The fact that a number of law firms have discussed the insertion of an ‘anti-embarrassment clause’ into their partnership deeds is the latest evidence that private equity mentality is infiltrating the legal profession.
The clause allows former partners to enjoy the fruits of a float or sale after leaving the partnership. As we report today (see cover), Travers Smith considered it seriously but backed away when it became clear that such an approach could create cultural friction.
It’s always been in the interest of legal market consultants to exaggerate the advent of the Legal Services Act (LSA), but even by those inflated standards it’s clear that a number of firms are positioning themselves for October. Last week (17 January) The Lawyer reported that the SRA was piloting the application process for ABSs with a small group of firms to iron out any issues before the LSA is implemented.
Private equity-focused firms are obviously going to be hyper-aware of the potential – not so much of IPOs, but rather how to turn income into capital to gain a tax arbitrage. Hence the interest in the ‘corporate member’ structure facilitated by the LSA.
And yet, and yet. Call me a stick-in-the-mud, but the eagerness of legal market consultants to talk up these structures is slightly unconvincing. The usual argument is that 30 years ago nobody would have believed that the leading stockbrokers would cease to exist in a couple of decades, and that you can apply that logic to the law. My scepticism isn’t based on the usual guff that law is a people business, or that it’s more benign than stockbroking was; it’s simply that lawyers don’t do convulsive change. Even if Berwin Leighton Paisner, Eversheds, Irwin Mitchell or Russell Jones & Walker (to name four entirely random examples, ahem) floated parts of their businesses on 6 October, it wouldn’t spark an immediate goldrush in the rest of the market.
The transformation of the law will be a slow process, and a discursive one. So over the next six months The Lawyer will be exploring a series of hypothetical scenarios involving specific firms with a panel of leading managing partners, recruiters, brand consultants and bankers. It will be essential reading in the run-up to October.