular areas. Also the business’s exposure to the property market is a potential negative depending on when a sale occurs.
Buyers?
Whilst this business will not attract huge amounts of interest, because of course anyone buying it will need to have a substantial cash sum to invest immediately in the sale price, and also in the cost of keeping the business going, it will be one that we think will sell at some point for a good price, and a deal will be something that will satisfy both parties, the buyer and the seller. When you look at businesses, quite often there is something missing from the sale, which results in quite a negative impact on the chances of success, but this particular business does not really have many downsides to it, other than the fact it will require substantial investment in order to purchase it.
The seller has done all the right things – they have limited their own role in the day to day running of the business, they are not dependent on other factors for their work, they have a mixed and varied source of business coming in, and they are planning for the future and not in need of a quick sale, which of course can drastically reduce the chances of success of a decent price.
Improvements?
One way this particular practice could improve its chances of success would be to convert to an ABS, but at present it is a limited company and SRA regulated. It is harder to sell a practice run as a traditional sole practitioner or partnership, as buyers like to see a corporate structure in place.
Key to a sale?
The key thing as ever to remember is that a functioning team of staff, committed to the business and well-established, can be key to the chances of success. Failure to keep a team of staff happy and working in the longer term will seriously negate any sale chances you may have, and practices can end up as a simple disposal in these circumstances.
Avoid change
Finally, one other thing to remember is that if you are looking at a sale, it is definitely not a good idea to start changing the structure of the business, for example closing down a department and concentrating on one specific area, because the buyer will immediately wonder why this is the case.
Summary
There are of course always ways to improve a law firm’s saleability, but this practice has to be at the top of the charts for its saleability in my opinion. Before anyone makes an enquiry about this firm – it is not for sale – this was a valuation for internal use only by the partners I am afraid!
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