Financial and Tax Due Diligence
commercially and strategically viable
Financial and tax due diligence are critical parts of assessing whether a merger between law firms is commercially and strategically viable. Rather than focusing solely on headline profits, the work is designed to reveal underlying risks and future sustainability.
ALFMA’s specialist advisers have extensive experience of financial and tax due diligence. We know what good looks like, and where risks hide.
Financial due diligence typically includes:
- Review of historic financial performance and trends.
- Accounting policy review, ensuring compliance with UK Accounting Standards.
- Analysis of work in progress and unbilled disbursements.
- Assessment of debtor quality, recoverability and lock‑up.
- Evaluation of partner capital, drawings policies and funding arrangements.
- Identification of contingent liabilities, including lease obligations and potential litigation.
- Review of working capital, cash flow, banking facilities and covenant compliance.
- Identification of exposure to write‑offs, contingent fees and aged matters.
- Review of compliance with the SRA Accounts Rules or CLC Accounts Code.
The objective is to understand the quality of earnings and how the merged firm’s finances will perform post‑completion.
Tax due diligence focuses on:
- Review of open tax years and historic compliance.
- Corporation tax or income tax positions, depending on legal structure.
- VAT treatment of fees, disbursements and recoverability.
- PAYE and NIC compliance for staff and partners.
- Assessment of partner remuneration and profit allocation structures.
- Identification of latent or deferred tax liabilities.
Together, these workstreams allow firms to identify risks early, quantify potential exposures, and build appropriate protections into the merger agreement, ensuring partners make informed decisions about joining together.
Why Work with ALFMA?
Law firm mergers demand sensitivity, expertise, and discretion. By working with ALFMA members, you gain access to advisers who:
- Have deep personal networks and credibility in the legal marketplace.
- Combine strategic insight with practical execution.
- Understand the financial, cultural, and regulatory dimensions of law firm mergers.
- Provide independent advice while acting as your trusted “critical friend.”
Every merger is a defining moment. With ALFMA at your side, you can approach it strategically, confidently, and with the assurance that your firm’s future is in safe hands.
Contact Us
The Association of Law Firm Merger Advisers are a team of proven market experts, to help you take the risk out of merging your business.
If you would like to speak with a member of the team you can contact us on
