I am the managing partner of a sixteen attorney insurance defense firm in Kansas City. Several of our insurance company clients have advised us that they are willing to send us cases in Texas. We have decided that we would like to establish an office in Texas. Our plan is to hire three lateral attorneys with seven to twelve years experience with Texas based insurance defense firms. We are not certain as to the best city to establish this office. We are thinking it should be a central location. We would appreciate your thoughts.
Unlike many states that have one or two major cities Texas has several including Austin, Dallas, San Antonio, Houston, Ft. Worth, El Paso, Corpus Christi, and others. Austin, Dallas, San Antonio, and Houston are all desirable locations for branch offices. Austin is more centrally located if your goal is to service the entire state.
I think it would be risky to simply try to guess as to the appropriate location. Your clients may have law firms they are using in certain areas of the state and may be looking for you to serve a need in a particular area of the state. They may not be willing to pay your travel expense if you are on the other side of the state. If this is the case this is the area that you need to be. I suggest that you have a discussion with each of these clients and ask them where their cases are concentrated and where they would like to see you have an office. This should dictate the office location. Hopefully, each of these clients are on the same page. If each of these client’s cases are concentrated in different geographical areas ask your clients whether they are willing to pay for travel related expenses from a central location. This should guide your location decision.
I would also make sure that these commitments are solid from each of these clients. I would get commitments from each client as to the types and number of cases they envision sending to you so you can properly assess the profitability of establishing a branch office. Do some research on the availability of experienced lawyer talent in the area. I would also give some thought as how you plan to integrate these Texans into your firm and culture. See my prior blog on branch offices.
John W. Olmstead, MBA, Ph.D, CMC
Our firm is a twelve lawyer firm in Austin, Texas. We have been approached by the owner of a three attorney firm in an adjacent city who has a complimentary practice consisting of institutional business clients. He is looking to retire within the next thirty days and he would like us to acquire his clients. We have reviewed his practice and we would be willing to take over his clients but not his personnel or other fixed assets. He has no interest in a merger or an lengthy relationship with us. It could add $800,000 per year to our practice. We would appreciate your thoughts.
It sounds like a great opportunity if there are no conflicts, the clients actually transition, and the billing rates are in line. Start with conflicts checks. Then ask for five year's of financial statements and tax returns, internal financial reports, schedule of billing rates, client lists, copy of building and equipment leases, and malpractice applications. Assess the stability of the revenue stream, repetitive ongoing clients, client dependency, etc. Prepare a letter of intent with terms for acquiring the practice. I would lead with a down payment of say $25,000 and then a percentage of collected revenue for say five years at 20% and see how he responds. He will want more certainty and a fixed price. If you have to go with a fixed price to seal the deal structure it with an initial down payment, payments over three to five years with provisions for reduction in the purchase price if the clients and revenues don't materialize. Make sure there are no pending malpractice claims or other liability issues.