We asked Andrew Manning founder of Know Progress to share his thoughts on preparing a law firm for sale.
The last few years has seen an increasing number of mergers or takeovers by law firms outside of the Top 100. This reflects a number of factors including a quest for economies of scale to enable investment in new technology, more lawyers, new partners, new offices, enhanced management, increased profitability, to enter new geographic markets and/or increase the range of services that can be offered, to become more attractive in the “war for talent” and competition of clients, and/or to raise additional and/or replacement capital to enable partners to retire or otherwise exit.
One important part of the sale or merger process, often forgotten, only partially completed, or attempted in the middle of negotiations is to make the firm ready for and attractive for sale or merger.
Why is this important? Well let’s consider similar activities that many of us undertake from time to time, like going on a date, selling a car, or selling a house.
If you are going to sell your house, it is likely that you will carry out any major repairs that require doing, such as mending a roof, or recognising that the sale price of the house may well be discounted to reflect such. It is likely that you will do some decorating, tidy the garden, plant some flowers, make some hot coffee or bread and put some flowers in vases, when viewers come round. In short you will try and make it as attractive as possible to potential buyers and address any issues that may lead them to withdraw from a transaction, or discount their offer, if and when discovered. The potential buyer will probably look around the house in some detail after initial viewings. They are also likely to walk around the local area, speak to people about the area, do some on-line research. They are quite likely to appoint a surveyor to identify any building related issues. Their solicitor will do legal searches and also ask you to answer specific questions such as whether the property has ever flooded, whether you have ever been refused insurance etc.
I recently sold my car, and the prospective, and eventual buyer, did some on-line research about the make and model and the specific vehicle. Their father even had an app that linked to the onboard computer to trace any historic or current faults, and a device that tested whether the paintwork had ever been damaged. They asked for the service records and raised a number of questions to me. Only when these were addressed to their satisfaction did they proceed with the transaction.
When going on a date (so I am told- it is a very long time since I have!) then people want to make a good first impression. They are likely to have a bath or shower, get their hair cut, put on smart clothes, brush their teeth, get their car cleaned, etc.
It is important when you are looking to sell or merge your legal business you get it ready too- you want to get ready for the first date and make sure that the first impression is good (and that is also very true if you are the potential buyer or merger partner). Equally importantly you need to get the substance behind the initial façade and first impressions ready too- else you can expect that the price be discounted, offers come with specific conditions and/or exclusions and/or requirements for guarantees and warranties, or the potential partner will walk away- potentially even walking out and leaving you at the altar. Or it may lead to a lot of arguments post transaction and potentially divorce.
In the next articles we will explore how you can make yourself more “merger ready” and more attractive to potential partners.
Author: Andrew Manning
Andrew Manning is a very experienced leader of service organisations in the business and professional service fields. He has been CEO of two law firms, and advisor to a number of others. Throughout his career he has been involved with the search for, due diligence, acquisition and disposal of a number of businesses. He has also led integration for both acquirers and the acquired and thus has hands on practical experience of dealing with the issues that arise pre and post sale or merger.
Andrew, an alum of Harvard Business School, currently has a portfolio career, mixing Non-Executive and part time/interim executive roles with consulting projects, mentoring and training services. He is also the author of a book on how to create more value in service organisations which has been endorsed, amongst others, by two Harvard Business School professors.