Law Practice Management Asked and Answered Blog

Category: Agreement

Jul 04, 2017

Law Firm Merger Agreement

Question: 

Our firm, a fourteen-attorney litigation firm in Sacramento, California, is planning on merging/acquiring a three-attorney firm in the area. We have completed our due diligence and both firms have agreed on the terms of the merger. What type of agreement and legal documents do we need to effect and implement the merger?

Response:

If business law is not your forte you may want to consult with a business attorney to determine the appropriate legal agreements that should be used to effect the merger. The agreement may be as simple as a Letter of Intent signed by the two law firms, a Memorandum of Understanding, or as formal as a merger agreement covering the major details and terms of the merger which have been approved by required vote of the partners of both firms including:

1. Merged firm name
2. Effective date of the merger
3. Method of integration, assets and liabilities contributed by each firm, and whether accounts receivable and work in process will be pooled and contributed
4. Management and governance structure and names of partners from each firm that will hold key management roles/positions
5. Compensation system for partners, non-equity partners, associates, and staff
6. How employee benefits will be handled and integrated
7. Capital contributions
8. Employees and their respective roles in the merged firm

Typical exhibits to agreements often include:

1. Employee Benefits Summary
2. Asset/Equipment Purchase Agreement
3. Employee Roster and Wage Rates
4. Proforma Balance Sheet
5. Proforma Income Statement
6. Partner Compensation Plan
7. Non-Equity Partner Compensation Plan
8. Associate Attorney Compensation Plan
9. Staff Compensation Plan
10. Attorney Career Advancement Plan
11. Office Lease
12. Partnership Agreement

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