Succession and succession planning is a subject that is being addressed in many law firm leadership forums. One statistic explains the intense focus on the topic – only about 30% of law firms make it beyond the first generation.

Why Do So Many Law Firms Fail?

Why do so few law firms make it to the second generation? Consider this progression of logic:

  • Few goals are realized by happenstance;
  • The greater the objective, the less likely it will be realized without serious intent;
  • A written succession plan reflects serious intent;
  • 95% of law firms have no written succession plan;
  • For a majority of law firms, 25% or more of revenue is generated by or closely associated with lawyers that are 60 or older;
  • Few firms will survive the loss of 25% of revenue in a short period of time.

So What? 

If you are a law firm leader, this reality should not surprise you. We regularly visit with managing partners and governing bodies that see the writing on the wall. With the exception of those who choose to bury their heads in the sand, most agree succession must be addressed. A comprehensive and workable succession plan is essential if a law firm hopes to survive beyond the current generation.

A 3-Step Path to Survival

Step 1 – Start now. As simplistic as this may sound, it may be the single toughest part of developing a plan. The day-to-day demands of managing a firm and a practice make it difficult to step back and consider the future. This reality is one of the biggest reasons many firms find themselves in their current predicament — years of not having time to address relationship continuity and succession.

To think too long about doing a thing often becomes its undoing” –Eva Young

Step 2 – Engage your colleagues in a series of discussions intended to yield a plan for succession. Inclusion is essential to obtaining the buy-in necessary for a plan to succeed. Conversations with those impacted (clients as well as lawyers) that focus on long-term benefits, continuity of representation of clients, and the value of legacy are critical pieces of the puzzle. Some of these conversations may not be easy; but without them you are reverting to a strategy of hope.

Step 3 – Execute and monitor the plan. Very few plans roll-out exactly as intended but the routine monitoring of performance to the plan provides a means of adjusting as necessary to achieve the objectives. Succession is about the future — and any conversation about the future must be on-going. Inside a successful firm, a good plan must be able to evolve.

A successful succession plan doesn’t necessarily mean future leadership comes from within your firm. The plan may include the recruitment of new talent in the areas of leadership, and/or client generation and servicing. It may mean that the core of your firm survives as a part of a bigger organization. The real key is that the result your firm ends up with is the result you desire. Without planning, the desired result is highly unlikely.

One additional note that many firms miss when it comes to the issue of succession planning—-Succession is likely on the mind of your clients. The issues of experience and continuity are likely being dealt with inside your client’s organization. A thoughtful collaboration between relationship partner, the client and firm leadership is an opportunity to demonstrate that level of client-centeredness all law firms proudly tout.

Our experience is that most firms wait too long and suffer the consequence of fewer or no options. Don’t let that happen to your firm!

Law firm merger is popular because, among other things, it can help a firm grab greater market share, enter new markets, bolster capabilities, or address succession challenges.  These results or outcomes can compel a firm to pursue merger enthusiastically.  Unfortunately, mergers don’t always guaranty success and in some cases can undermine a firm’s stability. To be successful in merger, a smart law firm takes a careful and disciplined approach.

Law firm leadership considering merger should keep five key elements in mind to maintain needed discipline.  By making its pursuit of merger touch upon these five fundamentals, a management team positions its firm for success. These fundamentals are:

Approach Merger with a Non-merger Strategy in Mind.  Merger is not an end into itself.  Rather, the tactic of merger should serve a distinct firm strategy that is advanced by merger.  The firm strategy may pertain to growing the firm’s substantive capabilities, building out existing expertise or adding market share in areas the firm already competes. But a merger not based on furthering a non-merger strategy is a hollow exercise, and one that is best avoided.  For this reason, firm leadership should clearly identify the firm’s strategy that is served by merger before embarking on the idea of merger.

Look for a Combination that Serves the Non-merger Strategy.  Once it is decided to further a firm strategy through the tactic of merger, it is only logical to confine the search for a merger candidate that fulfills the firm’s objectives.  For that reason, the firm should establish the essential characteristics of any potential merger candidate.   As the process goes on, many potential merger candidates presented may be bright and shiny, but do not have the characteristics previously identified. A disciplined firm is not swayed by otherwise exciting firms willing to merge if the essential elements needed for the firm’s strategy are lacking.

