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Planning to sell your firm for the best price possible
All boutique law firm owners will exit their businesses, in some form, at some point in time. As such, firm owners need to plan for that exit from the get-go, argues one principal.
Jerome Doraisamy
Recently, Unisearch and UNSW Edge hosted a webinar, titled “Legally conscious entrepreneur”, discussing the legal and business implications at different stages of a firm’s life cycle.
Ms Yap asked Mr Shkara, during the panel event, when boutique law firm owners should start thinking about selling their businesses and what steps they should take to ensure they can get a good price for that business.
He noted, in response, that he once received advice that business owners should be thinking about their exit “from day one because everyone’s going to exit at some point, one way or another”.
As such, to ensure that one’s exit is a happy one, it needs to be planned from the start, he submitted.
“The earlier that you plan it, the better because you’ll be able to put in place certain mechanisms and structures – whether it’s legally or from an accounting perspective – so as to ensure that when that sale date does come, you’re protected and you’re getting the most value you can out of your business,” he said.
Earlier this year, Mr Shkara spoke on The Boutique Lawyer Show about how to acquire another firm and what to consider when making such an acquisition.
Mr Shkara suggested that boutique law firm owners start thinking about the exit “as soon as you start conceiving the company in that foetal stage”.
This is especially so, he noted, if that firm owner has other partners, directors or staff members involved at the different life stages of the business – all of whom have an impact upon that business and who have developments in their personal lives.
“If you’ve got more than one partner, you’re exponentially increasing your chances of something happening to that person. So these things need to be considered like it’s actually not optional. You need to be putting pen to paper and thinking about how you’re going to be exiting, or what’s the mechanism going to be in place, are you going to be able to purchase another person’s share, is it going to be going to market? How is it going to work?” he said.
“Making sure that your business comes across as something that is transferable and is a sellable asset, as opposed to something that maybe might make a lot of money, but it might not be working in a different operator’s hands.”
Mr Shkara reflected that he has had experiences with such matters, and “what I would say is this, sometimes if there are multiple owners, multiple interests, different investors, different directors, that might make an acquisition or a sale more difficult for an incoming purchaser because there are so many stakeholders and there are different people that you have to deal with”.
Whereas, he went on, “if there’s a central unit or one board or one owner, that can make it very much more appealing for an incoming purchaser because it’s a much cleaner transaction, and purchases normally will come in in a ‘one entity’ kind of fashion, either as a person or as a company”.
It’s going to be quite rare in most circumstances, Mr Shkara said, for a group of companies to come in to purchase something “unless you’ve got a real unicorn on your hands”.
“But for most people, it’s going to be one entity coming in or one person coming in. They’re going to take over. So, that easy transition is going to be appealing for that person, and as a result of that, it will drive your price up,” Mr Shkara said.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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