Law Practice Management Asked and Answered Blog

Category: Succession/Exit Strategies

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Dec 03, 2025

Law Firm Succession Planning – Spouse Having to Windup a Husband’s Practice

Question:

My husband’s ( Robert) practice is located in Alexandria, Virginia. The practice is a general practice with a focus on estate planning, family law, and real estate. He is now sixty and suffering from Alzheimer’s.  He has three legal assistants and two associate attorneys. The associates are newbies each out of law school less than three years, are risk adverse, have no client book of business, and have no desire to own a law firm.  As my husband’s physical health has declined his mental acuity has declined as well. However, rather than examining possible succession alternatives he has continued to practice and the quality of his services to clients has declined. Clients have taken notice and many have taken their business to other law firms. Recently I, who serves as the firm’s office manager,  approached several law firms regarding possible sale of the practice. All of the law firms that I approached have rejected my proposals advising me that since the firm is “uniquely my husband” and without a lengthy transition, they do not believe that there is sufficient value to warrant a practice acquisition. Four weeks ago, I approached both of the associates and both advised me that they did not wish to acquire this or any other law practice. Last week both associates gave their notice and advised that they were joining other law firms in the area. Based upon the medical advice of my husband’s  doctor he has decide to close the practice and has asked me to handle the logistics of closing down the practice.

Response:

Unfortunately Robert’s failure to plan for his succession and transition has resulted in:

  1. Loss of compensation for the goodwill of his practice and the sweat equity that he invested because of the need for a hasty practice sale;
  2. A one generation law firm;
  3. Loss of peace of mind for Richard’s family and employees;
  4. Failure to provide continuity for clients and employees; and
  5. Failure to continue the legacy of the firm that Robert built.

Had Robert reconsidered his attitude of having partners, hired and groomed entrepreneurial associates with a desire to own a law firm, institutionalized the firm’s brand to be less uniquely Robert, and put in place both a short-term practice continuation plan and a long-term succession plan, the story may have ended differently.

You may not have much choice but to close the doors and windup the practice. You should check with your state bar association regarding your state court’s rules for the proper procedures for doing this. In many states a court may step in when a solo attorney:

Because clients’ cases, funds, and confidential information must be protected, the court ensures there is a responsible lawyer to manage the transition. Typically the court-appointed attorney (sometimes called a practice administrator, trustee, or receiver) is authorized to:

  1. Secure and inventory client files
  2. Notify clients of the situation and their options
  3. Return client files and property
  4. Manage trust accounts and distribute funds properly
  5. Seek continuances or withdraw from cases appropriately
  6. Close the office, handle billing, and deal with vendors
  7. Ensure ethical obligations are honored

They do not usually take over the cases themselves unless the clients choose to hire them separately.

The goals are to:

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

Nov 26, 2025

Law Firm Succession Planning and Transitional Work

Question:

I am the owner of a 16 lawyer litigation firm in San Diego, California. There are 6 non-equity partners and 9 associates. I am 65 and hoping to retire in the next five years. I am planning on offering equity to two non-equity partners next year and possibly offering equity to other non-equity partners in the next few years. In addition to working out the financial arrangements and partnership structure issues that are typically documented in a partnership agreement, what sort of transitional issues should I be concerned about and plan for. Your advice is appreciated.

Response: 

Transitional work typically falls into three general categories:

  1. Legal (lawyering) skills
  2. Client and Referral Sources
  3. Firm Management

Legal Skills

Frequently this is a major issue that requires attention in small sole owner/founder firms. There are no other lawyers in the firm with the legal skills that the owner has and will be required for the firm to be successful in the future. For example, I have worked with some litigation firms where the other attorneys in the firm (associates and non-equity partners) have not ever tried a case. In such situations several years of training and development in this area will be required and seasoned laterals may have to be hired or the firm sold or merged with another firm. In your case since you have several non-equity partners on board I assume that they are seasoned lawyers and this is not an issue at your firm. If this is the case there be no to little transitional time needed in this area.

Client and Referral Sources

This is an area of concern for most firms. Typically, the firm owner/founder has brought in most, if not all, of the client business into the firm and he or she controls the clients and the relationships with clients and referral sources. In these firms if the owner/founder were to leave the firm abruptly it is questionable whether the firm could survive after the owner/founder is no longer there. If this is your situation you will need to begin a focused and planned transition with specific clients and referral sources, tasks, timelines, and assigned lawyers. How long this will take will be dependent upon the number of clients, number of relationships that you have within the client organization for institutional clients, and the number of referral sources that you have that send the firm business.

Law Firm Management

Law schools do not train lawyers in management. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. It has been my  experience that lawyers who are “loners” have traditionally been poor managers. You are going to have to decide who will be good manager, or managers, and begin training and transitioning appropriate functions over to them.

The following are recommended areas in which the management skills should be developed:

  1. Client relations, including origination, development and retention.
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties.
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination.
  4. Administrative staff organization, relationships and utilization.
  5. Financial management including budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information to manage and run the firm.
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists.
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills that will be required.

I suggest that your develop a transition project plan in Excel with a breakout of tasks, responsibility for accomplishment, start date, and end date under the following broad categories:

Legal skills
Client and Referral Source
Firm Management

Under the client and referral source category each client/referral source contact should be listed.

You should also begin bringing other lawyers into your cases in order the your clients can experience working with them. Assign them as co-responsible attorneys on cases and gradually have them be responsible for billing and communications with your clients.

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

Nov 19, 2025

Law Firm Succession Planning – Selling Practice to Non-Equity Partners or Associates in the Firm

Question:

I am the sole owner of a five lawyer business transactional law firm in Cincinnati, Ohio. I  am sixty-seven and hoping to retire in the next three to five years. Besides myself there are two non-equity partners and two associates in the firm. I have not properly saved for my retirement and I am hoping to sell my practice to the two non-equity partners in the firm for a substantial sum. I founded the firm thirty years ago and believe that I have invested substantial sweat-equity in building the firm up to where it is today. I am not sure where to start and whether my expectations are realistic. Your suggestions and recommendations are most welcomed.

Response:

Years ago when interviewing non-equity partners or associates in a law firm I would never have asked them if they were interested in equity ownership or partnership since the answer would have been yes. Today, this is another story. Many non-equity partners and associates today do not want to own a law firm as sole owners or even have equity in a equity partnership. Don’t assume that your attorneys even have an interest.

So your first step will be to talk with each of them and determine their level of interest.

Your next step will be to determine the value of the firm and what you hope to ask for and how you want to be paid. Some firms have substantial goodwill value and others have little goodwill value at all. Firms that have little value are those where all the business is originated by the owner and he or she controls the referral sources. In these firms when the owner leaves there may be little to no future business.

In the final analysis the value of the practice is what an outside buyer or an attorney working for the firm will pay for (or invest) the practice. A balance often has to be struck between valuation and affordability. The valuation process is simply a tool to use to help you begin discussions and get to this point.

You also have to keep in mind that many of your competitor law firms are offering equity partnership with no buy-in at all.

I believe that firm value has to be balanced with affordability and a prospective equity member’s ability to pay for the shares. It all comes down to compensation. Generally, I find that a prospective equity member or partner must be able to see a significant compensation increase with a breakeven/payback period of around three years – no more than five. I also believe that when shares are seller financed the period should be no longer than five years. Many firms do not sell shares based on formal valuation – other methods are used.

Questions that equity member candidates usually raise:

1. Is the breakeven/payback from the investment in say three years as a result of the compensation gap?
2. How much more will he or she earn as an equity member?
3. Can he or she earn enough as an equity member to justify the investment?
4. Can he or she earn more as a partner somewhere else with as large investment, a smaller investment, or even with no buy-in at all?
5. Can he or she earn more somewhere else as an associate or non-equity partner?

In many law firms’ compensation is based upon performance and contribution and ownership shares have little or no bearing on member or partner compensation. Their primary goal is to acquire and retain talent.

Your expectations may be realistic if the clients and referral sources stay with the firm when you are no longer there and if your non-equity partners care about equity and owning a law firm and are willing to make the investment and take the risk.

