There are tens of thousands of lawyers in the world. Whom do you choose to handle the most important transactions in the company’s and possibly your own lives?
It is not a good idea to base your decision solely on price. Cheap does not always mean bad, but it can be a warning sign. A bad lawyer can cause a deal to be delayed or even derailed, or make mistakes that are only discovered after the deal has been completed.
Fixed Cost – Detailed Specification
Some lawyers will quote low to get your business and then raise the price mid-transaction once you’re “hooked.”
To avoid this, you must agree on a fixed price that is tied to a clear specification of what is and is not included in the quote. Does it, for example, include the provision of a data room and legal due diligence?
Obviously, if the specification changes significantly and requires additional legal work, it is reasonable for the lawyer to propose an additional fee, but this should be subject to agreement with you once the change has been identified. This process should also be outlined in your initial agreement with the lawyer, whether via email or in the “Client Care Letter” or “Engagement Letter.”
You may be able to negotiate a “capped fee,” which means that if the work exceeds in quantity but not in parameters that envisaged at the outset, the lawyer cannot charge more than the cap, and that if the work is easier than anticipated, you should only be charged what is on the clock, which is less than the cap.
Who is going to do the work?
In some firms and cases, you may meet a partner but end up dealing with an associate or even a trainee in some firms and cases. As junior lawyers do not have the same level of experience and expertise and must generally defer to the partner, this can cause delays and sometimes affect the quality of work. Again, it’s best to address this in the Client Care Letter or via email at the outset.
Coordination and breadth of knowledge
Many transactions will necessitate the use of lawyers with specialised knowledge, most notably in corporate, commercial, and employment law. Ensure that the law firm you hire has the necessary skill sets and a partner who will co-ordinate the various people and aspects of the transaction to avoid delays and any aspect of the transaction falling through the cracks.
Experience and Market Knowledge
Does the lawyer have substantial experience of the type of transaction contemplated, and, if the transaction relates to a specific market, does he/she understand the issues that arise in that domain, as well as the market norms to be reflected in the documentation? Such knowledge may be legally and commercially invaluable in relation to the terms agreed upon and, in the event of a company purchase or sale, the price obtained.
References and Efficiency
Although a firm is unlikely to put you in touch with dissatisfied clients, it may be worthwhile talking to current and/or past clients who have had similar requirements to get an overall impression of how the firm operates and whether any particular flaws were discovered.
One of the topics you should cover in such conversations is the firm’s efficiency in turning around documents and responding to inquiries. Lawyers range from extremely efficient to excruciatingly slow, and this factor can have a significant impact on the ease of the relationship with the other party(ies) and how smoothly the transaction proceeds.
For more information, please contact Simon Halberstam, SMB’s head of technology law, at email@example.com.