August 29, 2024
When we get enquiries from law firm owners looking to register with us, we will get a question fairly early on to ask who is actually interested in acquiring small law firms in the UK? I thought we would take a look at our database and give you an idea of the types of buyers/acquirers who regularly come up.
In the UK, small law firms can be bought by a variety of buyers, depending on the firm’s specialisation, client base, location, and turnover/profit levels.
Law Firms
The biggest group of buyers by far. We have over 400 law firms specifically registered with us as buyers and looking for various types of firms. These include larger firms looking for smaller firms to expand their geographical reach, client base, or to bring in specialised expertise, or firms of any size looking quite specifically for merger opportunities (we use the term ‘merger’ in a different way to the SRA – very often its all about one firm taking over another rather than setting up an entirely new entity together). Recruitment is a common theme for a lot of smaller law firm buyers – easy way to acquire staff. We also get smaller firms looking to expand simply by bolting on the client base of another law firm to move into a new area or grow their existing clients in current fields.
Troubled Law Firms
Very often looking for an SRA regulated shell law firm to take over and continue to run work through. Usually linked to PII problems – ie their renewal quote has gone into the stratosphere and the firm owners seek to move staff and clients across to a new firm. More common whenever we approach PII renewal deadlines.
Consolidators
These have had extremely bad press in recent years courtesy of some spectacular collapses. Often helped by the somewhat generous circumstances of ABS ownership (seems a lot easier to run up huge debts and collapse without any repercussions from the SRA than it is for solicitors working via traditional structures). There are still some operators out there, but they tend to be suitable only for firms in financial difficulty or looking for a fast exit. The model sounds great – collect small firms, deal with the admin centrally and benefit from the increased profit. Not sure anyone has made it work particularly well yet..
Non-Lawyers
This usually leads to a fairly complicated sale process, but non-lawyers can own solicitors firms via the ABS route. Non-lawyers make up about 20% of our buyer database. The same applies to private equity firms, although they tend to focus on much larger law firms than the majority of our stock for sale, or invest via the consolidator model. Overseas lawyers also form part of this group – some of whom have funding, but tend to struggle with the regulatory requirements.
Other Professional Service Firms
Accountants, IFAs, tax advisers and other financial sector professionals are a small minority of buyers, but again selling to them tends to result in a longer process courtesy of the need for an ABS.
Individual Buyers
Private individuals make up about 20% of our database. The Bank of Mum and Dad is not a source to be ignored – we get a good number of enquiries from fairly recently qualified solicitors with family funding behind them. Good buyers if the sellers can hang around for a few years and the buyer is already qualified and not far from eligibility for COLP/COFA and principal owner status. Similarly we get part qualified lawyers looking to acquire law firms before qualification so they can get trained, qualified and then take up an option to purchase a firm when they are able to.
Groups of Lawyers
Smaller group again – we do sometimes see small groups of solicitors looking to band together to acquire a law firm. Not the best buyers – quite often they decide to simply set up from scratch once they have looked into the costs involved!
Summary
We often say to law firm sellers that they will rarely sell to the party they were expecting to. A lot of sellers have an idea of the perfect buyer who is often about 30-40 years old, works locally, practices the same areas of law and just happens to have £200k in the bank to pay for a firm. Similarly small law firm sellers often expect the friendly firm up the road to buy them out for a good price. The reality is often (but not always!) markedly different!
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