A large law firm in a large metropolitan area was experiencing a cash flow crisis as a result of numerous problems, including its loss of a large client that accounted for approximately 20% of its annual revenues. The firm was maxed out on its term loans and lines of credit; payments to the bank and vendors were seriously overdue; and, the bank was threatening to call the loans. It had a partner compensation system that did not incentivize partners to maximize profitability. Billing write-downs and write-offs were out of control – totaling more than 25% of the firm’s annual revenues each year. Since the firm transferred client work to lawyers in its various branch offices, it did not know which offices, partners or clients were profitable.
The firm called on Altman Weil to advise them. We worked with them on several key areas, including firm restructuring, compensation, debt refinancing, and ultimately a merger strategy.
Our consultants identified unprofitable partners and practice areas as well as unnecessary clerical staff positions, resulting in more than 20 lawyers and 35 support staff positions being eliminated – with annual net cost savings in excess of $1,000,000.
We helped to create and implement a formula-based compensation system to increase productivity and reduce the amount paid to unproductive partners while simultaneously eliminating the pervasive sentiment among partners about the “unfairness” of the old system.
We worked with the firm to refinance a credit facility for $10 million on very advantageous terms, including increasing the aggregate amount of the line of credit, reducing interest charges by $100,000, and reducing the amount of personal guarantees by partners. We also helped to forge a new business relationship with the bank providing the new credit facility that generated annual revenues in excess of $1 million.
Finally we helped to adopt and implement an acquisition strategy to expand the firm’s practice capabilities and improve profitability. Our consultants contacted many prospective merger candidates on a confidential basis to identify an acquirer for the firm, and successfully arranged for most of the firm’s partners, associates and administrative staff to join with a large, national law firm.
Altman Weil helped this struggling law firm survive a cash flow crisis and paved the way for the firm’s partners, associates and staff to join a large and financially stable AmLaw 100 law firm.