Law Firm Succession Planning – Selling a Solo Estate Planning Practice

A managing partner with a firm on the west coast recently told me that he was looking for young hungry talent and did not want to be a retiring lawyer’s retirement program. Recently I was working with a four-lawyer estate planning firm in the Chicago suburbs that was considering acquiring a three-lawyer firm and they turned down the deal when they learned that the owner and the two associates would all be leaving the firm at the same time. The practice generated about 1.5 million in fees a year. The firm considering the acquisition was happy with the financial performance of the firm but had concerns as to finding the talent to staff the firm and whether the clients and referral sources would transition. So, the firm passed on the opportunity.

Your chances of successfully selling or merging your practice within the next year will be dependent on finding a firm that has an interest and needs and is interested in your clients and referral sources. Your financial performance indicates you really gave yourself a job. If a firm interested in your practice is busy and at full capacity they will have to find and hire an experienced estate planning lawyer to handle your work if your clients transition to the other firm. That lawyer’s compensation package will likely exceed the net profit that your firm has been generating. So, your best opportunity would be to find a firm that has excess capacity and could handle your work without having to hire an addition attorney.

Many solo practitioners that I have worked with would like to sell their practices in a cash sale. However, this seldom happens due to concerns that clients and referral sources may not transition to the acquiring firm, especially when client business comes from personal and professional referral sources. Rather than a sale a merger or “Of Counsel” arrangement is the usual outcome typically under some form of an earnout arrangement based on a percentage of working attorney and client origination collections over three to five years.

When merger or “Of Counsel” opportunities cannot be found the solo practitioner winddowns the practice and closes the doors.

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John W. Olmstead, MBA, Ph.D., CMC