There have been recent posts referring to searches for law firm acquisitions, which refer to online social networks and wide marketing approaches. These seem to emanate from legal services businesses taking a commoditised approach to a law firm exit/acquisition. It ignores the absolutely key aspect of cultural fit between the two parties.

In our experience, increasingly vendors want to exit because they have earned a decent living from their firm and want to retire for lifestyle reasons, and in the process, most want to look after their people after they have gone. In those circumstances, linking up with a modern growth business that demands four times salary by way of fees in any financial year, is not a great cultural fit when a small, community law firm has made a reasonable living by asking its fee earners to do between two and three times their salary.

Purchasers seldom want the founders to leave immediately, partly due to their need to be available for legacy issues (where to find that tricky file which is buried in the corner of the storage unit for example). 

The nuances of how firms interact with their clients and staff drive flight risks amongst both communities. On one hand a vendor firm may have staff members going into care homes to prepare lasting powers of attorney with skills that require significant amounts of EQ, on the other, growth firms want turnover, EBITDA, and an exit within given timescales, particularly if they are financed by private equity houses.

ESG is often talked about as being a requirement in any business (it is a broad subject in it’s own right) however increasingly some Insurers are looking for hard evidence of firms policies on the subject before they will consider the Insurability aspects of the business.

If small firms are looking to sell, my advice is to go to a specialist consultant who is known in the legal sector and who will inevitably have a wide range of contacts from which their client can select 2 or 3, because the sale process sucks in management time and effort and it needs to be efficient. Having a beauty parade of more than this devalues the process and rarely brings better results. The quality of the consultant is key.