A recent article in the Lawyer has questioned whether many law firms have got PE FOMO. They have started to see a trickle of firms take on PE investment or sell out to a PE backed entity and are worried that if they do not commit now then they will miss out. However, is that the right reason for taking this major step?
Timing is everything for any M&A transaction and it is important to ensure that your firm is in its most “sellable” state before you go to market. Normally a business in any sector would take a few years to tailor itself for sale ensuring that its accounts clearly demonstrate how profitable it can be, considering separating from non-profitable partners or areas or business, quantifying material unknown liabilities (such as dilapidations), tidying up contractual issues (ensuring clear written terms are in place and being complied with) and ensuring all statutory records and registers are accurate and up to date, any disputes or litigation is settled where possible
It is important to understand that not all PE providers are the same and not all PE deals are the same. You should therefore take time to review what is on offer and consider taking advice from corporate finance and legal professionals on the market, the sale process and the offered terms. It is important to consider, not only the initial transaction but also the requirements of the PE acquirer post acquisition.
“…many firms have got the private equity FOMO”