Only Pursue Compatible Firms.  Believe it or not, a merger candidate may meet all the strategic criteria but can still be a horrible choice.  Once a potential merger candidate shows that it meets the firm’s strategic imperatives, its compatibility must be carefully examined.  Determining whether a firm is compatible often requires focusing on five compatibility metrics: culture, finances, clients, compensation, and operations.  Upon testing those metrics for the two potential marriage partners, the compatibility of the two firms will become clearer.  If compatibility is not present, it is best to continue looking.

Make Integration a High Priority.  As hard as it can be to put a merger together and get to the closing table, it can be even harder to integrate the two firms once closing occurs.  Disciplined firms in the merger game thoroughly consider the idea of integration, map out steps to a successful integration, and discuss it with their merger partner-before closing.    If prior to merger the integration of the two firms looks to be too difficult, passing on the proposed merger may be advisable.

Be Selective.  Because merger discussions can be time consuming and create an excitement about the future, momentum in favor of merger sometimes can prove overwhelming. Letting deal fever force a merger is unsound.  Rather, any proposed merger, should be compelling for a firm to say “yes.”  If the match does not meet that standard, it is best that leadership step away from negotiations and wait until a suitable combination can be found.  Waiting for the right merger is not failure, it just means that further work needs to be done.

Merger for the sake of merger should not guide a firm.  Instead, being disciplined when pursuing merger is a recipe for a good outcome.  Are there other important steps your firm has followed in its mergers?

For law firm leaders, continuing a firm’s success is about constant monitoring, clear vision, perspective, and the willingness to act.

Well-run businesses, including law firms, stay abreast of changes in the marketplace by monitoring shifting client needs. Successful businesses track the initiatives of competitors and seek to secure the premium assets needed to compete. For law firms, that means keeping clients, getting new ones, and preserving the talent in the workforce.

There are many ways to achieve this, but for nearly all law firms it includes staying focused on the bottom line. If a law firm operates profitably, it can be more responsive to its client’s needs, it can respond to its competition, it can innovate where appropriate and necessary, and it can retain its most valuable attorneys. Call it “staying focused,” “being on top of things,” or “keeping your eye on the ball”—each speaks to operating as if nothing is assured. Yesterday’s success is no guarantee of tomorrow’s survival.

A successful law firm is a busy one. New clients are landed, matters are opened, and legal advice gets delivered. The success enjoyed may be traced to the principles that drove the firm’s formation, the drive of the lawyers that came together as a firm, or a little of both. A brisk practice might also be due to increasing client demand. Whatever the impetus for the good fortune, few law firm leaders are naïve enough to assume that present success is a guarantee of future prosperity.

But if the fleeting nature of success is recognized, why do some firms fail to sustain the momentum they worked so hard to build?

Sustaining a law firm’s success, or even just ensuring that a firm survives, is a challenge faced by every law firm—every day of every year. And wherever the significance of the task is understood, focused and dedicated leadership can act and plan in firm-sustaining ways. For some firms, however, finding a way to continue the good times escapes leadership’s attention. And a struggling firm is an unstable one, less and less able to sustain its reputation and market position and increasingly putting itself at great risk.

Four fundamental lessons, if followed, can reduce risk and improve a law firm’s chances of surviving. Continue Reading Thoughts on Building Long-Term Law Firm Health

If you practice law, there is one eventuality that should be added to that familiar duo of Death and Taxes. No one talks much about it, but it warrants the same attention to detail. The subject? The end of your practice. 

As is the case with its two more familiar rivals for attention, ignoring it will not prove wise. 

The fact is that that for most the end of your practice will probably be the most significant professional transition of your career — the transition of one’s practice to someone else. Drivers generating this change include:

  • Pursuit of another profession or passion;
  • An unforeseen health circumstance; or the most often,
  • Retirement

A critical part of practice management is planning for the future. In its most productive form, career planning includes a deep-dive into both short-term and long-term possibilities. And this kind of planning can be the difference between a smooth and profitable transition, and disaster.

There are a number of issues to consider. And as is the case with respect to your personal taxes or the distribution of a personal estate, expert counsel can help you avoid pitfalls. leverage every asset, and end up in successful transition.

