As the legal market in England and Wales continues to change, solicitors’ mergers and acquisitions are becoming more and more common. Consolidation within the legal market over the past few years has meant that larger firms are taking a greater share of the legal market, providing them with more power to compete.
This consolidation has led to many smaller firms considering their options, with law firm mergers being one route available. There are many factors that should be considered when deciding the future of your firm and ensuring a successful merger with another firm.
The rise in law firm mergers
Changes to the legal landscape from LASPO onwards have led to a number of firms deciding to make changes. This could be in the form of a sale or to merge with another firm. The changes which have led to a surge in law firm mergers and acquisitions in recent years include:
- The introduction of the whiplash reforms in 2021
- The extension of fixed costs
- Issues in obtaining professional indemnity insurance
- Issues caused by the Covid-19 pandemic
In an everchanging market, law firm mergers seek to achieve greater economic stability for the combined entity. Following securing significant investment in Fletcher’s Solicitors, Rob Fletcher stated:- “There are a lot of acquisitions going on in our industry at the moment as people realise that the future is firms that have the size to compete.”
It was interesting that the point was the number of acquisitions. The perfect “fit” to achieve a true merger is relatively rare, more often than not there will be an acquirer. Regardless of terminology, merging with another firm may give solicitors the opportunity to branch into a wider market when they become part of the merged entity. This type of business change may provide the new firm with more strength and stability to allow them to compete with larger firms in what is a very competitive market.
Law firm merger considerations
To ensure a smooth transition post-merger, there are a number of things that should be considered prior to the merger taking place. Some of the main points to consider are listed below:
Seek appropriate advice: Business change, such as a solicitor merger, requires a lot of planning, advice and guidance. The process of merging two businesses to create a completely new entity can be extremely complicated, so you should seek advice from a merger and acquisitions specialist to ensure due diligence and compliance with all regulatory requirements. This is something you will do infrequently, if not just the once, unless you are a serial acquirer. If you are dealing with a serial acquirer then you are in essence selling, making an independent adviser more critical. There are a number of such advisers that have developed a specialisation specific to law firms.
Inform the SRA: You should always keep the SRA updated on any changes to your firm, including plans to merge with another law firm.
Inform your clients: You should keep your clients updated on any changes to your firm to ensure good client relationships are maintained.
Exiting a market prior to merging
As part of the new entities long-term plan, there may be a desire to discontinue servicing a specific area of law after the merger takes place. In this situation, the decision may be to exit that area completely before the merger takes place.
Selling work in progress (WIP) files to exit a specific market can be a positive solution for merging law firms. It can help them focus on more profitable areas of law once the merger is complete.
R&R Solutions have worked alongside professional advisers, such as merger and acquisition specialists, on many law firm projects. We discreetly sell a firm’s cases to multiple purchasers on our panel of solicitors. This mitigates the risks to the buying firms and results in a higher value for the work in progress (WIP) being realised by the seller, whilst ensuring SRA compliance.
We are an accountancy service provider that has built specialised software and processes to liquidate the full value a law firm has locked into WIP over time. We monitor case progression and conclusion in real time and account back to our clients for the value realised on an agreed reporting period, either monthly or weekly, thereby de-risking a deferred deal from the seller’s perspective.
Our process is highly flexible, and many firms have greatly benefitted from exiting a market when merging, to dispose of a caseload within a legal area in which the merged entity does not wish to continue operating.
Solicitor merger alternatives
Although mergers are a great option for many firms wishing to change their business model due to changes in the legal market, they are not the only option, and there are some good alternatives. One of the main alternatives to law firm mergers involves restructuring the firm and exiting specific markets to focus on more profitable areas of law.
R&R Solutions have many years of experience in assisting on these types of projects. In some cases, we can facilitate immediate cash availability to deal with immediate exit liabilities when restructuring. As our process is flexible, the exit from the market can be completed in a way that best meets the needs of the firm, with many firms opting to exit the market using a phased approach.
Why choose R&R Solutions?
Whether you opt for a law firm merger, or an alternative, such as restructuring, R&R Solutions can help. The unique scheme offered by R&R Solutions is suitable for law firms and professional advisors, including accountants, merger and acquisition consultants, restructuring and insolvency practitioners, corporate recovery specialists and private equity firms. Our services are suitable for all types of legal work, using a simple, ongoing process with no up-front costs.
We guarantee 100% confidentiality for all clients. If you would like to find out more about R&R Solutions’s process, feel free to get in touch today via email at email@example.com, or 07887796989, or contact Sally Dunscombe at firstname.lastname@example.org or 07774 205 870..
Retirement Project - Grant Saw Solicitors LLP
“With our claimant personal injury partner retiring in we decided the time was right to step back from PI work. We reviewed the market options, were disappointed at the discounts being applied by potential buyers of the WIP and were referred to R&R’s offering the full realisation of WIP over time. It has effectively delivered what it “said on the tin” - over the project period we have seen a steady flow of receipts being accounted for to us, allowing us to recover the full value we had built up in the files."
- Mike Clary, Partner
Restructuring Project - Copley Clark
“Having taken a strategic decision to be completely step out of the claimant personal injury sector we were R&R’s first client to step back on a phased basis. R&R customised their offering specifically for us and I am happy to say it has worked a treat. We could focus our own resource on matters where we had a possibility of concluding within our timetable and utilised R&R’s panel firms to continue to work on other matters. Not only have their services allowed us to retain the value we had built in the files, the nature of the services ensured we were able to offer our clients the option of moving to firms with the skill sets required to best service their specific needs. For firms considering restructuring we would have no hesitation recommending R&R Solutions."
- Malcolm Lawrence, Partner
Restructuring Project - Farley Dwek Solicitors
" We had an extremely positive experience working with R&R Solutions after making the strategic decision to move away from an area of law and retune our business model. The process was very straightforward, and we were really pleased with the overall outcome. We would highly recommend the Recovery First model as a practical solution to any law firm wishing to exit a specific sector.”
Jonathan Dwek, Director
Ticking all the boxes for a quick, clean, confident exit from legal markets due to restructuring or retirement.
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