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Building Blocks to Successfully Acquire a Law Firm

Once you have conducted a comprehensive search of the relevant market to identify the best firms for merger or acquisition, the complexities involved in ensuring you make a success of it require very careful planning and strategic decision-making. Here are some essential elements that help you navigate the process more efficiently and increase the likelihood of a lucrative outcome for you, and the firm you are acquiring. 

Comprehensive Due Diligence

A pragmatic approach to what can be a tedious and challenging process is essential to minimise potential grief later on in the process. On top of assessing the target firm’s financials, client base, organisational structure, and risks, here are some other important things that buyers should be mindful of:

Scrutinise contracts, liabilities and regulatory compliance. 

Are there any factors that may make this acquisition more expensive than it is in the long run? Is it worth pursuing the acquisition if there were? Does the seller know anything about its contractual commitments?  There are ways to find out even if the seller doesn’t know. 

Engage with PII brokers early

Having an informed view on the insurance risk profile and costs is essential to establish early on because succession or run-off can be huge factors in the economic viability of most deals. 

Understand the depth of expertise in key areas

How thin is the talent pool and how vulnerable is it to an exodus if the team from the target firm is struggling to gel with key characters in the acquiring practice? Does the talent pool need to be bolstered prior to considering a deal or are you happy that you could back-fill with the right people in the event of unwanted departures? Most importantly, how would the departures impact the key client base?  Planning for all eventualities means you can initiate a process under any of these circumstances which can save a deal. 

Cultural Compatibility Assessment

Cultural alignment between the acquiring and target firms is often given lip service rather than real scrutiny, but is vital for long-term success. Assessing the cultural compatibility includes examining factors such as core values, work ethic, management style, technology adoption and client service approach. A cultural mismatch can lead to integration challenges, employee turnover, and a decline in client satisfaction. Therefore, dedicating time and effort to understand and bridge any cultural gaps is crucial. 

This can be achieved through open communication and sharing the rationale for why you do things the way you do. Proactive efforts to integrate the two firms’ cultures by having staff exchanges between teams and offices together with regular social events and gatherings are always useful in the early days as people feel one another out and get used to the ‘new management’. 

Identifying Synergies and Planning for Integration 

Identifying potential synergies between the acquiring and target firms is essential for maximising the benefits of the acquisition. These synergies can be in the form of complementary legal expertise, expanded client base, improved market reach, or enhanced operations. 

A clear integration plan should be developed collaboratively by both firms in order to capture these synergies. The plan should outline key integration milestones, communication strategies, personnel integration, and technology consolidation, among other aspects.

A well-executed integration plan minimises disruptions and ensures a smooth transition for clients, employees, and other stakeholders.

Strong, Cohesive Leadership, and Communication

When a firm merges with another, a feeling of uncertainty is natural and should be expected from the people within both firms. This often creates speculation and unhelpful, mostly untrue rumours, to circulate and can be destructive.  Once it is appropriate to communicate the grand plan to the people across both firms, it is essential that leadership teams from both legacy firms stand united and decisive, while offering clear, regular and effective communication at all stages of the acquisition process. 

Transparent and frequent communication with employees, clients, and other stakeholders is vital to alleviate concerns and maintain trust during a transition. Proactive leadership and clear communication help manage expectations, address challenges promptly, and maintain business continuity during the acquisition process.

Talent Retention and Transition

Retaining key talent is critical to preserving the value and expertise of the acquired law firm. Open dialogue with the acquired firm’s employees, understanding their concerns, and providing support during the transition phase foster a positive work environment and minimise attrition. 

Try to see it through their eyes, and not just the good stuff like where the opportunities are going to present themselves for growth, development and other exciting factors. What about areas where paranoia can mount around potential job losses and overlap? What might a person of junior/mid/senior level in each department think about this deal?  Can you anticipate this and either snuff the concern instantly; or perhaps identify that it needs addressing swiftly to deal with any necessary unpleasantness required? 

Aim to mix teams as early as you can but don’t just say ‘two from yours and two from mine’.Think like a matchmaker – it is important to consider who may get along with whom on a professional and personal basis in order to make this work. 

Post-Acquisition Evaluation and Continuous Improvement

Once the acquisition is complete, the work doesn’t end there. It is crucial to conduct a post-acquisition evaluation to assess the success of the integration and identify areas for improvement.

Regularly monitor key performance indicators (KPIs) such as staff and client satisfaction levels, and financial metrics. These can provide valuable insights into the effectiveness of the acquisition strategy. By identifying any shortcomings and implementing necessary adjustments, the acquiring firm can refine its approach and enhance future acquisition endeavours. 

Clarity is required on what ‘good’ looks like though so you can interpret the KPIs that are monitored and discussed at every board meeting religiously in the early months. If you only decide on this after the event, there is a danger of fitting the results to the KPIs. 

Engage staff often and early to get their opinions on what is going well, what they are enjoying and what concerns they have.  Make it anonymous so people can feel free to be candid.  This potential bruise to your ego will be worth its weight if it leads to identifying early fixes that can nip problems in the bud. 

Flexibility and Adaptability 

A well-executed law firm acquisition can bring numerous benefits, including expanded client reach, enhanced legal expertise, and improved operational efficiencies. However, it is crucial to recognise that each acquisition is unique, and there may be uncharted challenges along the way. Flexibility, adaptability, and a commitment to continuous improvement are essential throughout the acquisition journey.

Ortus Group has the Knowledge on Successful Mergers & Acquisitions

Having sourced and advised on more than 60 successful mergers over the last 19 years, Ortus Group continues to be trusted by law firms because of their deep understanding of the UK legal sector, and systematic guidance. 

The team is well-versed in sector analysis to identify the most appropriate targets and engage the best ones towards meeting and taking action.

For more information and how the team can help your firm grow through acquisition, contact us for a confidential, no obligation consultation.

Get Answers on Your Firm’s Readiness for Growth Today

Try our free-to-use self-assessment tool to understand if you are ready for growth through acquisition and what the next steps should look like to help steer your firm to success.

The eight question, self-assessment tool takes less than 10 minutes to complete and will provide helpful points on:

  • How your firm’s operations are performing and what to do if you have gaps that need filling in.
  • Where to start if you need to align reality with your aspirations.
  • If necessary, how to get further guidance on what you can do to improve your situation.

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