Some of the most common issues include:

  • Defining personal objectives
  • Compliance with local bar rules
  • Practice valuation
  • Finding a buyer
  • Negotiating the transaction
  • Transitioning client relationships

In this post we’ll explore the first three issues; and we’ll tackle some ideas around the remaining three in the next post.

Defining Personal Objectives

This first and most important step sets the stage for the entire process. It outlines what constitutes success, and sets parameters that will facilitate decision-making. What must be accomplished, and in what time frame? Do you want to completely step away from the practice, or keep one foot in? Do you want the transition to be prompt, or take place over time? Those variables dictate your strategy.

Compliance With Bar Rules

The ABA provides for the sale of your practice as long as certain conditions are met.  In Rule 1.17 sets forth the following conditions:

  1. a) The seller ceases to engage in the private practice of law, or in the area of practice that has been sold, [in the geographic area] [in the jurisdiction] (a jurisdiction may elect either version) in which the practice has been conducted;

(b) The entire practice, or the entire area of practice, is sold to one or more lawyers or law firms;

(c) The seller gives written notice to each of the seller’s clients regarding:

(1) the proposed sale;

(2) the client’s right to retain other counsel or to take possession of the file; and

(3) the fact that the client’s consent to the transfer of the client’s files will be presumed if the client does not take any action or does not otherwise object within ninety (90) days of receipt of the notice.

If a client cannot be given notice, the representation of that client may be transferred to the purchaser only upon entry of an order so authorizing by a court having jurisdiction. The seller may disclose to the court in camera information relating to the representation only to the extent necessary to obtain an order authorizing the transfer of a file.

(d) The fees charged clients shall not be increased by reason of the sale.

Please note that not all states (including Texas, where we are based) follow Rule 1.17. So, check your local bar rules before moving forward.

Practice Valuation

Whether you literally sell your practice or transition it to a new owner through another means, the practice needs to be valued for fiscal reasons.

Fundamentally this is a matter of determining anything being transferred that is relevant to the generation of future profits. Portions of the practice relevant to valuation include:

  • Hard assets
    • Furniture
    • Equipment
    • Property
  • Soft assets
    • Cash
    • Receivables
    • Work in process
  • Business systems/intellectual property
  • Goodwill
    • Existing clients
    • Former clients
    •  Referral sources of firm
  • Liabilities
    • Actual
    • Contingent

Even though each of the above items can have a significant impact on the valuation of the practice, the most difficult and critical valuation issue is that associated with the goodwill. What future revenue stream is really being transferred based on this often difficult concept?

Transitioning out of practice is best accomplished when handled as a process — one that begins long before the eve of the desired transition.

More in my next post…

Competition among law firms is as brisk as ever. Gaining an advantage requires more than hard work-it requires strategic thinking that causes a firm to be different in a positive and noticeable way. Simply working harder or relying on strategies that performed in the past is not enough.

If business as usual is not sustainable and differentiation essential, firms must consider not being all things to all clients, must bring greater focus to their clients’ needs, become more efficient, cost-effective and value conscious.  Firms also must consider advanced technology solutions, master project management, and “think outside the box.”

Firms seeking to differentiate face their old nemesis: change.  To conquer change and drive differentiation, firms must have and/or use the following five things:

Courage.         Differentiation means moving away from comfort zones.  It means changing the way business is done with the possibility that there is no turning back.  And it likely means narrowing service offerings and investing in specialization not invested in before.  Differentiation can mean saying good-bye to practice areas and personnel that for years have been a part of the firm.  Pivotal change like that takes courage.  Without it, recasting a firm through differentiation is difficult.

Knowledge.    The idea behind differentiation is not change for change-sake.  It is focusing on a new direction that offers more promise.  No new direction can be pursued without knowledge about the firm’s existing strengths, the opportunities in its markets, and the cost/benefits from pursuing a new direction.  Mere hunches are not enough.  Without a factually based and analytically tested plan, knowing whether the current state should be replaced by a future-state amounts to guesswork.

Judgment.       When moving from the status quo to something else, forks in the road will be confronted.  At those forks, critical decisions will need to be made.  The exercise of sound judgment is essential if the path towards differentiation is to succeed.  A firm embarking on a new and more focused way forward must be blessed with decision makers that have exhibited wisdom in the past.  If leadership’s judgment is suspect or untested, outside advice should be sought to supplement in-house mind power.