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

 

 

Aug 14, 2024

Law Firm Succession and Exit Strategy – Referring Out Work too Soon

Question:

I am an estate planning attorney in Chicago. I am currently 72 and have been in practice and owned my own firm for 45 years. In the past I had an associate attorney in the firm and a couple of legal assistants. Currently I have one part time associate no assistants. I do all of my own paralegal and administrative work. My associate has no interest in taking over my practice. Therefore, I am considering options as what to do with my practice. I have wound down over the last few year by cutting back on my time and hours and referring out almost all of the new prospective clients that contact the office to several other law firms. In fact, I quit taking on new clients three years ago and have referred out a substantial amount of work – gratis – without any form of compensation or referral fee.

I plan on speaking with a firm other law firms concerning joining as an “Of Counsel” with a transition plan for my retirement and taking over my practice. I would like to receive some compensation for the “sweat equity” for building the practice.

I would appreciate your thoughts.

Response: 

Of Counsel arrangements are the most common arrangements for sole owners/solos in situations such as yours. While practice sale is an option, I find the OC route the most common approach acceptable to other law firms. Your financial performance over the last five years often has a lot to do with the level of interest that there will be from other law firms, the compensation arrangements they are willing to offer, and if and whether they will be willing to compensate you for your “sweat equity” or book of business either while you are there as OC or post retirement. Unfortunately, your early winding down and referral of clients has resulted in your financial performance over the last three years dropping from what it was in the past. You have also referred out clients which also would be future referral sources to other law firms which would be a major selling point for establishing a “sweat equity” value for your practice. I often advise my clients – don’t wind down or referral out clients too early – do so when you have an arrangement with another firm. 

This does not mean there is not hope or that any other firm’s will have an interest in you or your practice. It could be that another firm is interest in you, especially if you have a unique skill set that the other firm does not have, and what you can do to help take their firm to the next level in a couple of years. When you are asked to provide financials to prospective law firms you might want to provide a list (redact the names of the clients) illustrating the value of referrals you have made to other firms over the last few years with fee estimates.

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

Aug 07, 2024

Law Firm Succession – Using Affiliation or Of Counsel Relationships as a As a Pre-Merger Pilot Test

Question:

I am sole owner of a law firm in San Rafael, California with an estate planning practice.  I have two part-time attorneys, four paralegals and three legal assistants. I am in my late 70s and want to retire in the next three years. I have recently had several discussions with another small firm that is interested in acquiring my practice via a merger. While I will only be practicing a few more years I want to ensure that I have the other firm would be the right fit for my clients and staff. Do you have any thoughts or suggestions?

Response:

Making the right decision concerning the “Who” is usually more important than the “What” or the “How”. Take your time to do the proper due diligence regarding the other firm. Get to know the partners as well as the employees of the other firm. Ascertain practice, client, and cultural compatibility. If you both determine that a a deal might make sense – then move to the “How”. Even though you have done the best due diligence you can – you won’t really know about the other firm until you try working together. So before you jump – consider taking a few baby steps first. You might start with an affiliation arrangement (Of Counsel) as a Phase I pilot test for six months. Under this arrangement you can both refer work to each other as well as have the other attorney work on some of your client matters. Outline the details of the relationship in an affiliation or Of Counsel) agreement. After six months review the success of the arrangement and whether it makes sense to take the next step. If it does – a Phase II step might be to enter into a more formal form of  practice continuation/transition arrangement with the other firm. Phase III would be either the eventual sale of your practice or merger with the other firm. Taking a phased approach allows you learn more about the other firm which will increase your odds of a successful transition and buys you time before actually merging your practice if that is the direction you should go.

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

Mar 06, 2024

Law Practice Succession Planning for a Sole Owner – A Question of Value

Question: 

I am a sole owner of a three attorney firm in Chicago suburbs. I am sixty-five and have two associates in the firm. We do estate planning, elder law, and estate administration exclusively. While I want to continue working for the next five years I want to begin succession planning and gain some understanding of how to value the firm and what it might be worth, if anything. Your thoughts on this topic would be most appreciated.

Response: 

Prospective buyers whether they be attorneys in your firm or another firm must be willing to pay the price you are asking and they will, when determining what they are willing to pay for your practice, estimate the extent to which they are likely to make more money and improve their position economically by purchasing your ownership interest or practice. If they can do as well in salaried practice or within a short time by starting a new practice, they will be unwilling to pay more than a token amount for the goodwill of the your practice. Likewise, depending upon the individual personal and professional qualifications of a prospective buyer, the same practice may have a greater or lesser value.

