Much as October 6th has passed with a whimper rather than a bang in terms of ABSs (although at least with Premier Property Lawyers we do have one ABS now in existence), this hasn’t stopped the national press highlighting the changes in the legal market and commenting on them. From Radio 4 debates to the front of the Business pages of many of the Broadsheets, the liberalisation of the market has been a hot topic.
Coinciding well with all of this has been the Espirito Santo Investment Bank report on the impact on the market. The headlines make eye-catching reading, from ‘Perfect Storm spells the end for thousands of solicitors’ to a ‘seismic’ upheaval of Britain’s consumer legal market. Whilst it must be remembered that the Bank is hoping gain a lot of clients and traction in the external investment market (they are currently advising Irwin Mitchell among others on their options for seeking external capital) the report is nevertheless a timely reminder to those in the ‘consumer’ legal market that standing still is not going to be an option. As well as focusing on the retail end of the market, the report also deals with the top end, arguing that even the large City firms will not be immune from the changes. Chiming with the greater proportion of commentators in the market, the report predicts that medium-sized City firms will be particularly badly affected.
Much as the rules now allow for external investment, many firms have found over the last couple of years that the expectations of external investors are pretty high and do not sit comfortably with the sort of returns traditionally generated by law firms. The report states that business angels would expect annual returns of 60-70%, private equity around 30-35%, and even public companies 12-20%. It’s clear that for those firms who are serious about attracting external investment, the spotlight will very much be on the ‘business’ of the firm.
On a final note, this week also sees the launch of yet another franchise, Simplify the Law. This one appeals to me especially as its key message is the importance of client communication. Co-founder Jonathan Brewer argues that clear and proactive communication will be the difference between success and failure for law firms. It’s always good to see someone singing from the same hymn sheet as yourself (see my last post…..)