Table of Contents

  • About The Authors
  • Understanding the Basics
  • The Valuation Framework
  • Findings: Valuation of the Am Law 100
  • Comparison to Publicly Traded Firms
  • Summary

A Wall Street Methodology for Valuing Law Firms

May 2019 | $0

Why should law firm leaders and owners be interested in assessing the value of the organizations?

The answer lies not only in the final result, the numerical value of the law firm, but also in the similarity between the intent of shareholders of publicly traded companies and the equity owners of law firms. Shareholders of publicly traded firms pay attention to value of the companies they own for two reasons.

Firstly, they wish to monitor the value of their investments over time. Equally important is their desire that companies identify and pursue strategies which ultimately enhance the value of their ownership holdings. As owners of their law firms, the goals of equity partners matches that of shareholders. And as managers, equity partners are focused on enhancing the value of their holdings and be informed by valuation techniques on implementing accretive business decisions. 

 

Methodology

This report proposes to update and enhance the methodology previously used to value law firms.

The capital markets based methodology used in this report relies on a calculated after-tax cash flow for each law firm, and determines the net present value of all its future cash flows.

This bottoms-up approach is a reliable and well-used methodology which is frequently used by Wall Street analysts to value publicly traded companies which have steady profit growth profiles similar to law firms.

Madhav Srinivasan
Chief Financial Officer at Hunton Andrews Kurth LLP

Madhav Srinivasan is the Chief
Financial Officer at Hunton Andrews Kurth LLP,
and leads the global finance and pricing competencies. He has extensive
experience in legal finance and management, combined with a deep background
in corporate finance, financial consultin g and capital marke ts. Madhav is an
adjunct faculty at Columbia Law School in New York and University of Texas at
Austin School of Law ; and an ALM Intelligence Fellow . He has published articles in
leading journals and is a frequent speaker at major conferences.

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