TURNAROUND PLAN AVERTS SHUTDOWN
The Executive Committee of a medium-sized law firm in a large metropolitan area called an emergency meeting to discuss its cash flow crisis and to decide how to respond to their bank’s decision to limit its access to its line of credit because of the deteriorating situation. The financial crisis was primarily caused by the loss of a large client, combined with the departure of several groups of profitable partners to competing firms.
The Executive Committee contacted Altman Weil, which had no prior experience with the firm, to have a consultant participate in the special meeting. The firm’s Managing Partner proposed during the meeting that the firm close at the end of the month in order to use the proceeds from outstanding WIP and accounts receivable to pay off bank debt and liabilities to vendors. During the meeting the Executive Committee authorized Altman Weil to perform a financial analysis on a rush basis to determine if there was a core group of lawyers and staff that could operate profitably until the firm could arrange to be acquired, or if the firm should be wound down at the end of the month.
We helped to identify unprofitable partners and practice areas as well as unnecessary clerical staff positions, resulting in more than 15 lawyers and 30 support staff positions being eliminated with annual net cost savings in excess of $1,600,000. These changes were implemented immediately and the firm continued to operate on a profitable basis through the end of the year.
Our next step was to prepare pro forma financial projections reflecting the impact of the restructuring plan and the future profitability of the remaining lawyers and staff. This allowed prospective acquirers to see how the firm’s future profits would contrast with its recent losses. Almost all of the remaining partners, associates and staff joined an AmLaw 100 law firm at the end of that calendar year.
With Altman Weil’s guidance, this law firm was able to avert a financial crisis and avoid having to close down its operations causing it to terminate the employment of all partners, associates and staff. Although some lawyers and staff did ultimately lose their positions, the imminent cash flow crisis was avoided. We assisted the firm’s remaining partners, associates and staff to become a part of one of the largest law firms in the country.