by Neil Cameron of the Neil Cameron Consulting Group
Well the ABS race is on. In just a fortnight we have had Silverbeck Rymer and Russell Jones & Walker start on the road to become ABSs. Neither is doing it for themselves; they are both subject to takeover – one domestic, and one foreign. Silverbeck Rymer is being taken over by Quindell Portfolio in an £20m example or vertical market integration, and RJW by Australian market pioneers Slater & Gordon in a horizontal integration move worth £54m.
In The Times newspaper Tina Williams of Fox Williams is quoted as saying “This deal is a real wake-up call to law firms that expected to have years to adapt to a changing market”. I could not agree more.
Over the past few years firms UK general have had one of three reactions to the Legal Services Act and the creation of the ABS:
• they have ignored the whole phenomenon hoping it might go away;
• they have half-heartedly flirted with the concept;
• they have determinedly examined the options, and readied themselves for a move – like Irwin Mitchell and Duncan Lewis.
But there are many routes to forming an ABS; one is by an established law firm on its own initiative, one is a new start-up with new capital, and one is the investment of external capital in an established law firm. For a more detailed examination of the consequences of these options see our ‘Flirting with Floating’ article.
Quietly, in the background capital-rich organisations have been circling around the market like lions drawn to fresh young meat. Some in a blaze of self-publicity – such as Lyceum Capital – and others more stealthily like Investec. Other established enterprises that believe they can expand into this market have also been examining their options – like the Co-Op.
No-one could have predicted which way this was going to pan out, or predict accurately what will happen next – the law of unintended consequences makes sure of that. But now all bets are off, and I think we are going to be amazed at how quickly things move – especially in the high-volume consumer law areas such as personal injury and similar work.
Like all the girls at the teen-age dance, even if you don’t really want to dance neither do you want to be the last left standing at the end of the evening with the other no-hopers with no-one to partner up with. Make no mistake, Slater & Gordon is mopping up the Australian market for their target work – buying up firms and building a brand that attracts potential clients at the expense of other competitors. That is exactly what they want to do here – and who is going to stop them?
Any law firm reliant upon any degree of such business must now determine what it will do to counter the threat. They must either:
• launch a highly attractive and competitive service to the new sleek enterprises – which will require a heavy investment in marketing and systems. Few firms can afford to do this;
• undertake their own IPO and hope that the market will find them attractive enough, and then use the capital raised to invest in marketing and systems. This will take time;
• throw themselves under the feet of one of the new entrants – the estimated RJW partner bung of £2m will be attractive here, although that sum per partner will continually reduce as less attractive firms come forward desperately competing for involvement;
• find a new business partner with which to form an ABS – again, this will end up being a cut-throat beauty parade – and quicker than any of us think;
• wind up the firm and retire.
Best of luck guys…