Internal Strategy – Selling Your Interest to Other Attorneys in Your Firm 

This is the option that we like to see a firm start with. Determining and receiving a fair price depends largely upon obtaining the right buyer. They must have the ability to keep your practice intact and have the financial resources and inclination to take on the risk of owning a law practice. The right buyer must possess not only adequate professional qualifications, but also favorable personal characteristics which are just as important in determining whether a young lawyer will be able to take over an established practitioner’s practice. Most practices are not sold outright for cash. Usually, payments will be spread over a period of two or three, or more, years. If the buyer is unable to handle the practice successfully, he or she may be unable to continue your practice.

The plans for valuing a withdrawing, deceased, or otherwise terminating partner’s interest in an organized law firm are many. Law firms will generally turn to one or a combination of the formulas listed below:

  1. A dollar figure set for each percent of the share of interest or for each share of stock in a professional corporation (This can be reset each year or on agreement or formula).
  2. A valuation placed on the goodwill or contribution of those who originated the firm.
  1. A valuation placed on the contribution of a partner other than originators of the firm.
  1. Capital attributed to the partner whether contributed in the form of cash, library or other assets.
  1. A calculation to include unbilled work inventory and accounts receivable.
  1. A figure or formula related to annual earnings.
  1. Provision for a gradual reduction in earnings over a period of years.
  1. Provision for some participation for the rest of the life of the partner.
  1. Participation in earnings or other value based proportionately on the number of years of service with the firm.
  2. Funded pension arrangements under the partnership or professional corporation form of practice.

External Strategy – Merging Your Practice with Another Firm

While you have a couple of associates working in the firm don’t assume that they will have an interest in ownership. If not you may have to consider merging with another firm. This is a common approach taken in such situations. More often, the lawyer or law firm will first assess the compatibility and economic feasibility of the merger. After determining that it is appropriate to proceed to join forces, favorable billing and other economic arrangements can be concluded with further considerations including a plan for ongoing income distribution arrangements among the partner and salary arrangements for employed lawyers and others who become part of the merged organization.

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

Feb 14, 2024

Law Firm Succession – Transition of Senior Partners Leadership and Management Roles

Question: 

I am one of three founding partners in a 17 lawyer insurance defense firm in Houston. We have a total of 18 lawyers in the firm – 3 founding equity partners, 4 other equity partners, 5 non-equity partners, and 6 associates. The three of us founding partners are in our 60s and approaching requirement and are concerned about succession planning and transition. We feel that we are in good shape concerning transition of clients but not so concerning management roles and responsibilities. The firm is managed by the three of us and we have kept tight reigns on the administrative/management side of the house. We would appreciate your thoughts.

Response: 

A successful transition strategy involves three components.

  1. Legal Skills (lawyering skills)
  2. Client and Referral Source Relationships
  3. Firm Management and Leadership Roles

While it sounds like you are in good shape concerning legal skills of your other partners and client and referral source relationships, work needs to be done in the areas of firm management and leadership.

Law schools do not train or develop managing partners or lawyer managers, nor does doing excellent and complicated work for demanding clients. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. The better lawyer managers have a second sense for people and management, in addition to being good lawyers and possibly outstanding rainmakers. Many firms develop successors to management by delegating to selected mid-level and junior partners short term management assignments and by rotating these partners through various management areas to develop their general management skills rather than developing particular lawyers as specialists in specific management areas. These firms begin to train mid-level and junior partners by assigning short term, low risk management activities before entrusting them with key management jobs.

Management Skills

The following are recommended areas in which the management skills of mid-level and junior partners can and should be developed:

  1. Client relations, including origination, development and retention;
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties;
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination;
  4. Administrative staff organization, relationships and utilization;
  5. Budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information;
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists;
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills of mid-level and junior partners. Three of the most frequently used approaches for teaching management skills include being assigned to a committee, being elected or appointed to a management or leadership position and serving as a member of a special team.