Resolve. It goes without saying that a firm seeking to differentiate must believe in its strategy.  When possessed with that belief, it is essential that the firm have the resolve to follow through on its plan.  Because it will be moving away from the comfort of the status quo, and bumps in the road could be felt, the firm must remain confident it is new direction.  As challenges are confronted, the firm’s commitment to the plan must be demonstrated by forging ahead.  If resolve is lacking, for a whole host of reasons failure is more likely.

Leadership.     A strong leader or leadership group must be in place before differentiation is possible.  People being asked to invest in the new way, many less courageous or simply uncertain, will gain strength from leadership that believes in the path forward and acts in ways consistent with that belief.  Strong persuasive attributes will be needed constantly as doubters, opponents, and uninformed overreact to challenges along the way.

Making your firm stand out is greatly aided by courage, knowledge, judgment, resolve and leadership.  Does your firm have those attributes?




Growth through lateral additions is a hit or miss proposition at best. Numerous survey reports indicate that far fewer that 50% of lateral additions meet the expectations of the hiring firm. There are a number of reasons for this poor performance. Three that almost always foreshadow disappointment in the near term include:

  • Exaggerated estimation of portable business,
  • Lack of cultural fit and,
  • Lack of strategic fit.

All three of these can be addressed by taking two steps that most firms fail to take.

Step 1

Clearly define strategic growth objectives. Strategic growth is growth that:

  1. Allows the firm to better serve current or emerging needs of existing clients,
  2. Allows the firm to capitalize on an emerging market opportunity of significance,
  3. Shores up a weakness that is limiting the firm in a material and defined way, or
  4. Strengthens the firm in an area in which it holds a strategic market advantage.

The strategic growth objectives should be enumerated in writing with specifics as to level of experience required, area of expertise needed, physical location, and any other characteristics that define a successful candidate for the specified strategic objective.

Step 2

Seek input from your firms attorneys. Depending on your firm’s size, solicit specific lateral recommendations from all attorneys — or, in larger firms, to an appropriate segment of partners/shareholders. A prioritized list of strategic growth objectives should be distributed along with a simple question – what attorneys do you know personally that would a) fill one of our strategic objectives and b) be someone you would really like to practice with?

Potential hires that meet strategic growth objectives and are personally connected to one of your attorneys greatly increase the odds of a successful lateral addition.

A friend and great thinker on this topic, Eric Fletcher, recently posted an article that is worth a read. The article includes a model for successful lateral pursuits. Do yourself a favor and check it out!

Merger is a tactic that never ceases to be popular with law firms. Among other things, a merger can create excitement, offer greater financial opportunity, provide a rescue, or promise a firm and its people a more promising future. As merger activity unfolds, a law firm leader may soon feel initial enthusiasm damped by unwanted attrition from portions of the firm.

Despite the perceived positives, merger can be unsettling to a firm’s personnel, including its key contributors. Uncertainty abounds and producers, non-producers, associates, and staff wonder whether a combined firm, from a personal standpoint, will be good or bad. Indeed, uncertainty can result in unanticipated departures that can tarnish a firm’s appearance and attractiveness. And in this frenzied time of law firms competing aggressively for lateral additions, this risk can be particularly acute. Without adequate advance preparation, departures can adversely affect the merger discussions and, in some instances, spell their doom.

Because merger discussions can foment anxiety at all levels, attention to dealing with that anxiety is a must. Most particularly, it is important to prepare for potential departures prior to diving deep into the merger waters. To do so, law firm leaders must:

Recognize that Turmoil May Arise. Before any merger discussions get started, leadership must understand that anxiety at the firm will increase in a multi-fold way. Contributors of all degrees will wonder whether a merged firm is a place they want to work. Once merger is in play, normally calm people can become skittish. Leadership must be sensitive to this potential and act to provide a calming influence.

Understand that Intangibles Matter.   Merger preparation means that data will be assembled to identify a firm’s strengths and explain its weaknesses. These analyses, especially regarding the firm’s producers, will focus on their economic contributions and downplay or explain away the negatives associated with some of the more challenged firm segments. Yet the firm’s real weakness can be the lack of glue or adhesion in its component parts. Leadership must identify where fissures might erupt and take steps to bond around them.

