Law Practice Management Asked and Answered Blog

Category: Merge

Apr 17, 2019


Law Firm Merger/Acquisition – Should We Merge or Acquire

Question: 

I am the managing partner of an eight attorney firm in Dayton Ohio. We have two equity partners (both in our early fifties), two non-equity partners, and four associates. Our practice is a very niche specific practice and there are only three or four other practices in the state that do the work that we do. There is another firm in Cleveland, Ohio that has approached us regarding possible merger or acquisition. The firm does similar work that our firm does but this firm also handles some areas that we don’t handle but would like to get into that falls within our niche area. There are two founding partners in the firm – one in his late sixties and the other in her early seventies, one associate attorney, and four staff members. The two partners are planning on moving towards retirement and are looking for a succession strategy. They have not shared with us their timeline or any financial information. We have had one face-to-face meeting and several phone calls. We would appreciate your take on this, next steps, and whether we should pursue further.

Response: 

You have not indicated whether your firm has a strategic plan? If you do my next question is whether this practice area and having another office three and one half hours away supports the vision of your firm?  Often, but not always, a merger will emerge as a way to achieve some aspect of the firm’s vision. For example, a merger might help the firm:

The above would be right reasons to consider a merger or acquisition.

You should take pause if the reasons you are considering merging or acquiring the other firm include:

If your firm does not have a strategic plan you may want to at least engage in some form of internal self-analysis to insure that you are looking through a clear lens, are building a sound business case for the merger or acquisition, and are identifying the characteristics of the ideal merger/acquisition candidate.

In your situation you are looking at actually acquiring a practice three and a half hours away with two senior partners that will be retiring. Obviously, there are risks but the devil will be in the details that will come out of a thorough due diligence examination which I believe is your next step. Here is a link to a prior post concerning information that you should ask the other firm to provide. 

Your due diligence examination should focus on:

Right up front you should ask the partners in the other firm their specific timeline for retirement and how long they will be available for client and management transition. A key issue will be whether clients will remain with the firm when they retire? Are there others in the firm, non-equity partners or associates, that the clients have confidence in to the extent they would remain with the firm or will this all be on your shoulders as owners of the acquired firm? The other question you should should ask up front is what the partners of the other firm are looking for in the form of purchase price or compensation for the firm.

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

 

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