The Firm
An amalgamation of two local law firms with different ambitions: one looking for continuance and survival, the other looking to grow. The merger created a team of 5 partners and around 40 staff, working from 3 offices: one profitable, one loss making and the other stagnant. Overall, the firm was undercapitalised, had high levels of lock up, low profitability and under-performing staff.
At the time of Pegasus’ intervention, the firm had merged into one office, 3 partners had left with capital shares paid out in full, and had undergone a re-launch. Financially, the 2 remaining partners were in a vulnerable position, the bank were threatening to call in their substantial overdraft, and both were approaching retirement with no succession planning in place.
The Aim
To achieve a position of financial stability; work out the strategic options available to the partners and then to support the partners in implementing those options.
The partners’ sought continuity for their clients; security for their core loyal staff and on-going protection for themselves.
The Method
Over a period of 2 years, Pegasus oversaw a planned programme of key steps:
- Resolving the cash crisis/lockup by chasing unpaid bills, billing existing WIP and enforcing key procedures to instigate efficiency at all levels.
- Identifying the partners’ immediate objectives to save and modernise the firm.
- Identifying the core business areas; allocating resources to the more profitable property and private client areas and then scaling down other stagnant areas.
- Identifying the most effective staff and monitoring trading for 9 months to assess on-going viability.
- Developing alternative strategies/options to securing the long term viability of the business.
- To meet the partner’s objectives, Identifying, targetting and approaching ’good fit’ merger partners and bolt-ons.
- The best fit solution was found and an effective take-over was negotiated and implemented.
The Results
By working carefully through a long term strategy, Pegasus was able to immediately:
- Reduce the overdraft by 70% in 6 months.
- Avoid redundancies for the committed and loyal staff.
- Create very advantageous consultancies for both partners.
The Pegasus guidance into the merger negotiations helped achieve a highly satisfactory position for the partners – continuation of their practices (with guaranteed incomes); continuity for their clients; security for their committed staff and a comparatively favourable financial result as the indemnity insurance liabilities, leases; dilapidations and TUPE responsibilities were taken over by the new firm.
Key to the deal was the ‘lean and mean’ firm profile achieved prior to the merger.