Apr 18, 2017
Law Firm Succession/Exit Plan – Merger, Selling, Laterals, or Promoting Associates to Equity
Question:
I am the owner of a small estate planning firm in Worcester, Massachusetts. I have three associates and three staff members. I am fifty five and am wanting to begin putting in place my succession/exit plan. I would like to retire and exit the practice in ten years. Would I be better off selling to another firm or attorney, merging the practice, bringing in laterals, or selling to one or both of my associates? I am interested in your thoughts.
Response:
The biggest challenge for many firms, is finding the right WHO.
The who dictates the what – the actual succession/transition/exit strategy. In other words, many law firms find that they start down one path and end up on another. Not all non-equity partners and associates want to own a law firm. Not all lateral and merger candidates will be a good fit for your firm and culture. The key is the right relationship and sometimes that takes the form of making someone at the firm a partner, bringing in a seasoned lateral, merging with another firm, or selling the practice. Therefore, succession/transition plans have to be flexible and often the key is not get stuck in creating complex succession plans at the onset. Establish timelines, outline a general course of action, generate some momentum and see where that takes you. Then build the plan when you can see where the firm is headed.
Unless the retiring partner in a larger firm has a unique practice that requires the firm to conduct a search for lateral or merger candidates, larger firms will not have to embark on a search. However, solo practitioners and often sole owners will have to explore their options and conduct a search for the following:
- Associate candidates that can be groomed for either partnership or to buy the practice
- Associates and Lateral partner candidates
- Merger candidates
- Of Counsel Candidates
- Practice sale candidates
This search and exploration often is the most time consuming and difficult part of the process and often the options identified through this process ends up dictating the succession/transition/exit strategy.
If a firm has associates, does the firm have the right associates on the bus for the long term? In other words, has the firm hired associates that want to be business owners and own a law firm? Many owners and senior partners in law firms are approaching retirement age and are beginning to think about succession strategies. As they examine their associate lawyer ranks, some partners are often surprised to learn that there may be few takers. While their associates may be great lawyers, they may not bring in business and may not be interested in ownership or partnership. Such firms have hired a bunch of folks that just wanted jobs and have no interest in owning a law firm. While this hiring approach may have satisfied the firm’s short-term needs – it may fall short in the long term.
Click here for our blog on succession
Click here for out articles on various management topics
John W. Olmstead, MBA, Ph.D, CMC
Posted at 08:29 PM in Succession/Exit Strategies
Tags: Exit, Firm, Laterals, Law, Merger, or Promoting Associates to Equity, Plan, Selling, Succession
Categories
- Career Management
- Client Service
- Coaching
- Compensation
- Competitive Business Models
- COVID-19
- Culture
- Financial Management
- Governance
- Human Resources
- Laterals
- Leadership
- Management
- Marketing
- Mergers
- New Firm Startup
- Offices and Facilities
- Partnership
- Practice Sale
- Profit Improvement
- Project Management
- Strategy
- Succession/Exit Strategies
- Technology
- Trends
- Work Life Balance