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Considerations in acquiring another firm amid COVID-19
Given favourable conditions for merging or taking over another legal practice, there are a number of factors that firms with expansion plans must take into account.
Jerome Doraisamy
According to FMRC director Sam Coupland, there was a “huge appetite” for mergers pre-pandemic, and the age of coronavirus has likely accelerated that trend.
Reflecting on the motivation that law firms would have at this juncture to acquire another practice, he said that a desire to bolster existing practice groups in the wake of the global coronavirus pandemic would be a driving force behind acquisition strategies rather than using the pandemic as an opportunity to [diversify] a firm’s offering.
“They’ll feel like they have an infrastructure that can cope with more, so it’s really about getting more out of what they already have. In their ideal world, it’s the idea that one plus one makes three. They’ll say: ‘If we roll this other practice in, then we’ve got room in our office so the rental expense won’t be there, much of their back office won’t be required, maybe even a handful of their fee owners won’t be required because we have people with excess capacity’,” he explained.
“The firms that I’ve been speaking with are looking for complementary practices that have a commercial flavour to them, but they’re operating across fairly broad practice areas as well.”
There are a number of considerations that firms must make if they are looking to acquire another amid the pandemic, Mr Coupland outlined.
“The first thing is to work out what your offer is: why would somebody want to come and join you? It needs to go beyond saying, ‘We have a fantastic culture’. Every firm thinks they have a great culture, or a unique culture. And the fact is, most do have a pretty good culture, but a fairly similar culture. So, that’s not going to get people across the line,” he posited.
“It boils down to this: are you looking at a genuine merger where you will roll a new firm in as well as their partners become equity partners in the new business? And, if that’s the case, you’re going to have to make sure that you’re more profitable than they are, and that’s not always the case. So, in settling on a deal, are you rolling them in as part of a new venture or are you prepared to write them a cheque and pay out their equity? Just being a nice place to work isn’t really going to cut it.”
Mr Coupland also offered advice for practices that might be looking to be acquired in the wake of the pandemic.
“Work out what you want and be realistic about it. Stress test it. If you’re looking for someone to purchase your business, would you buy what you’re currently offering? I suspect, as a result of the pandemic, there’s even less silly money out there, and as a result, I think you’re going to get a deal if you’re prepared to accept terms,” he suggested.
“So, if you’re looking to be acquired, the more flexibility that you have in terms of a deal, the better off you’re going to be. You will get a better deal if you’ve done some of the hard work yourself. If you’re looking to your new merger partner to make difficult employment decisions for you, you’re not going to end up with as good a deal. You’re much better off getting your own house in order first and then you’re a much more attractive bride.”
To listen to the full episode with Sam Coupland, click below:
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly and HR Leader. He has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. In June 2024, he also assumed the editorship of HR Leader. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.
You can email Jerome at:
