When “Big Law LLP” comes calling – a niche law firm acquisition

Armstrong Watson was engaged by a significant niche firm who were being purchased outright by a large global player in order to create a fully formed specialist team within the significantly larger practice. We were therefore engaged to value the smaller practice, to negotiate heads of terms, to comment on the taxation aspects of the deal and to perform the “reverse due diligence” on the acquirer.


Valuing a law firm is, in itself, an art; there are no scientific answers, instead you have to carefully look at the variables (our client in this case for example had a retainer with a very large retailer – which must clearly have some value to it).

Being accepted into a global firm (with inevitably very defined, often non-negotiable lock steps) presents a complicated package of benefits, remuneration, annuities etc – all of which have to be forecast into the future to establish their truth worth.

In effect the consideration being paid for the niche firm becomes the access to the future profits of the bigger firm and thus the main question our client needed an answer to was “will the acquiring firm be able to afford this/continue to be a going concern in the future?”.

What we did

We produced various valuations, as well as considerable narrative to illustrate the various options open to the selling partners and what level of consideration might be “reasonable” in the circumstances.

We are well versed in assessing partnership offers something we do routinely here. This particular offer was considerable in profit terms, however that does not necessarily translate into cash and there was some significant modelling required so that the partners could compare their current position to the most likely future one.

Reverse due diligence was required to establish the most likely maintainable levels of profitability of the firm, to investigate any potential unrecorded liabilities and to assess the cash demands of any other liabilities. We were able to establish the underlying security of profits of the acquiring firm and allow our clients to negotiate any amendments to the eventual deal from a position of financial logic and pragmatism.


The new business goes from strength to strength and has allowed the niche firm access to a global client base, a succession solution and the potential of significant rewards of membership of a much larger firm.

Tom Blandford of Armstrong Watson can be contacted at Tom.Blandford@armstrongwatson.co.uk or 07793 621 951. Other members of ALFMA can be contacted here.

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