The sales process when selling your law firm

I was interviewed recently by Law Firm Ambition about my views on the most common questions I see around selling a law firm. Below I answer questions around the sales process and negotiation when selling a law firm. To see my answers to previous questions, follow these links:

Questions 1 - 5 - The basics 

Questions 5 - 10 - Determining value

Questions 11-15 - Minimising tax and getting your law firm ready for sale 

16. What is the subtle difference between a sale and a merger?

This distinction is important as it can be emotive, so whilst you might think this is only terminology it hides an important cultural point.

In a so-called merger, one side will often perceive themselves as the bigger partner and thus as an acquirer that is effectively buying the other firm, whereas the other side may be thinking it is a merger of equals. If the transaction sets off on this footing, it can unravel over time as that cultural imbalance plays out.

It is important to establish early on if you are the bigger fish or the smaller one and to make sure you are comfortable with which way around the deal is going. A truly equal merger is very rare.

17. Other than price, what are the key terms we need to negotiate in the sale agreement?

There are many intangible features to consider – such as style, culture, ongoing support for staff, clients, etc. Some elements will be more important to you than others.

It is also worth noting the other variables within the consideration, in addition to price. These are ongoing employment (ie if you are being kept on for a considerable period, with what remuneration?) and deferral (ie if the consideration is to be paid over time, then on what basis?).

18. How do I start the sale process?

Get some professional advice from an adviser with suitable knowledge and experience of selling law firms.

Be aware that some law firm ‘brokers’ are more reputable than others.

19. How long will it take to sell the firm?

The fastest I have ever done it was six weeks. However, that was a distressed sale and a unique set of circumstances. Three to six months is more common.

20. What advisers or agents will we need and how much will they charge?

In theory, you could do it yourself. However, there is an old adage about having a fool for a client!

You are likely to want at least an accountant (for the valuation and tax structuring) and a corporate lawyer (for the drafting of the sale and purchase agreement). It is usually helpful to have someone (which might be the accountant or lawyer) as ‘lead advisor’ in a project management role and acting as ‘honest broker’ to all sides. This helps professionalise the process and remove some of the emotion.