Some commercial solicitors charge by the hour and some use a fixed fee model. It is always best in my opinion to agree a fixed fee.
Beware as the fee only covers the transaction itself. If there are any other subsequent issues such as employment or property disputes, these will not be included. It’s always advisable, in my opinion, to do a little legal due diligence before going to market to address any issues which may hold up the transaction.
The fee itself can vary; some large firms charge astronomical fees. I had a client that decided to use his own firm, who were billing him by the hour, and on a very small transaction which hardly got off the ground and was aborted, he was billed £18,000 plus vat!
That having been said, there are many factors that dictate charges including:
The size of the transaction
The amount of due diligence involved; a small business with one or two staff involves less work than a larger or more complex organisation.
Which party draws up the sales agreement and the complexity of the terms e.g. an earnout
Whether or not property is involved. There may be a separate solicitor within the firm dealing with leases or land transfers.
The seniority of the Solicitor- a Partner will have more experience and charge a higher fee.
Regional variations in fees exist with the obvious example being London. My advice on the location of the Solicitor is that it is of little significance as most transactions can be carried out remotely.
If it’s a straightforward case with minimal staff and a small business with a transaction value of up to around £100,000 then fees will be around £3,000-£5000 plus vat. This can then be higher depending on the amount of work that needs to be done.
Beware of lawyers charging less than this... they are busy, and it will be a very skeleton service as they will have lots of clients. Always check a solicitor’s present case load, check their website and LinkedIn profile. You are looking for professionalism, experience, good customer service, efficiency. Delays can lead to aborted purchases!
The more complex the case becomes, the higher the fee will be. Typically, a business worth up to £500,000 with say 5 staff could be upwards of £10,000 plus vat.
A higher value transaction of upwards of £1 million plus can be anything from £25,000 - £75,000 plus vat.
I tend to recommend good, well respected and professional lawyers as they have worked with us before and I have created a good understanding and working relationship with them. It’s important to work as a team especially as there is often some pushback on the agreed sales price after due diligence.
I always strongly suggest to clients that they follow our recommendations as even firms that have been used by clients for years tend not to provide as good a service.