Negotiate Knowing that Departures are a Possibility. Nothing can hamper merger discussions more than experiencing lawyer departures after having touted those same lawyers as key pieces of the proposed combination. For that reason, no one component of your firm can be oversold. Negotiations should emphasize that the firm is greater than the sum of its parts and is an institution of great value.

Confront Departure Issues Head-on. If you have an idea that a departure is possible, deal with that risk directly. Visit the potential expat to address any disaffection that is fueling those thoughts. While this is where persuasive powers are critical, it is also critical that leadership address with other attorneys any fallout if departures do occur. For those that remain, a departure of one or more lawyers may create panic. Eliminate their concerns with a factually backed analysis of the firm’s remaining strength.

Provide Comfort to the Merger Partner. In instances when the departure cannot be averted, inform your prospective merger partner about the departure quickly with an analysis that emphasizes the remaining value of the institution. If you have been successful in tamping down any panic, consider informing your potential merger partner that additional departures are not expected and why. Finally, if your firm’s original pitch presented the firm as an institution more valuable than the sum of its parts, a leader’s ability to comfort a potential merger partner is enhanced greatly.

Pursuing merger is a high risk/high reward proposition.  It should not be pursued without understanding that lawyers may leave the firm in the midst of the initiative.  Can you firm withstand departures and make a merger work?  Can you firm continue if merger discussions cause departures, and no merger is consummated?




Following a pandemic driven drop in the number of law firm mergers in 2020, based on what our practice is seeing, 2021 will see a substantial increase in combinations. It seems like scarcely a week passes without an announcement of another law firm merger.

We have been particularly interested in the pending Thompson Knight – Holland & Knight transaction.

This reported combination appears to be experiencing some unwanted attritionthat is fairly common in large mergers. This article reminded me of how important it is to ensure that key firm assets understand the strategic value and support the deal.

There are a number of solid strategic reasons for law firms to consider merging. In my opinion, three at the top of the list are:

  • The addition of specific expertise and technical capabilities necessary to better serve existing or targeted clientele;
  • Succession planning; and,
  • Financial stabilization.

I have been encouraged by the fact that two of the recent mergers our firm was privileged to consult on were specifically driven by succession concerns. In each case, senior partners made the strategic and selfless decision to seek a culturally compatible merger partner in order to provide a platform of future opportunity for its younger lawyers.

Unfortunately, a significant percentage of mergers are driven solely by the misguided idea that  getting bigger is better.

Why do I say “unfortunately” and “misguided” Isn’t growth a good thing?

Simply put — I believe the numbers-driven strategy is the root cause of a majority of failed merger initiatives. Getting bigger often only magnifies and compounds existing deficiencies.

If your law firm is considering a merger, what is driving the pursuit.

Law firm mergers can accomplish a great deal, so it is no wonder they are popular. The number of mergers consummated each year is steady if not growing. Strategically designed and executed law firm mergers can boost combined firms to places otherwise difficult to achieve in the time frames desired.

Even though many mergers make sense and receive the accolades deserved, there are other combinations that fail. Indeed, by some assessments, fifty percent of all mergers fail. Failure can be traced to many reasons, but when post-mortems of failed mergers are performed five ill-conceived notions behind merger are frequently observed. Based on that history, merger contemplated by leadership should be rethought if its impetus is premised on any of the following rationales or motivations:

Obsession with Growth. Without question, growth is a prominent feature with all mergers. But more than the result should be the impetus for pursuing merger. Many mergers that fail can trace their failure to an obsession with growth and allowing that obsession to dominate thinking. The move to merge must be borne of sound strategy, analysis, and due diligence, not a belief that bigger always is better. Growth will be a subsidizing inevitable by-product.

Desire to Dominate in the Wrong Areas. A law firm may be known for a particular specialty and the strategic desire to dominate that specialty may drive decision making. When thinking of domination, it is advisable to look at the coveted area and ask, is it sufficiently profitable, does it have an inspiring future, will it help or hurt other areas of the firm? Applying basic business analytics should be employed so that any merger boosts the brand long-term and is, in the long run, accretive. More “meh” from a merger helps little.

The Clamor for Excitement. It is not uncommon for a faction within a firm to appeal for action to jolt a seemingly staid and stodgy firm to life. Excitement is good, but the big splash that goes with a merger will recede from the consciousness sooner than often imagined. While the excitement may have been fun, a merger fundamentally must strengthen the firm. Being saddled with nothing more than the burden of a bigger firm is the antithesis of exciting.

