With the law firm partnership model continuing to act as a block when it comes to freeing up capital for investment in technology and more efficient processes, UnitedLex’s new ULX Partners law firm insourcing venture is piquing interest on both sides of the Atlantic, and the legal services provider is currently in discussions with law firms in the UK, including one magic circle firm.
ULX Partners was launched in June together with Am Law 200 law firm LeClairRyan, with the announcement of the new venture which, to be frank, raises more questions than it answers. Essentially, the way it works is that a law firm enters into a joint venture in shared resources vehicle ULX Partners and, as in the case of LeClairRyan, a significant number of support staff (300 at LeClairRyan) become employees of the joint partnership alongside UnitedLex professionals (130 in the above deal).
The law firm pays a flat management fee and is given equity in the joint venture.
So, the argument goes, the model means that not only does the law firm no longer have to manage their support staff but they will have access to far greater resources and training than ever before = greater efficiency = more profit. The talent pool will include a full range of support covering transactional and non-transactional practice areas as well as finance, HR, IT, pricing, procurement and knowledge management.
The move is an extension of UnitedLex’s legal managed services and technology services deals with the likes of US tech company DXC and GE respectively.
However, speaking to Legal IT Insider, UnitedLex CEO Dan Reed said: “It’s not just an alliance, the law firm becomes a part owner.”
He adds: “The equity/ownership is what enables additional value to flow into the law firm so the law firm gets three benefits: 1) it can put more energy into the client and has less worries about operational administrative issues – they don’t have to think about them, ULX Partners takes that off their hands so the firm gets to focus on what it does best; 2) The quality of the services being provided is therefore superior; and 3) ULX Partners, because we’re able to drive more value, creates more profit.”
Asked how this differs to Integreon’s back office outsourcing deals with the likes of CMS and Osborne Clarke a few years ago, which the firms backpedalled from in around 2013, Reed says: “They were priced at levels that were unsustainable and they only took a piece of the operation. They took back office work. What ULX Partners does is goes full spectrum: it helps alleviate all the operational concerns of the firm. We’re fusing technology and all operational support and bringing not only technology but domain expertise.”
He adds: “Employees are still at the firm – they don’t move physically – but they are no longer a part of a cost centre, they are in a value-driving part of the business. ULX Partners is an enabler, so psychologically one reason employees should want to do this is to become part of a much more vibrant community. It will give them an uplift in morale, capability and resources.”
The new venture leverages decades spent building up and investing in UnitedLex’s capability and Reed says: “We already have so much more infrastructure: because we are venture-backed by JP Morgan we’ve been able to invest over the last decade in systems and tools and locations and can tap into that in a very similar way to the way PwC or Accenture might do – but no-one has done it for law firms. No-one has done it to this scale and to this degree.”
UnitedLex has its own proprietary tech but inevitably has third party software in its toolkit, for example in the States for litigation services its proprietary technology is Questio but it also uses LAW Prediscovery, Relativity, AccessData’s Forensic Tool Kit and Guidance Software’s EnCase.
In the UK the provider now has around 80 professionals – up from 10 around two years ago.
Despite the fact that the UK is deregulated and firms can operate as multi-disciplinary partnerships, it is envisaged by UnitedLex that the structure will be the same in both the UK and the US.
Reed says: “The philosophy or purpose is ultimately to drive more value to the client.”
The partnership models that most law firms are structured in have evolved little despite massive technological advances in other sectors and Reed said: “Unlike other sectors law has enjoyed immunity from scrutiny but the C-Suite is now saying ‘we need to figure out how law becomes more digital.’”
“Law firm partnerships haven’t evolved because they are not equipped to make the investment in technology, in project management, in workflow, design and training. Because the partnership sweeps out the profits there’s not much opportunity for investment.
“The question is how to move forward and in our view they need a partner that can bring in capital and expertise. Firms such as Fieldfisher are nice attempts but lack the depth and breadth of experience and they also lack the path to dynamic liquidity.”
The plan is to get the LeClairRyan deal properly underway before launching a similar partnership in the UK and then a full-blown “constellation”
Reed said: “In the UK we think the number of deals similar to LeClairRyan will be high, there is no cap, the question is one of timing. We’d like to be able to launch or scale in the UK in 2019 although we’re having some preliminary talks. We’re hell bent on making sure the model works with LeClairRyan and every aspect is nailed down before looking to the beginning of 2019 for an opening in UK.”
In terms of the types of firms that UnitedLex or ULX Partners is engaged with, they are larger than you might expect.
“We had one magic circle, one Am Law 10 and a smattering of substantial size law firms that are curious and very interested as to how this could help them leverage or expand more efficiently. From a size perspective, there is no limit. What we do that can work for a midsize firm works well for the world’s largest firm. Our balance sheet is bigger than any magic circle firm and so is our ability to make the investments, and our capability to invest across the globe.”
In terms of whether this model is tried and tested, Reed says: “We’re following a very clear path of what IBM does. The difference is that we have a profit share. PwC’s arrangement with GE is identical in the sense that there is a profit share.”
He adds: “It’s no different to what we’re providing to our Fortune 500 clients. We just thought ‘how can we do this for law firms?’ We’ve tweaked the joint venture concept but other than that it’s a natural evolution for us.”
“The history of it is that over the last 10 years we have been working with massive corporates and the reason they choose us is that we bring a range of capabilities that they don’t have, including technology training and access to suites of resources so partnering with us gives them a wide range of benefits.
“We saw an opportunity to transpose that capability to law firms. Just as we have been able to add value to the largest corporates, we have looked at law firms and seen that they also have significant back office needs, technology needs and resource needs, because partnerships generally have a lack of capital and after distributions can find it hard to invest in technology.
“Law firms’ sole focus is on serving clients through the business of law. If you look at other industries they have the advantage of engaging, for example, Accenture. We are able to give law firms the same opportunities and tools as is prolific in almost every other industry – law is the only sector that hasn’t undergone progress in resource optimisation and we’re enabling law firms to achieve that.”