  1. Committee Membership: Mid-level and junior partners may be appointed or elected to serve on the management or other committees. Depending upon the form of firm governance, partners may be appointed or elected to represent various age groups and/or regional offices in multi-office firms. They may be chosen to serve on other committees such as marketing, associates, recruiting, lateral hires, administrative staff, financial, ethics or the management committee, etc.
  2. Appointed positions: Partners may be appointed to manage functional areas of administrative or substantive firm activity. For example, a partner may be appointed to chair a practice area or one of its sub-specialties. Another one may chair the marketing committee. A third may serve as the firm’s ethics partners, etc.
  3. Special Team: A partner may lead a special team to address a specific issue or function. For example, a partner may be requested to recommend new or emerging practice areas. Another may explore the feasibility of establishing a new regional office. A third partner who has an interest or background in technology may direct the firm’s automation effort, etc.

The mid-level or junior partner selected for training should receive administrative assignments and his or her performance should be evaluated accordingly. Each lawyer manager should be requested to develop a plan for the year, including goals and proposed action plans for accomplishing their objectives. They should be required to review these plans with the head of the committee or the partner to whom they are accountable. Partners who are appointed or elected to specific positions should be accountable to a partner or committee responsible for their actions and be evaluated on their performance. Many law firms consider the success or failure of partners in planning and implementing administrative assignments when recommending or setting their compensation levels. This is done to encourage the firm’s “best and brightest” partners to accept administrative assignments and not feel uncomfortable because they may record fewer billable hours. Also, it would be wise for the managing partner or executive committee to identify and provide other non-monetary forms of recognition to successful lawyer managers.

Planning for the transition of law firm leadership and management calls for the ability of the current managing partner or members of the management committee to spot leadership and management potential among the partner complement. Once this potential has been identified the current management must nurture and develop this potential so as to provide the future leaders of the firm.

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

Jan 31, 2024

Law Firm Equity Partnership – Buy-Ins and Buyouts

Question:

I am the sole owner of a personal injury practice in Orlando, Florida. I am in my mid-sixties and am looking to transition out of the firm and retire in the next five to seven years. I have three associates in the firm. I would like to sell my equity to one of the associates that has expressed an interest and has been with me for many years. I would like to receive some value for founding the firm and my contributions over the past thirty years. I would like to see him a twenty percent interest initially and more over the next few years. I am trying to determine a firm value for calculating his buy-in. I would appreciate any thoughts that you may have regarding how buy-ins for partners are determined.

Response: 

Approaches to buy-ins and buyouts are all over the place in law firms. Here are a few of the common approaches:

  1. Naked in and naked out – given shares or percentage interest.
    No buy-in at all. A new equity partner is given a percentage interest or shares with no buy-in whatsoever. When the partner leaves the firm
    for whatever reason he or she is paid their share of earnings to date and that is it. No buyout for their interest.
  2. Naked in and naked out with cash-based capital contribution.
    A new equity partner is given a percentage interest or shares with a capital contribution in alignment with their percentage interest.
    When the partner leaves the firm for whatever reason he or she is paid their share of earnings to date and their capital account.
  3. Naked in and naked out with cash-based plus WIP and AR buy-in.A new equity partner is given a percentage interest or shares with a capital contribution and a buy-in the unbilled work in process and accounts
    receivable in alignment with their percentage interest. When the partner leaves the firm for whatever reason he or she is paid their share of earnings
    to date and their cash-based capital account plus their interest in accounts receivable and unbilled work in process.
  4. Purchased shares based on a valuation at the time the shares are purchased and sold.
    A new equity partner is sold a percentage interest or shares based on a valuation at the time of purchase. When a partner or shareholder leaves the firm for whatever reason he or she is paid their share of earnings to date and their shares are purchased based upon a valuation of the firm at that time. These valuations often include a goodwill value. Sometimes the purchase price is discounted for sweat equity – time that an equity partner candidate has been with the firm, etc.
  5. Founder Benefit.
    New equity partners are given a percentage interest or shares with no buy-in or a cash-based capital contribution in alignment with their percentage interest and paid their share of earnings to date and their cash-based capital account, if any, when they leave the firm. However, original founders, in addition to being paid their share of earnings to date and their capital account, are also paid a founder benefit often in the form of a multiple of their average individual earnings (compensation) for the past three years.
  6. Buyout based on firm cash-based valuation, plus accounts receivable and work in progress plus percentage of future collections from new business after the termination date for three to five years. This approach used in practice sale situations, particularly contingency fee firms, when a goodwill value is difficult to ascertain. The percentage of future revenue on future business after the termination date serves as a proxy for the goodwill value. This approach is seldom used in multi-partner/shareholder firms. In fact, many multi-partner/shareholder firms specifically exclude goodwill from any valuation.
  7. Buyout based on mandatory retirement and winddown.
    An approach used by some second-generation firms is a mandatory retirement program that can begin as early as age 60 and no later than 65. The program requires a five-year winddown program in which a retiring equity partner reduces his or her work schedule twenty percent per year and compensation draw, distribution, or salary. During this period the partner is paid their cash-based capital account and their ownership percentage times the collectable accounts receivable and billable and collectable unbilled work in process as of the date the winddown program commences. During the winddown the retiring partner is expected to transition clients and management responsibilities.

