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Exit strategy

Passing the baton on a successful practice is hard — but a creative plan can ease the transition.

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When Ottawa lawyers Don Ray and Roger Button started to plan for retirement in 2010, when they were both in their mid-60s, they realized they were in a unique position — and not a particularly good one. 

“The bottom line was we didn’t have anyone in-house, we didn’t have any juniors, and we didn’t think we could sell our practice on the open market because there’s really no value attached to the kind of general practice we had,” Button says. “Those are pretty difficult to sell these days.”

When the name Burke Robertson — a large, Ottawa-based law firm — came across their desks, “something clicked.” It felt like a good fit right down to the location — one block away from where they’d been practising.

“People were familiar with that location. That has some impact on whether your clients will follow you,” says Button. “Another advantage was that we share a very similar approach to the practise of law so that when we transitioned our clients, we knew they were going to a firm that shared our values. That was very important.”

Ray and Button approached the bigger firm and negotiated a merger deal that included having them stay on for at least two years, during which time they would transition their clients over to the new firm. Burke Robertson also agreed to take on two of office staff with important corporate knowledge.

“What we had to make clear was that the clients we brought with us were our clients and would always be our clients,” Button says. “So that if this didn’t work out and there was a divorce, they wouldn’t be able to poach our clients from us and we would have been able to either go back into our own practice or make similar arrangements with another law firm.”

For Burke Robertson managing partner Edward Masters, the primary consideration in the deal was the reputation of the lawyers — good lawyers have good clients, he says.

“Roger and Don eagerly took on the role of mentor so we had two years benefiting from their experience and knowledge,” says Masters. “We also had two years to get to know their clients and their clients’ needs. When they ultimately stopped working we had access to a group of very good clients.” 

Start. Planning. Now!

How thinking about succession can help you at every stage of your career.

“I think every firm and every lawyer should be thinking about succession planning immediately, regardless of age,” says Allison Speigel, a 32-year-old commercial litigator. “When you start your firm, I think you should be thinking about succession planning because succession planning dictates what lawyers you are looking to hire; the processes you are looking to put in place.”

Speigel spent the first five years of her career as a litigator at two law firms in New York City. When she was looking for a career move, Speigel Nichols Fox was attractive for a number of reasons — not least of all because her father and uncle are two of the equity partners, so she knew she’d be protected there.

“If you are walking into an environment where you have no family ties, then to me it would be a business deal: what role am I coming in to fill; what are you expecting of me and what does the relationship look like moving forward. Those are all terms that should be negotiated up front, with the understanding that some of it will have to be re-negotiated down the road.”

Here is what she recommends junior lawyers think about in terms of succession planning:

Who are the players? 

If the brand is associated with the senior partners’ names, “then you should be looking around and asking, ‘what does this look like in five years? Or in10 or 15 years?’ ”

How is the firm structured?

“At our firm we have the old guard — the three main partners who will be retiring in the foreseeable future. They’re 65-plus at this point. But we also have this amazing middle generation of people who are at the firm. The great thing they provide is the stability and the continuity during any type of transition.”

Being one of the players:

“(T)hink about everything from a business angle: what does the business look like? Are the foundations strong? Are you looking at the market? How does your business fit into that market? If you stop thinking ‘someone is going to feed me my whole life,’ the question is, ‘can I go out and catch my own food?’ ”

Keeping clients in the loop: 

“What does our transition plan look like? Do our clients know? Are our clients comfortable with the next guard?” 

Finding “the one”

Grooming an associate.

Michael Farrell, 67, says he had a “eureka moment” when he realized he’d been grooming a person to take over his practice for years. 

“Starting at age 16 in high school she worked for me all through her undergrad, and all through law school. She didn’t article with me, but she became extremely familiar with my practice over the years. When she was being called to the bar about five years ago, I was starting to think succession. I told her she could join me if she wanted to, with a view to taking over.”

She still had to prove herself in practice, something Farrell says she did in four years as an associate. By the time the decision was made for her to take over, “she knew the practice, the clients, the office, the neighbourhood, so for her it made a lot of sense. She really hit the ground running.”

Here are the attributes Michael Farrell says retiring lawyers should look for in a successor:

• A similar philosophy and approach to law;

• An ability to serve clients in an established manner; 

•  A general enjoyment and enthusiasm for the practice;

• Somebody who isn’t just interested in the numbers but who wants to cultivate a practice;

• An ability to grow the practice. 

Advice from the experts

Diana Miles, Executive Director, Organizational Strategy / Professional Development and Competence, Law Society of Upper Canada

“Lawyers should start planning for retirement when they are in good health, with sufficient time to allow for thorough preparation. We recommend lawyers start succession planning at least 10 to 15 years before they anticipate retiring.

Not only do contingency and succession planning make good business sense, they are part of a lawyer’s professional responsibility. Appropriate plans will minimize expense and avoid prejudice to clients.”

Kathleen Fortin, Arthur G. Greene Consulting, LLC

“Small firm founders and solo practitioners are realizing that putting a plan for succession in place, whether it be internal succession, an Of Counsel arrangement or other options, makes sense. Not only do senior lawyers feel that their early planning can benefit clients and staff, they are often surprised to learn that the transition planning and exit strategies can incorporate personal rewards for the practice they have built.

Resources

The Law Society of Upper Canada estimates 1,200 to 1,500 lawyers will formally retire over the next five years. Here are some tips on how you can approach succession as you approach retirement.

Get a Tool Kit 

Law societies across Canada offer a range of free resources and materials for planning your exit. These include everything from a sample letter to clients announcing you are moving on and who will be covering their legal needs to templates suggesting appropriate wording for newspaper announcements. The Law Society of British Columbia, for example, also offers a handy “winding down” inventory checklist of office items you may own or lease and numerous other helpful succession documents attending to details you may not have thought of. 

Log on 

The Law Society of Upper Canada has a Succession Planning Toolkit, available at lsuc.on.ca.

Some organizations also offer free webinars on succession planning, such as this one on the LSBC website.

Hire Help 

There are a number of consulting companies that specialize in issues specific to the legal industry, including succession planning. Arthur G. Greene Consulting, LLC, for example, works with lawyers to develop retirement and exit plans including valuing your firm for selling; mergers;  winding down a practice; transitioning and how to create a search plan or recruit a successor.