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Best Practice: Law firm merger – are we a suitable candidate?

Asked and Answered

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

Q. We have a two-partner firm in Columbus, Ohio. We have two staff members, and there are no other attorneys in the firm. We have been in practice together for 17 years. I am 62 and my partner is in his fifties. My practice is limited to intellectual property and my partner’s practice is limited to medical malpractice defense. Recently, as a result of lack of coverage, our unwillingness to hire associate attorneys, and our frustrations with dealing with management issues, we have decided that we would like to merge with a larger firm. However, we are concerned that our numbers may not be satisfactory. Our five-year averages are as follows:

  • Gross Revenue – $500,000
  • Expenses – $240,000
  • Net Income – $260,000

Since we split the pot evenly we each made $130,000 on average. With these numbers are we a suitable candidate or are we just whistling in the wind? We would appreciate your thoughts.

A. Obviously these are not great numbers. Depending on firm size and type of practice, most small firms are looking for revenue per lawyer in the range of $360,000 and up. Many firms are looking for books of business that will keep the candidate and an associate busy – $750,000 plus.

However, law firms are also looking for new sources of business (clients) and lawyer talent. There are firms that have work but need help and might be interested in your talent and skills as well as the clients you could bring. You might not be able to join the firm as an equity partner but might be able to come in at the non-equity level, depending on the firm size. Due to the very different practice areas each of you have, you might not find opportunities in the same firm.

I encourage you to look around, start your search, and see what happens.I have seen many situations similar to yours that have resulted in successful mergers and lateral or of-counsel positions.

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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.

Posted on Mar 08, 2017 by Mark Mathewson | Comments (0)
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