When it comes to selling, stepping back or expanding your business, it can be a confusing process where specialist help is hard to come by. This is particularly apparent in the legal sector, where often these types of businesses choose to go through this process alone or in-house to save time and face which can often result in a detrimental effect.
We spoke to Philip Lewis, a networking expert in legal services, about his current role in being the middleman in the sale/acquisition process, the main red signals to watch out for when looking to sell or acquire, and also how accountants can play a vital role in the process…
Tell us a bit about yourself and your history in business?
I started to work in banking for Barclays when I was 16 and stayed there for over 40 years. I enjoyed various management roles within the banking sector and spent the last 10 years of my career specialising in the professional services sector. This was mainly looking after firms of accountants, surveyors, architects, and solicitors. Around 70% of my clients were law firms so over the years I accrued a solid level of experience, knowledge, and contacts in this sector before leaving banking in 2014.
Most recently you’ve provided network consultancy for a variety of businesses, within in the legal sector. How did this come about and what exactly does your role entail?
This came about following my experience with solicitors, as mentioned above. I have been helping a number of law firms recruit consultant lawyers via my extensive network. I do have introducer agreements with these law firms in this respect. As you may be aware, they will not be paid a salary but rather income is be based upon a percentage of the amount billed. This type of arrangement is becoming more common in the legal sector and can work well for a partner who is looking to retiring from their current firm but wants to continue working, perhaps on a part time basis from home, where they take care of long-standing key clients.
Such lawyers need to be generally self-disciplined and organised, but it can give appropriate solicitors more flexibility in their lives which the pandemic has shone a light on the importance of. I don’t charge for my time, but I am able to generate some income from these types of introductions as the law firms pay recruitment commission in respective cases.
With specialist guidance for businesses going through selling or acquiring other firms, what are the main things you suggest to businesses before they choose to sell up/expand?
The short answer to this is it depends upon the circumstances. I believe there will be increased instances of law firm consolidation in the SME space during the period following the pandemic. Given my 10 years of experience managing solicitor practices’ finances, I am well equipped to discuss this topic with appropriate lawyers through knowledge and wisdom. Succession planning remains one issue but there are also changes in the professional indemnity insurance market which heavily impact smaller law firms. Truth be told, some of the up-and-coming younger solicitors no longer aspire to be partners in a firm, so this type of natural succession plan no longer exists in many law practices. Most law firms I talk to currently are struggling to recruit as there are just not enough quality lawyers to go round.
I therefore suggest that it may be easier for them to acquire another firm, instead of trying to recruit. One of the advantages of this is that the firm making the acquisition is more likely to continue working with the existing clients of the firm being acquired. Some solicitors do tend to overpromise and underdeliver in terms of existing clients’ followings when they switch job. This can create problems for the firm recruiting who are committed to large salaries, particularly where the lawyer is unable to bring their clients over, possibly due to covenants with the old firms in question.
If a business chooses to sell or expand but they aren’t in the correct place or position to, what are the main red signs for this?
Sometimes the partners of a company disagree on the strategy or the plan for a firm, which can seriously hold up the process. It’s a highly recommended for law firms, and all businesses for that matter, to get their ‘house in order’ as far as possible before entering the process. Team and culture are big things also, with so many different working cultures existing simultaneously in law firms, therefore being flexible to adapt and blending them into the bedrock of the merger needs to be focussed on.
Putting yourself in the shoes of the people buying your business, or the company you’re buying from, you want to make your company as an attractive proposition as possible. This will make it easier for the relevant parties to easily envisage hitting the ground running once the process is complete.
How can accountancy firms, like ourselves at Nordens, help with the process of the sale/acquisition of a company?
There are so many lengthy and complex financial implications to consider when a firm merges or acquires. This is where accountancy firms can assist include offering advice regarding taxation, preparation of business plans, cashflow forecasts and profit budgets to gauge the profitability or otherwise of a merger. Having a separate aid analyse your financial figures, whilst working in partnership with you to achieve the desired outcome, is pretty much always a benefit. It’s another string to the bow so to speak and it may just uncover or unlock something that wasn’t previously discovered.
We hope this has outlined to you the process of selling or acquiring a business within the legal sector and the best methods to achieve this. If you require any more information on selling/acquiring a business, or anything accounting related for that matter, please don’t hesitate to get in contact with us at Nordens where one of our trusted advisors would be happy talking you through your query.