In the final analysis the value of the practice is what an outside buyer or an attorney working for the firm will pay for (or invest) the practice. A balance often has to be struck between valuation, affordability, and willingness to pay. The valuation process is simply a tool to use to help you begin discussions and get to this point.

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

May 25, 2022

Law Firm Succession – Equity Partnership – Process for Admitting Equity Partners

Question:

I and another partner are the owners of a seven lawyer family law practice in Chicago suburbs. We started the firm twenty years ago after leaving behind a partnership in another firm. Of the other five attorneys there are three non-equity partners and the rest are associates. I am sixty three years old and my other partner is sixty. Both of us are beginning to think about retirement and how we are going to transition out of the practice. Two of the non-equity partners are well seasoned attorneys, have major case responsibility, and bring in client business. We have discussed equity partnership vaguely with two non-equity partners but they have been non-committal. I would appreciate your thoughts and advice on what our next steps should be.

Response:

I believe that you have been two vague in your discussions. Your non-equity partners need to know what the deal is, what financial investment will be required, and what their expected return will be based upon the historical financial performance of the firm. It is hard for non-equity partners or associates to commit to equity and taking on the risk of ownership when they don’t know what the deal is. This is a scary proposition for them and they need detailed information so they can evaluate and make an informed decision. A vague discussion doesn’t cut it. I suggest that you put together an equity partnership proposal that includes:

  1. Profit and loss statements for past the five years.
  2. Balances sheets for the past five years.
  3. A current accounts receivable and unbilled work in process report.
  4. Tax returns for the past five years.
  5. Malpractice insurance application.
  6. Building and other leases.
  7. Proposed Partnership Agreement
  8. Proposed Equity Partner Compensation Plan
  9. Planned date of admission
  10. Governance and management plan
  11. Ownership percentage being offered
  12. Capital contribution or buy-in requirement
Meet and discuss the proposal with your candidates, allow sufficient time for candidates to discuss with their families and advisors, and set a timeline for their decisions. I think you will see a different reaction. If they still are unable to commit your may have to begin thinking about an external strategy and looking around for merger candidates.

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

Jan 26, 2022

Law Firm Succession Planning & Practice Transition – Have I waited too Long?

Question:

I am the sole owner of a twelve-lawyer defense litigation practice in Chicago. We represent automobile manufactures and have approximately ten major clients. I am the only equity partner in the firm and all of the other lawyers in the firm are associates. Two associates are seasoned lawyers with substantial experience and have been with the firm for many years and the other nine have less than five years experience. The two seasoned associates are in their mid-sixties. I am sixty-eight. I just realized that the firm’s office lease expires in eight months and I have decided that this is a good time to retire. I will not sign another lease and I would like to be completely retired in the next six months. My wife has some health issues and I need to devote my total time time to her. I have talked with the two senior associates and they plan on retiring as well. Therefore, I will have to either close the firm or find another firm interested in taking over the firm. Have I waited too long?

Response: 

Possibly so. Eight months is a very short timeline to locate another law firm that might be interested in acquiring or merging with your firm. However, this is not always the case. I have had situations where interested parties were located in a month or two through cold approaches, discussions held, details worked out, and the transaction concluded within six months. If you have a few firms in mind that you could approach the process could go much quicker than if cold approaches have to be used. So your timeline is not impossible but you need to get started yesterday. Keep in mind that client transition is paramount in the success of such arrangements and usually the acquiring firm wants a transition period, often of a year or so in which you work at the firm in a consultant capacity to assist with client relationship management and transition. Therefore, you might have to stick around in an Of Counsel role for a year or two.

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

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