Who buys law firms and accountancy practices?
Law firm buyers fall into a few categories. Large investors buying into the sector, family buyers – purchasing for family members to take over and run a law firm, lawtech companies buying into the actual transactional side of the industry and companies in related sectors looking to run their own legal operations. We get some solicitors who look to establish their own companies by buying another business, but they are the exception to the norm.
One glaring exception is the local rival law firms. Our experience to date is that the vast majority of enquiries we get from local rivals or firms based locally looking to expand by takeover are making the enquiries to either a) get intel on the operations of a local rival or b) looking to try and acquire a local rival without needing to spend very much or any money.
Looking at our list of successful sales, the few we have had involving local firms have been a flat pack deal (where the buyer purchased the remnants of a failed law firm from the administrators) and a retirement arrangement where the seller became a consultant for the buyer’s firm and no money changed hands. Almost all the sales that have involved a premium price being paid (ie cash) have been with other types of sellers.
A lot of sellers have a fairly romantic notion that they will set up a firm, work in it and on it for over 40 years, find a young, enthusiastic solicitor just starting out who wants to spend £250k on a law firm, sell it to them and depart to enjoy retirement. Unfortunately reality is very different. Most younger solicitors see how easy it is to set up their own firms and don’t see the point in purchasing an existing practice, particularly one that may have antiquated systems and methods of operation. It is rare to find firms managing to find a younger partner who comes on board with a view to acquiring the equity after a set period of time.
Very different types of buyers. Most buyers of accountancy firms and gross recurring fees are other accountancy firms and accountants. Just about every deal we see or are involved in will be with another accountancy firm, probably quite local, looking to pay a set multiple for the gross recurring fees (in 2022 this seems to be around the 1.2 x GRF mark, although this will fluctuate depending on the market). We don’t see many alternative types of buyer and there doesn’t seem to be the consolidation that occurs in the legal profession – accountancy firms on the whole are either one man or woman bands or large multi-partner operations with multiple offices across the country, if not the world.
Generally there are so many different types of potential buyer for businesses it can be hard to categorise them, but the above is a general snapshot of the buyers we see on a day to day basis making enquiries about the law firms and accountancy practices we have for sale.