New years often spark new beginnings, and sometimes, the beginning of the end... The festive season's ‘pause’ allows law firm owners to reflect and consider retirement or planning an exit. After being involved in double-figures worth of law firm mergers and acquisitions, here are my top tips for a successful sale….

Optimise

Prepare your business for sale well in advance. This helps achieve a higher sale price and ensures future contingent payments are deliverable. Put yourself in the buyer's shoes and systematically address their anticipated ‘needs and wants’. This preparation includes optimising your firm's operations, financial health and client relationships.

Assess motivation and timing

Understand why you want to sell and if the timing is right. Consider market conditions, personal circumstances, and your firm's readiness. Selling at the right time can significantly impact the sale price and ease of transition. Reflect on your personal goals and the current market trends to determine the best time to sell.

Make due diligence easy for the buyer

Due diligence allows buyers to learn about your business and ensure comfort with the price and quality of assets. Present accounts, business records, client lists, technology stacks, people records, client files and regulatory records in an organised, structured, and understandable manner. Full disclosure is crucial as it forms the basis for warranties and indemnities granted to the buyer. Transparency during this process builds trust and can expedite the sale.

Be flexible

Flexibility with terms and conditions can make your firm more attractive to buyers and help achieve a better sale price. Being open to negotiations and willing to accommodate reasonable requests from potential buyers can make you attractive to work with.

Business plans and revenue bridges help

A clear business plan outlining your firm's strengths, market gaps, and competition helps buyers see future value and provides a transition roadmap. It demonstrates growth potential and profitability, recognising future value in terms of a revenue bridge. Highlighting contracts won but not yet revenue-producing or integration savings not yet achieved from a recent acquisition can add significantly to the sale value.

Multipliers

Large, well-managed Will banks, a brand that retains clients beyond individual lawyers, long-term revenue-producing contracts, and proprietary IP that enhances service efficiency or quality can help achieve a greater multiplier in value. These factors contribute to the overall attractiveness and valuation of your firm.

Do your homework

If you have multiple suitors, select the right one carefully. Conduct due diligence on them: check their balance sheet, take references, and ensure good relationship chemistry. Understanding the financial stability and reputation of potential buyers is essential.

Negotiation

Be prepared to discuss terms and conditions to reach a mutually beneficial agreement. Spend time on detailed heads of agreement. Know your red lines and maintain consistency on key deal points for smoother negotiations. Effective negotiation skills can help you secure favourable terms and conditions – have a plan and execute it.

Be prepared to compromise

A good deal is one where both parties don't get everything they wanted but still see the transaction as commercially and strategically beneficial. Being willing to compromise on certain aspects can facilitate a successful sale and foster a positive relationship with the buyer.

Transition planning

Develop a joint transition plan for a smooth handover to the new owners. This may include training, introducing key clients and staff, and providing ongoing support during the transition period. A well-executed plan helps maintain continuity and minimise disruption. Ensuring a seamless transition can enhance the buyer's confidence and will be key in preserving value.

This article was written by Rob Aberdein, Director at Simpson & Marwick and published in the Scotsman on 6 January 2025