Law Practice Management Asked and Answered Blog

« August 2011 | Main | October 2011 »

September 2011

Sep 27, 2011


Law Firm Upstream Mergers/Acquisition – Merging With a Larger Firm

Question:

Our firm is a three partner general practice firm in a small community. Our ages are 72, 68, and 64 respectively.  Our firm has not adequately prepared for succession/exit of the partners. We have over the years hired associates but have been unable to keep them – they have all left for greener pastures. We are now contemplating merger with a much larger firm that has 40 plus attorneys. We have had several meetings at the office and we have provided them with our financials. They have not provided us with detailed information. We are getting frustrated. It has been over four months since we began talking with this firm and we seem to be "stuck" and not maintaining momentum. We have other options that we have just begun exploring. How can we get "unstuck" and move this process along?

Response:

Right off the bat – admit that this is not a merger of equals – it is more of an acquisition.  Hopefully, you have discussed firm name, whether your existing office will be retained or closed, and the future roles of each you as well as your staff. These are often deal breakers and many firm merger talks never get past this point.

You really need a project plan – or timeline – for a project like this with due dates and milestones. Otherwise, the process will continue to drift. You need a timeline for this merger candidate as well as other options that you are pursuing. I would contact your contact in the larger firm and agree on a timeline. You might want to ask them to provide you with a proposal within an agreed date – say 30 days and see what they come back with – it could turn out that their partners are not able to come to any consensus – and the merger simply dies.

If the firm does come back to you with a proposal – now it is your turn to do your due diligence. Start with the people – do you like these people and do you believe you would enjoy working with them? You should insist on a few social functions, etc. so you can get a feel for their people. Don't take a shortcut here.  Ask for their financials, personnel rousters, clients lists, partner demographics, list of partners that have retired and are receiving payouts and upcoming retirements in the future.

Insure that you obtain an understanding for the work culture of the firm? Are you compatible? Obtain all the detail that you can about governance and structure, the compensation system and how it works, retirement of partners – whether funded or unfunded, and complete details on the mechanics. How will the merger/acquisition be implemented? Will accounts receivable and work in process be pooled in the new firm – or worked off and collected in the old firm? How many shares etc will you have in the firm? Are ownership shares and compensation shares different?

All of these questions, and many more, need to be addressed in order to decide whether the merger makes sense. If it does and you decide to move ahead – then you and the firm can begin putting a implemention/integration plan together. 

Click here for our blog on succession and retirement

Click here for our law firm management articles

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

Sep 21, 2011


Law Firm Strategic or Long Range Plans – Why Does a Small Firm Need One?

Question:

I have a small firm in Indianapolis. I am the only attorney in the firm and I have three staff members. I have been in practice for 30 years. I have been reading your posts on strategic planning. Why do I need one for a small practice such as mine?

Response:

A strategic or long range plan serves as the roadmap for your practice. When you go on vacation do you head out without a map, plan or your GPS. Probably not. The same should be true for your practice. A plan defines who you are, where the firm should be heading, and how you get there. It helps focus you as well as your staff and improves productivity, accountability, and alignment with your goals. It identifies what work your firm does (or sometimes more importantly) what it does not do. In essence it outlines what services your are selling, to who, and where. Your plan then lists out the steps you should be taking to move to your desired future.

I have seen solo practitioners time after time reach their 60s and realize that if they had it all to do over again they would do things differently. Often they have completely failed to put in place solid succession strategy and realize no value for their sweat equity when they retire. A plan or roadmap can help direct your efforts over the years.

The important thing is to it keep your plan simple and update it often. Ten pages or less – in outline form. I have seen excellent one page plans. When circumstances change – change it. Review it every month.

Click here for our blog on succession topics https://www.olmsteadassoc.com/blog/category/successionexit-strategies/

Click here for articles on other topics

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

Sep 14, 2011


Law Firm Succession: Opportunities for Solos and Small Firms to Join Other Small Firms Looking for Talent to Implement Their Succession Strategies

Question:

I am a solo practitioner located in the Chicago suburbs. I have one staff member. I am 53 and have been practicing law for over 25 years. I try to limit my practice to estate planning and estate administration. However, I do have to take on other general practice type matters to stay busy. Practicing law by myself is beginning to take its toll on me – it gets lonely practicing alone, coverage and backup for clients is difficult, and I have the full burden of the worry 24/7. What do I do with the practice when I get older and reach retirement age? I have not taken a vacation in years. I have been thinking about the pros and cons of joining another firm? What are your thoughts?

Response:

One option would be to grow your practice internally. You could add a younger associate attorney. However, it sounds like you currently don't have the business that would support the position. Then you would have to train the mentor the assoicate and pray that once they become productive – two or three years down the road that they stay with you and don't leave for greener pastures.

Another option would be to bring in a more senior lateral attorney with experience and a book of business.

A third option would be to look around for another solo or small firm that is looking for someone to carry the firm into the next generation as a part of their succession strategy.

According to a 1995 American Bar Foundation Lawyer Statistical Report the number of bar admissions has been consistently around 30,000 each year since 1977. Further, the number of lawyers by age reached 30,000 for lawyers under 50. Those lawyers in 1995 who were in their late 40s will be reaching retirement age between 2010 and 2015. Law firms have a larger population of lawyers in their 50s and 60s that will be approaching retirement and must develop strategies for transitioning their legal and leadership skills as well as their client relationships and market presence.

Sixty-five percent of law firms’ equity partners are in their late 50s or early 60s. Over the next 10 years there are going to be a lot of successions.

There are a lot of firms looking for someone just like you.

I am currently working with several firms in the ChicagoLand area that have asked us to help then find someone just like you. So there is a lot of opportunity to join a firm that is looking for a succession strategy that will carry the firm into the next generation.

The big questions is always the "who" more than the "what". So put together a plan and start looking around and see if you can find a compatible firm.

Click here for our blog on succession topics https://www.olmsteadassoc.com/blog/category/successionexit-strategies/

Click here for articles on other topics

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

 

Sep 07, 2011


Increasing Law Firm Profitability: Using Metrics and Measurements to Focus Performance

Question:

Our firm does mostly flat fee work. I am the sole owner of the firm and am considering hiring my first associate. Each of us work as a team and do a lot of cross-over work on all client/matters. I have two paralegals. We don't keep timesheets on our flat fee cases. Do you have any suggestions as to how to proceed with the hiring of this associate?

Response:

It sounds like your firm is relucantly approaching the next step in its growth. Adding your first associate will change the dynamics of your firm and will require you begin to implement more formal approaches to performance management for all members of your team – the new associate, your staff, and yourself. I would start by thinking through the exact tasks and roles that you would like the associate and other staff members to perform. In other words define the associate position. Do to expect the associate to bring in business? Are you willing to train a new associate without experience or are you looking for someone with experience. Can you structure work so there is less crossover of team members on files? If not, how are you going to measure their performance and production? (Time, their production fee dollars, file or case counts, etc.) Are you going to incorporate a variable pay or incentive bonus component into the compensation plan for the associate as well as the other staff members? (More firms are doing this) Define the position first and then decide on the "who".

I encourage you to begin establishing production (performance) goals for all employees and then measure performance against these goals. Tied at least a portion of compensation to accomplishment of these goals. More firms are starting to pay for performance and less for simply showing up.

Click here for articles on other topics

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

    Subscribe to our Blog
    Loading