2011 Round-up – Alternative business structures: Street legal

2011 is set to be the year of the high street-friendly alternative business structure, and the players are already jostling for position

 The news that the SRA had been given approval to regulate alternative business structures (ABSs) earlier this month set the ball rolling for the first applications from January (The Lawyer.com, 1 December).

The SRA had hoped it would have approval in time for the Legal Services Act (LSA) coming into force on 6 October, but the process was delayed because the Government had not given the go-ahead to the SRA’s proposed process for disciplining ABSs.

Converts

A string of organisations have expressed interest in transforming into ABSs, with the SRA in talks with 50 businesses about converting.

DLA Piper’s announcement of its purchase of a minority stake in prospective ABS LawVest scotched the usual claim that ABSs have no relevance to big City law firms (TheLawyer.com, 28 October). The investment gives DLA Piper a foothold in the commoditised ­sector, with the firm’s co-CEO Nigel Knowles becoming non-executive chairman of the company. LawVest is planning to launch an ABS aimed at small to medium-sized entities next year.

The Co-operative, meanwhile, hired two family law partners from legal aid firm TV Edwards in November as a precursor to Co-operative Legal Services’ conversation to an ABS (TheLawyer.com, 2 November).

This followed Irwin Mitchell’s ­declaration of intent to take on the corporate mid-tier through a ­flotation set to raise £50m (The Lawyer, 25 April).

A raft of firms have followed suit, or are already attending the party (see ’First movers’ box).

QualitySolicitors, a national network of law firms, could have kicked off pre-LSA, but has been given further firepower by the new regulatory mood. It is already well-established through a growing web of firms that have adopted the network’s branding and standards. It currently has 110 firms in 220 locations, plus stands in large branches of WHSmith, and is growing fast following private equity investment last month. It aims to be present in 1,000 locations by the end of next year.

Two-year-old Lawyers2You, the ­consumer brand of Birmingham law firm Blakemores, has some 50 stands in shopping centres and events across the Midlands and plans to have a ­network of 150 independent law firms by 2014 and to expand globally.

Last month virtual law firm Everyman Legal, which counts some senior commercial solicitors among its ranks and whose target market is entrepreneurs, announced its intention to seek admission to junior stock exchange ShareMark. The equity it hopes to raise will allow it to build the framework to support a rapid scale-up of operations.

And £100m insurance firm Parabis Law is already a de facto ABS and will become a multidisciplinary practice when the rules allow. It has also ­indicated strong interest in private equity investment as Parabis continues to develop. It recently joined forces with an accident management company to offer insurance companies and brokers a white-label ABS to revolutionise the motor claims process.

Net set, go

This year showed the role of the web in the ABS market too. After Hugh James, Nelsons and Pannone signed up to online document service Epoq Legal in 2008, LegalZoom, said to be the biggest net-based legal brand in the US, is set to enter the UK in 2012 alongside Google-backed Rocket Lawyer, through which 40,000 ­business contracts were created last year.

The market is growing fast.

First movers

AA Legal Services
Access Legal (consumer brand
of Shoosmiths)
Claims Direct
Connect2Law
Co-operative Legal Services
DAS
DLA Piper
Face2face Solicitors
HighStreetLawyer.com
In-Deed
Irwin Mitchell
Lawyers2You
Legal365.com
QualitySolicitors
Simplify the Law

WE SAID, YOU SAID

We said:
“The introduction of ABSs could not be more ­timely, as the Co-op has proved with its plan to ­target ’the most underserved group’ of clients with its low-cost family advice.

ills & Reeve, meanwhile, is responding to the new challenges ABSs will bring by engaging the services of a psychiatrist to ensure its family advice fits the bill – and its bills fit the families. Talk about ­survival of the fittest. But what’s all this got to do with commercial firms? Nothing, right? Wrong. The genius thing about ­evolution is that it affects us all, even if we’re not aware of it. With DLA Piper throwing its weight – and its cash – behind ABS-in-waiting LawVest, the notion that the legal elite can ignore the upstarts has been scotched once and for all. Don’t expect Slaughters to follow suit, but many will. There will even be a China-controlled ABS in the near future if former Bird & Bird partner Stephen Kines gets his way. Having left the firm in August, Kines, who set up 2Birds’ Eastern Europe ­operations, now runs a ­business whose sole aim is to find an Indian or ­Chinese firm to buy a share of a UK ABS. If he pulls it off – and with a e5m price tag the stakes are high – the effect really could be market-moving.”
Margaret Taylor, Leader, 7 November

You said:
“Floating a law firm is just a bad idea. Here’s how it would inevitably work: the firm floats and gets a load of cash up front, which it uses to offer ­stonking amounts of cash to a few ’big name’ ­partners, who will most likely be coming to the end of their careers, but will be looking for one last big pay day. The new ’big name’ partners will have to be ­guaranteed minimum payments every year, which will be much ­bigger than the sums paid to ­existing partners in the firm. This will create resentment and ­ultimately a really bad atmosphere at the firm.”
Barry @ 10:11, 26 April

“DLA are going to be the most hated firm in the next few years – a bit like Manchester United are the most hated football team. The top 15 firms will hate them because they’ve got sharp elbows and are now making top-quality lateral hires. The 15-50 category will really struggle if this SME-focused service is cheaper and better than they can provide (and let’s be honest, there are some awful SME-focused ­services delivered by mid-tier firms). This development really turns the screw on them.”
Anonymous @ 11:05, 28 October

“The consumer will benefit from these changes to the legal market. Partners at all but the very top firms will find this new world very ­difficult.”
Anonymous @ 10:41, 9 November