Impact of the COVID-19 pandemic on law firm succession

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Impact of the COVID-19 pandemic on law firm
succession

• Hearsay The Legal Podcast

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Introduction

• While you would be forgiven for thinking that the
  COVID-19 pandemic might suppress MA activity,
  law firm acquisitions are on the rise as firms
  around the country grapple with the challenge of
  law firm succession. Sam Coupland, director of
  advisory firm FMRC, suggests that the appeal of
  acquiring other firms is higher than ever, as
  law firms either reorganise and redesign their
  systems and processes to thrive in a post-COVID
  world, or fall behind.

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• Law firms who were already lagging behind their
  competitors technologically are now struggling to
  compete with the law firms who have embraced
  technology to continue to operate unimpeded by
  lockdowns and other social distancing
  requirements. These firms are looking to merge
  to mitigate future uncertainty and risk, as
  suggested by chief executive of Bartier Perry,
  Riana Steyn, who argues that COVID-19 has created
  a burning platform for lower-performing firms to
  innovate or exit the market.

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• The Australian Financial Review reported at the
  end of 2020 that 80 of corporate law firms
  reported stable or rising profits following the
  pandemic, with an average profit margin of 7.
  These figures largely reflect the profits made by
  larger firms who have the advantage of multiple
  teams and revenue streams diversified across
  different practice areas, as well as a generous
  technology budget to help them rapidly adjust to
  remote work.

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• Law firms looking to acquire a practice also need
  to consider how to retain clients and employees,
  in spite of the friction that the merging of two
  organisational cultures can create. Simply
  selling to the highest bidder without further
  consideration of how the transition will affect
  staff, clients and the firms reputation, does
  not guarantee a successful merger. Similarly,
  those wishing to sell their practice should be
  aware that a savvy acquirer will consider more
  factors than just recurring revenue, EBITDA and
  other financial metrics when looking to purchase
  an existing firm they will also consider the
  compatibility of the firms respective cultures
  and brands, their IT systems and other
  operational integration issues.

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• For more content about succession in the law, see
  Successful Law Firm Succession of Hearsay with
  Craig Osborne, Managing Partner at RMB Lawyers.