Law firm exit strategy: Withdraw from a legal market

law firm exit strategy

The legal industry is currently undergoing major changes, with a number of new mergers and acquisitions leading to consolidation within the market. Unfortunately, we are also witnessing a high percentage of law firms struggling financially due to the current economic climate and changes within the legal services industry, such as the whiplash reforms and the fixed costs extensions.

Because of the current nature of the legal industry and the economy, many law firms are making strategic decisions to exit specific practice areas, or to close or sell their firm completely. Whichever route is chosen, it is always sensible to have an exit strategy or a succession plan in place to successfully transition and avoid a distressed situation.

Making a law firm exit strategy

A well planned strategy to exit a market, sell your firm, close, or transition the practice to another firm is needed to protect your clients, your firm, and yourself.

Your law firm exit strategy should include exactly what will happen to your firm, your staff and your caseload when you exit the market. Whichever path you decide to take for your firm, you will need to consider how the firm will adapt in these situations and how your clients will be looked after.

Selling your firm: Selling your business can be a difficult decision to make, and when selling a law firm, there are a number of factors which must be taken into consideration to ensure the sale is SRA compliant. Some of the main things to consider when selling your firm include; informing your clients of the sale, informing the Solicitors Regulation Authority (SRA) of your plans to sell,  dealing with the run-off of files prior to the sale of the firm, and possibly successor practice insurance cover.

Exiting one or more areas of law: Instead of selling or closing your firm completely, you may decide to exit one or more areas of law, such as personal injury, to focus on more profitable areas and increase cash flow for your business. Similar to selling your firm, there are a number of steps that must be taken when exiting a specific market, such as ensuring your clients are informed and that their cases are transferred to a firm with the knowledge, expertise and capacity to take on their case.

Merging with another firm: If you decide to merge your firm with another firm, the process may be fairly straightforward, or you may encounter some problems with the merging firm. We recently assisted in a situation involving merger candidates who were required to exit a specific market before the merger could take place as the merging firm did not wish to operate in this specific market.

Closing your firm: The decision to close a firm can be made for a number of reasons, most commonly due to financial difficulties, insolvency, issues in obtaining professional indemnity insurance, or the retirement of a sole practitioner. Closing a practice within the legal services industry can be a fairly complex process. There are many things that must be considered to ensure the firm closes in an orderly manner, avoiding any compliance issues and ensuring clients are well looked after when the firm ceases to practice. 

 

How can Recovery First assist?

The Recovery First model can be used within a law firm exit strategy to assist in the run off of files and ensure an SRA compliant closure or sale, avoiding a distressed situation. We can also provide assistance in merger and restructuring situations, assisting firms in exiting specific markets.

We provide a solution for law firms directly, as well as insolvency practitioners, accountants, restructuring and corporate recovery specialists helping law firms to withdraw from the market – even in very distressed situations where SRA intervention is a real and present threat.

As each project is unique; the flexibility of our model allows us to bespoke a solution to ensure the best outcomes are achieved, utilising the specialist expertise of a combination of our panel law firms to ensure maximum value is recovered for the WIP assets.

And because our model aligns all parties’ interests on success at conclusion of cases, there is no need for any lengthy due diligence so we are able to act very quickly.

Our service provides a methodology which:

  • Is SRA compliant and ensures clients are protected
  • Provides compliant formal commercial contracts between all parties
  • Manages the transfer process of live matters from original firm to our panel firms
  • Provides financial management of the costs recovery process, including the allocation and distribution of funds
  • Give you access to a dedicated, experienced management team to oversee the process from investigation to conclusion

 Our clients receive 100% of their recoverable WIP, plus their allocated entitlement to deductions from damages, anecdotally returning significantly higher value than a traditional WIP sale.

Our team manage the transfer of files from start to finish; placing case files with an approved law firm  to protect the integrity of the client’s case, while at the same time maximising the value of the work in progress.

We guarantee 100% confidentiality for all clients. Get in touch today using the contact information below, or click a button at the top of the page and we will contact you to discuss the process.

It's never too late to speak to Recovery First. Contact us now in the strictest confidence

Sally Dunscombe:

sally.dunscombe@recoveryfirst.co.uk

David Johnstone:

david.johnstone@recoveryfirst.co.uk

Telephone:

01357 440140

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