The financial considerations of acquiring another law firm

Acquiring another law firm can be a great way to grow your practice – but there are a range of financial considerations to take into account.

Proceeding without caution could lead to costly mistakes and an unfair deal, which could damage your firm’s profitability and growth potential.

Here’s what you need to consider when acquiring another law firm.

The financial benefits

With opportunities to diversify your practice and occupy a greater market share, there are a range of financial benefits to acquiring another law firm.

Acquiring another firm means you’ll take on their existing clientele, widening your client base.

The enhanced capacity can also help you to avoid capital expenditure.

Additionally, valuable assets such as property, equipment, and Intellectual Property (IP) could be hugely beneficial to your business. However, always make sure you obtain proof of any assets (such as copyright) to avoid getting caught out.

The financial risks and considerations

Due diligence is important in establishing whether the target firm is in sound financial health.

A law firm with an unusually high level of debt should be treated with caution. Would you be equipped to deal with the debt and turn the firm’s fortunes around, or would the acquisition risk your own business?

You also need to think about what practice areas the target firm offers. A firm that offers new opportunities for you is ideal, while a firm with too much overlap could lead to wasted resources.

It is also important to make you have details of any past, current, or pending cases, also look closely at the impact of a change in the business’ ownership on existing contracts.

If the asking price is wrong, many acquisitions or mergers fail, so ensure the price is right.

For further information and advice on mergers and acquisitions, please get in touch with our expert team.