Selling a Law Firm FAQs

Answering FAQs About Selling a Law Firm

Selling a law firm FAQs

There are many reasons for selling a law firm, from administrative burdens, to cost savings or crystallisation of assets within your firm. Succession planning is also something that all owners should begin to think about as soon as they become an owner, and although you may not be looking to sell today, it is never too early to have a strategy in place.

We have been assisting law firms on mergers and acquisitions for more than 40 years and are proud of our nationally recognised team. This is our FAQ guide setting out the questions we are often asked by those seeking advice on selling their law firm.

Do I need to have a plan in advance?

Having a plan in place to prepare for the sale of a law firm is crucial for ensuring a smooth and successful transaction. This planning process should begin well in advance, often years before the intended sale, to maximise the firm’s value and appeal to potential buyers.

The first step is to conduct a comprehensive review of the firm’s operations, financial health, and legal compliance. This includes tidying up financial records, resolving any outstanding legal or regulatory issues, and ensuring that all contracts, particularly client and employee agreements, are up to date and transferable.

Next, focus on enhancing the firm’s value by building a strong, sustainable client base and streamlining operations. This may involve investing in technology, improving client relationships, and developing a robust succession plan to ensure continuity in client service after the sale.

Marketing strategy is also a critical part of the plan. Identifying potential buyers and preparing marketing materials that highlight the firm’s strengths, such as its reputation, client portfolio, and growth potential, is essential.

Do I need a valuation?

You should consider getting a valuation for your law firm well before any planned sale, ideally 1 to 3 years before you intend to sell. This timing allows you to understand the current market value of your firm and make any necessary adjustments to maximise its worth before putting it on the market.

A valuation early in the process also gives you insight into the strengths and weaknesses of your business. If the valuation reveals areas where the firm could improve—such as financial performance, client retention, or operational efficiency—you have time to implement strategies to enhance its value. This could involve streamlining operations, expanding the client base, or addressing any outstanding legal or regulatory issues.

Additionally, an early valuation can help you set realistic expectations for the sale price and inform your broader succession or exit planning. By knowing the firm’s value, you can better plan your financial future post-sale, including retirement planning or reinvestment in other ventures.

What steps can I take to increase my chances of sale?

• Make sure all your accounts are in order and fully explanatory. Ensure you have prepared copies of accounts that you can give any potential buyers, and do not rely on those submitted to Companies House as very often they contain insufficient information.
• Have a copy of your Professional Indemnity Insurance (PII) proposal available for a buyer to see in PDF format. PII proposal forms are considered to contain most information that buyers need and are viewed as being an accurate reflection.
• Obtain a price for run-off cover from your PII broker. Whilst you may wish to sell/transfer etc your practice on a successor practice basis, this is useful information to have.
• Ensure you have obtained the consent of anyone who has an interest in your business, whether this is a shareholder, member, equity partner or partner. Also, consider putting senior management on notice, such as your practice manager, of a potential sale. Although care should be taken not to alarm staff into looking for another job.
• Make sure your internet presence is spotless. If you have negative reviews, deal with them with carefully measured responses. Ensure your website is up to date and contains useful and interesting information about your business and the fields of law you cover. If you have not got a social media presence, consider setting one up – X and/or LinkedIn, in particular.
• Write user manuals for every process in your business. If you have written procedures for everything in your office, it is very easy for a buyer to come in, take over management of the procedures and see exactly what is done, how and when.

Selling a law firm FAQs – What is the sale process?

Selling a law firm involves several steps, each requiring careful consideration and legal compliance. The process begins with a thorough valuation of the firm, typically conducted by a specialist to determine its worth based on factors such as client base, revenue, reputation, and assets.

Once the valuation is complete, the next step is to prepare the firm for sale. This includes tidying up financial records, ensuring all legal and regulatory compliance are in place, and addressing any outstanding issues that could affect the sale, such as unresolved client matters or employee disputes.

Marketing the firm to potential buyers is the subsequent phase, often involving confidential negotiations to maintain the firm’s reputation and client trust. When a buyer is identified, the parties enter into detailed negotiations, which culminates in the drafting of heads of terms, a sale agreement and often a consultancy agreement. This sale agreement covers the terms of the sale, including the transfer of assets, liabilities, warranties and client contracts.

Regulatory approval is a critical step, particularly from the Solicitors Regulation Authority (SRA), who must approve the transfer to ensure compliance with legal standards.

Finally, the sale is completed with the formal transfer of ownership and the integration of the new owner, ensuring a smooth transition for clients and employees.

How long will it take to sell the firm?

Generally speaking, it takes between three to six months to complete on the sale of a law firm. However, in certain circumstances, it can be a lot quicker, particularly if it is a distressed sale.

How do I keep the sale process discrete?

Ultimately, the sale will become public knowledge, but you should be able to control information to some degree using non-disclosure agreements, etc.

If I can’t find a buyer, what are the alternatives?

If you are unable to find a suitable buyer, it may be sensible to turn to an internal successor, or perhaps recruiting an individual to fill the gap.

Law Mergers & Acquisitions is the UK’s leading and longest serving consultancy specialising in law practice sales, acquisitions, mergers, bolt-ons and valuations. Contact us now to discuss your requirements.

Selling a law firm FAQs