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Financial Security For Law Firms

Financial Security – What is next

To download a printable PDF version of the article, click on the link below:
Financial Security What Is Next.

As Covid 19 and the lockdown continues the impact on firms is continuing to be assessed from an operational, staff, client and financial perspective. Firms are also, rightly turning their attention to their future and the medium to longer term impact of the crisis.

The Government are providing short term solutions and most firms and business are getting some help and whilst this assistance is greatly appreciated (for those who have been able to receive it) the concerns are what happens next.

Options

Not all law firms, and businesses have an uncertain financial future, but the unfortunate reality is that many will. A prudent firm will have cash reserves to rely upon in difficult and unexpected times but that in itself is often difficult to achieve in the first place. Therefore, many firms will be looking to changes they must make into the future for sustaining themselves and returning to their previous position (and possibly even stronger).

In this article we discuss some of the considerations we have been discussing with firms.

Funding - There continue to be new initiatives being offered by the Government with the latest, set to launch on 4th May, 2020. This will give a much needed cash injection to firms with loan terms that are very favourable. Whilst it is appreciated that borrowing money when the future is uncertain could be considered a risky strategy this facility is certainly worth considering due to the terms in which it will be provided i.e. government guarantee, no interest and no capital repayments for the first 12 months.

Structure – Reviewing the structure of the firm is an option some firm are looking at with considerations being given to changes in the partnership agreement, equity, capital investment, partner loans or indeed allowing the entrants of new partners. This is a time of change and this is forcing firms to think differently about the way the firm is structured and we are seeing firms challenging the past and looking to the future with potential stability being secured through new structures and people joining on terms that may not have previously been available.

Earnings – It is an unfortunate and inevitable consequence of a reduction in income that profits will be affected, and this will impact on earnings, particularly for partnerships or companies which rely on a dividend model. Also, firms are considering longer term impacts on salaries and bonus payments. Whilst it is very difficult for any firm or individual to contemplate a salary reduction or loss of income generally this may be the reality that some firms and their staff need to address. It may (and hopefully) will only be short term and firms will hope, where this is necessary that staff will appreciate that some sacrifices will bring security allowing firms to return to a healthier position where any sacrifices can be reversed.

Staff – As firms look at their business and the changes that it is going through and will continue to go through there is the potential that redundancy will become a necessity. This is an unfortunate consequence of financial issues and restructuring and news is starting to emerge that businesses of all sectors are introducing redundancy as a result of the impact in their business as they have already recognised that the damage will be longer term. This is negative, but may be an essential step and whilst no firm is encouraged to take unnecessary action it has to be encouraged to take action to protect the main business and to do so carefully, with planning and sensitively wherever possible.

Mergers or Acquisitions – Some firms have been contacting us and discussing if a merger or an acquisition should be part of the current and immediate considerations. This is not always due to the firm hitting immediate financial consequence but has also been part of an overall strategic review by the partners, it may be something that has previously been contemplated or simply the current owners of smaller firms are seeking security of numbers and economies of scale.

Taking the decision to sell or merge your firm is a significant decision to make and the owners must be ready to take this step. Even if the requirement to merger or sell is reactionary to the current crisis, the process alone can be significant in terms of time and resource but also a successful merger or sale will only occur if all parties are committed to the success and accept that change will be embraced.

Our Merger and acquisition page provides some insights into considerations that are necessary before a firm commences along this path.

It is equally true that firms who feel that the reverse should be part of their strategy which is to start making acquisitions to increase their numbers, again, this needs careful thought and consideration.

We will be issuing an update to our previous blogs on the topic of mergers and acquisition  shortly which provides firms with a more detailed insight into areas that they should consider as part of a sale, purchase or merger.

The Future & Support

There are many issues that firms are facing and considering for their future and we hope some of the above is of assistance as firms plan their strategy during and post Covid 19.

At The Strategic Partner we work with firms for a range of reasons including assisting with strategy and planning.

If you are already considering merger or acquisition as part of your strategy, we are happy to provide a free consultation to discuss your current thoughts and provide guidance or share knowledge where appropriate.

Due to the work we do within the sector we have a number of law firms, across the Country, that are acquiring law firms and actively continuing with this strategy even during the crisis.

Regardless of your firm’s size, from sole practitioners through to large multi service and office firms we have the experience to provide support and we may also have firms willing to open discussions on mergers and acquisitions.

To contact us you can call us on 0203 911 9710, email us info@thestrategicpartner.co.uk or visit or website to make an online enquiry https://www.thestrategicpartner.co.uk/Contact-Us

 

 

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