A recent matter undertaken by ALFMA member Bennett Briegal LLP is a good example of growth by acquiring a team, rather than acquiring the entirety of a law firm. You get the team you want, which commercially fits into your plan, but without the baggage or risks of acquiring the whole firm.
A team move can be contentious or non-contentious; the right strategy can help reduce the contentious risks whilst evidencing compliance with restrictive covenants.
Case Study – Engineering a team move
We were approached by a respected law firm, ABC Ltd, who wanted to expand one of their specialist teams. They had a current application from the Head of Department at another firm who was desperate to join them, as their current national firm did not value their specialism. We’ll call her Jo. ABC wanted to “take the team if possible” but did not want to be embroiled in restrictive covenant litigation or expose the targeted staff to any litigation risk.
Acquisition of a Team or Practice?
When we were first approached, ABC Ltd was willing to look at acquiring practices, particularly niche practices. We saw that the most viable option was a team move involving Jo and her colleagues, who were central to their current firm’s presence in the market.
We developed a strategy from the start to ensure that ABC Ltd was able to advertise the linked roles and recruit five out of six team members from one firm, but also attract similar talent from another firm as part of their wider recruitment strategy. The posts were advertised on the firm’s website and on Linked-In.
Public information to target the team
We devised a strategy with our client to attract and encourage applications, bearing in mind the constraints of the employee/employer relationship that existed with regards to prospective employees. We also needed to avoid falling foul of Jo’s restrictive covenants.
Once the applications were in and interviews had occurred with team members, we engaged in dialogue with the target team’s firm after a number of the staff had indicated they were going to depart, and we were able to diffuse their frustration and anger by pointing out the roles had been advertised and that team members had been taken from various firms at the same time. The other firm’s frustration that this was specifically targeting their firm quickly dissipated and instead quite rightly their focus turned on why their team members had wanted to leave. This enabled a discussion about the specialism and its impact within their firm and why it was not quite right for them and enabled us to make an offer to acquire the work in progress for the team.
One member of staff did not transfer because they were junior and rated highly enough that they could be accommodated within another team at the firm. As a junior lawyer they were not yet committed to the specialism, and thus unattractive to our client.
The people and the WIP
Our client offered to acquire the WIP for a discounted rate. This enabled them to ensure that their significant recruitment of people from various firms was supported by the acquisition of sufficient work for a relatively modest sum. This enabled our client’s team to grow to double its pre-existing size through one team move.
The firm losing its team had the option to sell or to recruit heavily into an area it was not fully committed to. The acquisition was therefore simple to agree in principle.
In a team move scenario, restrictive covenants, both for partners and employees, are always critical. We devised a strategy to ensure that the individuals did not compromise themselves or indeed their legal obligations. It sounds simple, but as cases before the High Court regularly demonstrate, it was not something which firms always consider.
For our client to be able to acquire both the skillset that they wanted and the work in progress was a success. It is not a deal that is going to make headline news in the legal press, but it created a team of a similar size that is much more profitable, will allow the firm to grow that practice area and to ensure that it has got a depth of expertise which is unrivalled in its local market.
If you are considering acquiring a team, or if you would like to approach multiple parties from the same firm to take them collectively, we can devise a strategy and work either in collaboration with you, your preferred recruitment consultants or indeed can make the approaches direct on your behalf.
If you would like to talk about team move options or the impact of restrictive covenants whether as a law firm or as an individual, we would be delighted to help.