In 1991 the American Bar Association adopted Model Rule of Professional Conduct 1.17 which affirmed that an entire practice could be bought or sold, and modified the Rule in 2002 to permit the sale of part of a practice.
Yet many lawyers, even those who feel urgency to sell and realize what part of a practice’s value remains in the wake of the Great Recession, are uncertain how to assess the financial value of what they have built up.
Recently a lawyer asked my advice on how to assign a specific figure to what has become one of the most in-demand practices today: an immigration law firm. He was disappointed when I emphasized to him that every practice and every practice situation is different — his goal was a hard and fast valuation formula.
To see why this cannot be so, consider some of the unique issues relating to an immigration practice. The Rules of Professional Conduct give requirements for transferring one’s interest in a law firm that apply to all lawyers, but they may have special impact on an immigration practice:
Fees charged to clients cannot be increased solely because a practice is sold — even if the purchaser is a larger firm that may charge higher rates than a small firm practitioner.
The selling attorney must give written notice to clients no less than 90 days before the transfer that clients have the right to their files, a matter of special importance given the sensitive personal information that immigration files may contain.
The selling attorney must also inform clients of their right to retain other counsel. If the client is an executive who has since relocated to another country and who decides to retain local counsel, the logistics of transfer may be substantial.
There are other ethical issues in an immigration practice sale that can be answered only by reference to the rules in specific situations. If immigration law is just a portion of a firm’s total practice, some jurisdictions prohibit splitting off a single practice for purchase or sale.
Another possible concern again relates to the sensitive nature of immigration client files. Does client confidentiality prevent the selling attorney from discussing specific clients or their matters? If so, how can a buyer know the nature of the practice without some disclosures? Would a buyer be willing to purchase something, sight unseen? What if the selling attorney has made an error in a client’s visa or citizenship application, and the problem doesn’t surface until after the sale — what is the malpractice insurance coverage?
Issues like these likely have their counterparts in other practices, but they are definitely relevant to selling an immigration practice.
A business is worth only what someone is willing to pay for it. Today, for example, the global migration of executives and professionals creates an especially strong demand for immigration law services. But the lawyer who does not have established relationships with immigration counsel in other countries must be wary of over-emphasizing the global capabilities of the practice.
For a successful sale, the buyer must be assured of an immigration law practice of a certain volume of revenue or a certain client base that remains with the selling attorney for a designated period of time. All this is not to say that arriving at a fixed value is impossible. But it must be done by recognizing the realities of what makes each practice unique. There is no formula that fits all.