Law Firm Succession – Using Affiliation or Of Counsel Relationships as a As a Pre-Merger Pilot Test

Question:

I am sole owner of a law firm in San Rafael, California with an estate planning practice. I have two part-time attorneys, four paralegals and three legal assistants. I am in my late 70s and want to retire in the next three years. I have recently had several discussions with another small firm that is interested in acquiring my practice via a merger. While I will only be practicing a few more years I want to ensure that I have the other firm would be the right fit for my clients and staff. Do you have any thoughts or suggestions?

Response:

Making the right decision concerning the “Who” is usually more important than the “What” or the “How”. Take your time to do the proper due diligence regarding the other firm. Get to know the partners as well as the employees of the other firm. Ascertain practice, client, and cultural compatibility. If you both determine that a a deal might make sense – then move to the “How”. Even though you have done the best due diligence you can – you won’t really know about the other firm until you try working together. So before you jump – consider taking a few baby steps first. You might start with an affiliation arrangement (Of Counsel) as a Phase I pilot test for six months. Under this arrangement you can both refer work to each other as well as have the other attorney work on some of your client matters. Outline the details of the relationship in an affiliation or Of Counsel) agreement. After six months review the success of the arrangement and whether it makes sense to take the next step. If it does – a Phase II step might be to enter into a more formal form of practice continuation/transition arrangement with the other firm. Phase III would be either the eventual sale of your practice or merger with the other firm. Taking a phased approach allows you learn more about the other firm which will increase your odds of a successful transition and buys you time before actually merging your practice if that is the direction you should go.

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John W. Olmstead, MBA, Ph.D, CMC

Posted at 07:48 AM in Mergers, Succession/Exit Strategies

Aug 07, 2024

Law Firm Succession – Using Affiliation or Of Counsel Relationships as a As a Pre-Merger Pilot Test

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