Feeling trapped? Options for succession & exit for law firm partners

For many law firm partners, the idea of stepping away from their practice can feel daunting — shaped by emotional ties, financial complexity and legacy concerns. Yet with the right strategy, an exit can be rewarding and aligned with the values that built the firm in the first place.

Here, corporate lawyer Ruth Hargreaves — part of our specialist professional services team and an expert in business sales and exits — explores the options available to law firm partners, from partner buy‑outs to private equity sales, acquisitions and employee ownership trusts (EOTs).

For individual partner exits

Existing partner buy-out

If only one or some of the partners in a firm are looking to make an exit, a common solution is for the remaining partners to buy out the departing partner(s).

Since those remaining are already involved in the business, they’ll have a solid understanding of its financials, operations and risks. This familiarity reduces the need for extensive due diligence and makes the transaction more efficient and cost-effective. 

Another benefit of a partner buy-out is retaining the firm’s independence. Unlike with introducing a new partner or investor — which may bring conflicting visions for strategy and operations — this route offers a seamless transition that promotes stability for both the business and its culture. 

That said, a partner buy-out isn’t always viable. The remaining partners may lack access to the funds needed to complete the purchase and financing the deal could risk overleveraging. Additionally — if firm funds are used to facilitate the buy-out — it may reduce cash flow available for other business needs. 

For full partnership succession

An entire partnership may wish to exit together and there are a number of ways to facilitate that.

Private equity

One option for all partners seeking an exit is to sell their shares to a private equity firm. Following the Legal Services Act — the introduction of different ownership models for law firms — this route has become a practical option for lawyers. 

A private equity sale involves selling to an investment management firm. Typically, a private equity firm’s aims would be to make changes that improve the business’s financial performance before ultimately selling it on for a profit. This often includes adjustments to operations and personnel. 

One benefit of private equity is the injection of management expertise and resources which enables the business to grow at a faster rate. However, it’s important to note that partners are often expected to remain in the business for a period following the initial investment. 

Sale to another law firm

The continued consolidation of the legal market presents the opportunity for firms to sell to another legal service provider. This may be driven by the acquirer’s desire to expand into a new region or sector or increase their market share. The acquisition of an existing practice can be seen as a lower risk way to facilitate growth. 

A deal like this may allow each firm to retain its own brand and legacy while also benefiting from shared resources and straightforward referral opportunities. While attractive in some respects, it should be noted that this type of deal can still see the selling firm lose an element of autonomy as strategic decisions will inevitably be influenced by the acquirer’s overarching goals. 

Employee ownership trusts 

If obtaining a fair price for the law firm from a third-party proves difficult — or the concept of being acquired by a competitor is unappealing — partners may consider selling to an EOT. 

This is a succession strategy where business owners transfer ownership to a trust that holds shares on behalf of employees. It allows the firm to remain independent while ensuring that employees share in its success.

Employee ownership relies on a strong leadership succession plan, typically involving more junior members of the organisation stepping into the roles of exiting partners. This transition takes place over a number of years to allow for a smooth and gradual succession. 

Talk to us

Every firm is different and so is every exit. That’s why expert guidance matters. Our specialist advisors help law firms to navigate the full spectrum of succession options so you can choose the path that’s right for your people and your practice.

Talk to us by calling 0333 004 4488, emailing hello@brabners.com or completing our contact form below.