“Keeping Up.” Closely tied to a clamor for excitement is the interest in “keeping up” with competitors that have grown or merged. While competing is all about keeping up or overtaking your market rivals, channeling that desire into a non-strategic merger is not the answer. All firms are different, and just because another firm merged successfully, doesn’t mean a merger is for you. Strategy, analytics and due diligence, not fads, should drive mergers.

To Fix the Unfixed. Firms with challenges frequently compound those challenges by adding more variables to day-to-day life. A firm with problems should address those problems before jumping into the merger world. Worse still is a merger birthed with the belief that the merger partner will cure ills nagging the present. Bypassing a pre-merger fix will only make things worse in the long run.

When examining the scene of failed law firm mergers, one or more of these five fingerprints often can be lifted. If your firm is thinking about a combination, are its thoughts based on questionable impulses or well-thought-out strategies and analytics?


It has been a good while since I have written on this topic but two recent events prompted me to address it again.

The first: last week, Bruce Matson, former General Counsel of LeClair Ryan, reportedly (subscription required)  admitted embezzling $2.5 million dollars from a client trust account.

The second situation relates to a client — a relatively small firm located on the West coast. In this instance my client discovered that an employee has misappropriated more than $300,000 over a period of several years. The now former-employee was also unfortunately a gambling addict.  Consequently, virtually none of the funds are recoverable and a criminal prosecution is providing little relief.


I am shocked at the number of times I’ve seen this happen inside a law firm. No firm is immune, and there is no set pattern. The size of the firm doesn’t matter.  The villain might be a partner or a staff member. And it may be theft from a client trust fund or an operating account.

But in virtually any situation the abuse of trust could have been prevented.

 Most lawyers (therefore, most law firm management teams) have not been trained to design basic internal control processes that safeguard firm resources. As a result, many law firms provide numerous opportunities for financial abuse.


None of us enjoy considering the possibility that colleagues might actually steal from the firm. But while leadership strives to inspire trust, an awareness of some of the typical methods used to embezzle funds can result in firms establishing processes that serve to prevent a brand of theft that might occur.

A short and incomplete list of ways in which funds are misappropriated include:

  • “Shadow” vendors are established, complete with a company name and address, in order to receive payments that wind up in the hands of the individual committing the fraud. This is a common approach; the payments (checks or electronic transfers) typically start small and increase in frequency and amount over time.
  • False expense reports are submitted for reimbursement. Again, these tend to grow as the thief is successful. In some cases, the firm is the direct victim in others the fraudulent charges are passed through to clients who unwittingly absorb the loss.
  • In larger firms, fictitious employees are sometimes set up in the firm’s payroll system.
  • Some law firm allow an individual to have sole control over authorizing and issuing and accounting for payments. In some instances the perpetrator has made direct payment to themselves, family members or personal creditors.
  • In other cases, firms allow the same person to receive and deposit client payments while, at the same time, having the authority to “write-off” client receivable balances. This can lead to an employee endorsing a client payment to their own benefit and then eliminating the client receivable with no one the wiser.

These are just a few of the countless ways in which law firm and law firm client funds are misappropriated.


The question is what should one do to decrease the probability of such a loss. The short answer is to engage a local accounting firm to review your firm’s procedures and design an internal control process. As your firm grows the process should be re-evaluated by an external accounting firm. Ideally, as the firm grows have the firm’s books and records audited.

In addition, there are a host of things that can be done to decrease the probability of loss. Here are seven ideas that represent easy protective measures:

  • Have background checks conducted on all new employees
  • Make sure a person independent of handling cash deposits has authority to “write-off” client receivables
  • Separate the responsibilities of making disbursements and reconciling bank accounts
  • Require two signatures for larger payments
  • Separate payroll review from payroll preparation
  • Have all requests for reimbursement signed by another person
  • Maintain an annual budget for all types of expenditures and receipts and diligently review variances to that budget

In addition to the above, a firm of any size should consider fraud insurance. This won’t provide protection from the event, but can limit economic exposure.

In thinking about this blog post I did a simple google search on law firm embezzlement during the last year and was discouraged by the tremendous number of reported incidents.

How long has it been since your firm’s internal controls have been evaluated?