Acquisition As Exit Strategy
A small, boutique intellectual property firm in a major metropolitan area had historically suffered from below average profitability, and frequently had difficulty in meeting payroll commitments. The firm’s technology expenses were extremely high even though it had old, outdated computers running on an obsolete network. In addition to low profitability, the firm had difficulty collecting receivables, tracking productivity of timekeepers and paying vendor obligations on time. The sole shareholder did not have an exit strategy and although there was an heir-apparent in the firm, no buy-out plan was in effect. The firm’s lease agreement was expiring in eighteen months and the shareholder was reluctant to commit to another 10 year lease term, which the landlord was seeking.
Altman Weil helped the firm to identify unprofitable lawyers and paralegals, as well as unnecessary clerical staff positions, resulting in annual net cost savings in excess of several hundred thousand dollars. A comprehensive expense reduction program was implemented that cut over $150,000 in excess expenses while simultaneously upgrading all technology. Work flow procedures were re-engineered to facilitate much faster production of legal documents involving less human intervention. More work could be done by fewer employees at a lower cost.
The next step was to develop an exit strategy. To that end, we helped prepare pro forma financial projections reflecting the impact of the restructuring plan and the future profitability of the remaining lawyers and staff, which allowed prospective acquirers see how the firm’s future profits would contrast with its recent losses. As a result, almost all of the remaining partners, associates and staff joined an AmLaw 100 law firm at the end of that calendar year.
Altman Weil helped this struggling law firm survive a cash flow crisis, meet its financial obligations to creditors and ultimately to join one of the country’s largest and most prestigious law firms earning dramatically higher levels of compensation.
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