Law firm acquisition: Ensuring a smooth process

law firm acquisition

Acquisitions are becoming more and more common in the everchanging UK legal market for many reasons. A law firm acquisition is a process whereby one law firm acquires another law firm, either through a merger or an acquisition of shares or assets. In a law firm merger, two or more law firms combine to form a single entity, whilst in an acquisition, one law firm purchases all or a portion of another law firm’s assets or shares.

The purpose of a law firm acquisition may vary, but they are typically carried out to achieve strategic goals such as increasing the acquiring firm’s market share, expanding its service offerings, or entering new markets. It can also be a way for a firm to gain access to new clients, talent, or expertise.

Law firm acquisitions can be complex and involve a range of legal, financial, and regulatory considerations. They require a detailed due diligence process to assess the target firm’s financial, legal, and operational affairs and to identify any potential risks or liabilities. Additionally, you will be required to inform regulatory bodies such as the Solicitors Regulation Authority before the acquisition can proceed.

 

Legal considerations in a law firm acquisition

There are many legal factors that should be considered when planning your acquisition, some of which are listed below:

  • The acquisition process will involve a legal due diligence exercise, which involves a detailed review of the target firm’s legal, financial, and operational affairs to identify any potential liabilities or risks.
  • The legal framework that governs the acquisition process will depend on the type of acquisition being undertaken, whether it is a merger, acquisition of shares or acquisition of assets.
  • Legal documentation such as sale and purchase agreement, share purchase agreement, and asset purchase agreement will need to be drafted, reviewed, and executed by both parties.
  • The firms must ensure compliance with the regulatory framework established by the Solicitors Regulation Authority (SRA), which governs the professional conduct of solicitors in England.

 

Financial considerations

When carrying out a law firm acquisition, there will be a number of financial considerations that must also be addressed before the merger takes place, such as:

  •  The valuation of the target firm is crucial in determining the cost of the acquisition.
  • The buyer will need to conduct financial due diligence to determine the target firm’s financial performance and profitability, as well as to identify any potential risks or liabilities.
  • Financing options will need to be considered, such as cash, debt financing, or a combination of both.
  • Will there be any deferred element to the purchase price, and if so, to what extent and for what length of time?

 

Regulatory considerations

SRA approval is no longer required for law firm mergers, acquisitions or closures to take place; however, firms going through these types of processes are still required to inform the SRA of the change to their firm.

 

Other considerations

  • Is the newly acquired or merged firm going to operate in the same markets? Are there any markets that the firm will be required to exit before the changes take place?
  • If the law firm acquisition involves exiting a specific market, firms must consider what will happen to their existing client files when the acquisition takes place.
  • Cultural fit between the two firms must be taken into account, as well as the potential impact on clients and staff.
  • What impact will the acquisition have on current staff and personnel. Firms may be required to assess the skills and expertise of current employees, identifying redundancies, and determine the need for new hires.
  • Communication with key stakeholders such as clients, staff and regulatory authorities is vital to ensure the success of the acquisition.

How Recovery First can assist with law firm acquisitions

If a firm is required to exit a specific legal market to allow for a law firm merger to take place, Recovery First can assist.

Recovery First helps law firms withdraw from specific sectors of the legal market in law form acquisition situations, whilst ensuring maximum value is retained by the law firm. We work alongside restructuring lawyers, accountants, insolvency practitioners, restructuring and corporate recovery specialists to ensure the most profitable outcome is achieved on any file transfer agreement.

We provide a flexible approach and can facilitate a phased approach of transferring work to our panel of solicitors.

We guarantee 100% confidentiality for all clients. If you would like to find out more about Recovery First’s process, feel free to get in touch today via email at david.johnstone@recoveryfirst.co.uk, or 07887796989, or contact Sally Dunscombe at sally.dunscombe@recoveryfirst.co.uk or 07774205870.

 

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