The SRA is now receiving applications for ABSs. Who’s first out of the traps?
On 3rd January, the Solicitors Regulation Authority (SRA) officially opened the doors for applications from firms interested in becoming alternative business structures (ABSs).
There are the obvious applicants – those that have been crouching on the ABS doorstep for some time. But there may also be surprises in store, particularly if early indications among the larger firms are correct.
For lawyers making their way in the profession, the year ahead could be a game-changer.
The early entrants
Among first movers are predicted big brands such as The Co-operative, The AA and, if reports are correct, Admiral Insurance.
These and other new entrants will undoubtedly impact the consumer end of the market. Some existing high street firms see the new competition as a threat. Others see it as a much-needed boost that may well bring in more work, and jobs, all round.
One thing is for sure. High street law will never be the same again.
The impact on larger firms
But for lawyers in larger, established firms, recent thinking has gone something like this: ABSs are the kind of thing that happens to other firms, in another legal world that has no relevance to us.
That attitude might be about to change.
DLA Piper, for instance, has bought a minority stake in LawVest, a prospective ABS aimed at SMEs, which is due to launch later this year. DLA’s joint CEO Nigel Knowles is to become the firm’s non-executive chairman, although exactly what kind of firm he will be involved in remains shrouded in secrecy.
Given DLA Piper’s expansion record, however, it’s probably safe to assume that the growth plans for this new enterprise will be anything but small fry. In time, perhaps it will even rival some of the mid-tier.
Apart from the investment opportunities now opening up to the larger firms, there are also now several options for firms seeking external investment. One way of doing that is through flotation on the stock exchange.
Australian firm Slater & Gordon was listed on the ASX (Australian Stock Exchange) back in May 2007. The firm has since exceeded revenue targets, enjoyed a healthy number of acquisitions, and a share price that continues to hold up well despite market uncertainties.
Now UK firms can do the same. Irwin Mitchell was the first to declare its intention to float – with the hope of raising £50m to take on the corporate mid-tier. If it has a similar success to Slater & Gordon, no doubt others will be quick to consider the IPO route.
What about me?
But what does all this mean for the average lawyer? Well, there is lots of talk of consolidation in the legal market – that the smaller businesses will be eaten up by bigger players. Perhaps that is true at the smaller end of the market in which firms will increasingly come under the banner of national brands.
But what we are seeing in these early days is the burgeoning of new types of legal business, with innovative ideas as to how to deliver legal services and support and reward ambitious lawyers to boot.
In addition, firms that have only been able to rely on banks for capitalisation now have a choice. New investment may lead to fresh and rapid growth in some quarters – and in the long-term, a real re-shaping of the profession as an increasingly corporate mind-set enters the legal boardroom.
These developments are not without critics, some of whom fear for the independence and integrity of the profession if corporates/shareholders ‘take over’.
But for lawyers, the rise of ABSs may result in just more career options – created by a wealth of different legal businesses that are not afraid to change and innovate. The traditional partnership ladder will not die but it will increasingly be challenged by the alternatives.
The Legal Services Act was designed to bring new entrants and new competition into the legal profession, with the aim of improving levels of service to clients.
But looking at some of the likely moves around the corner, it seems clients may not be the only ones to benefit. CP