Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC

Q. I am the managing partner of a five lawyer firm in Denton, Texas. We have the opportunity of acquiring a sole owner practice in a nearby city with a complimentary practice area. We have had one meeting and our firm is interested. We want to initially do a quick and dirty due diligence so see whether this firm is really a qualified opportunity. What sort of information should we ask for?

A.  I would initially ask for the following:

1. Five years profit and loss statements and balance sheets and tax returns. (2011, 2012, 2013, 2014, 2015)
2. Lawyer and staff headcount for each of those five years.
3. Current hourly billing rates.
4. Description of his mix of clients by dollars and by time expended – practice type and geography.
5. Description of how the firm bills (hourly, flat rate, contingency)
6. Copy of leases (space and equipment)
7. Copy of malpractice insurance policy and last application.
8. Salaries and benefits for attorneys and staff members.

This will give you a good idea of what you are dealing with and whether the opportunity is worth pursuing further. If you decide you want to pursue this opportunity you can ask for additional information as the discussions unfold.

Click here for our blog on mergers

Click here for our article on mergers

Click here for articles on other topics

John W. Olmstead, MBA, Ph.D, CMC, (www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics and author of The Lawyers Guide to Succession Planning published by the ABA. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.