You want to sell your law firm? Then it's good to know what the takeover market in the law firm field looks like. Many small businesses are entering the market, but the large firms with multiple employees dominate. More and more tasks are being taken out of the hands of other professionals, but the days of casual billing are over, thanks to digitalization.
Society is becoming more legalistic, but consumers are more empowered. Competition is too eager for exorbitantly high fees, so there are tensions in the market. Alternative revenue models are sprouting up, there is a lot going on around digitalization, and laws and regulations are becoming more diverse and extensive.
There are many ways to value a business. A common method of expressing the value of a business is "a factor x gross annual profit." This factor is also called multiple and another designation for gross annual profit is EBITDA (Earnings Before Interest Taxes Depreciation and Amortization).
In the business services sector, which includes a law firm, an indicative EBITDA multiple range of 4.6 to 5.5 is currently used, according to the Brookz Takeover Barometer. The average EBITDA multiple across all SME sectors is 4.90.
The valuation of a business is often the starting point for negotiations between buyer and seller. The outcome of these negotiations is the final sales price. So valuation and price are two different quantities. Besides valuation, the price is also determined by possible scarcity in the market, bargaining power of the parties, the strategic value of the business for the buyer and possible synergy effects for the buyer (cost savings, purchasing advantages).
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Do you want to buy a business or sell a business in the business services sector? With this Brookz Sector Monitor, we want to present buyers and sellers with facts, figures and an outlook that provide insight into the number of transactions, the value development of businesses and the latest trends and developments in the business services sector. Because in every buying or selling process, thorough preparation gives peace of mind, overview and structure.
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Society is held together by legal frameworks and this is certainly not going to change. There is more and more work for legal firms, but competition is also lurking.
In figures, the number of law firms in 2024 looked as follows(CBS):
With this online training from Brookz you are optimally prepared to largely sell your business yourself: 25 Powerpoint videos, a comprehensive valuation report, legal model contracts, handy templates, checklists and expert support. Plus 50% discount on listing your business on Brookz!
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A number of trends and developments will inevitably cause changes in the coming years, but also offer law firms many growth and acquisition opportunities:
As more and more laws and regulations arise, nationally and internationally, consumers are more likely to call on the knowledge of a legal specialist. The threshold to legal action has, however, become higher with the increase of court fees and the reduction of subsidized legal aid.
There is a battle going on between custom and model cases. Thanks to digitalization, there is a lot to streamline in content with clients. Agreements, both business and private, can often be offered as model documents, which means that the client can be helped sooner and cheaper. On the other hand, however, there are complex matters that really need to be examined and handled by a specialist. There seems to be a duel going on between the two sides of the coin, where a combination is still awaited, according to ABN Amro.
Where the legal profession is known as a cock culture, the end of this seems to be in sight. The number of women in the legal profession at the largest 50 firms stood at 45.1% in 2021.
In the Netherlands the trend does not seem to have really caught on yet, but internationally virtual law firms have been popping up for some years. From their (home) office, you log in to a secure connection with the specialist, thus creating an agreement digitally.
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