As is customary at the commencement of a new working year it’s worthwhile reviewing the events of the previous twelve months to spot those themes and trends which will shape the legal sector in the coming year.
It will come as no surprise that change continues to be a constant in the industry – with firms facing up to the challenges of practicing law in the 21st century in a number of different ways. My opening 2016 commentary will be followed by a series of blogs tracking the sector over the next year and drawing on our experience assisting our clients.
This week I reflect on flotation, merger & acquisition activity and the opportunities for firms to drive savings through organisational change.
LEGAL FIRST
In June Gateley PLC became the UK’s first full commercial service firm to float on AIM – raising £30m. The first six-month trading period to November saw a respectable 10% growth in like for like revenue and with shares trading a little above issue price despite a substantial fall in the wider market it will be fascinating to see exactly what yield constitutes a “progressive dividend policy”, and indeed how retained profit is used for investment in the development of the firm.
TRAIL OF THE LONESOME PIONEER?
However Finance Directors amongst the Top 100 don’t seem in a rush to market. In a recent survey by Thomson Reuters only 8% of respondents thought a listing was appropriate for their firm, even fewer (6%) considered private equity investment as suitable.
Why is this? Perhaps there is a degree of caution – particularly in the light of Slater & Gordon’s recent woes – and of course lessons from the failure of Vantis, RSM Tenon and Numerica in the accountancy sector. Moreover, having had the benefit of being up close and personal with 40 or so FD’s in 2015, the embedded nature of the partnership model itself would appear to act as a brake on more radical ambitions. Whether this is a “good thing” or not is a question I’ll return to in the coming weeks.
MAJOR MERGER MANIA
Although the overall count of mergers and acquisitions continued its gentle decline, the year began with Slater & Gordon (who else?) taking on board Walker Smith Way and Leo Abse & Cohen. In May, Midlands’ giant Shakespeares swallowed up SGH Martineau rapidly rebranding as Shakespeares Martineau. Irwin Mitchell concluded a deal with Thomas Eggar.
International relations were furthered by Wragge Lawrence Graham and DLA Piper in Canada, whilst Dentons appears to rivalling the CIA in broadening its reach in South America as well as circling several targets in the UK.
DRIVING EFFICIENCIES
It’s axiomatic that preparation for flotation, merger or acquisition provides a huge opportunity for reviewing how the firm organises its back office functions, supplies and services. Irwin Mitchell for instance is likely to TUPE some Thomas Eggar back office staff across to its existing outsourcing contract with OCS.
In contrast, Gateley PLC has developed ‘partnering style’ relationships with suppliers and service providers for many years fostering a deep understanding between supplier and client.
During 2015 our team identified 5 year savings of £1 million in Records Management alone for one Top 100 firm after rationalising arrangements following successive acquisitions. In addition, one of our many LawNet clients Mogers Drewett will benefit from six-figure savings over the same period now we’ve commenced rationalising suppliers following merger in 2014 – with more to come.
It should go without saying that due diligence and a robust integration plan are vital in achieving the economies of scale that merger should bring.
We’d go further – whilst our clients concern themselves with revenue and cultural fit we’re always very happy to take a look under the bonnet to develop a pre-integration plan identifying prospective savings, opportunities for process improvement and highlighting where bodies are buried in supply and service contracts – another theme I’ll return to in the coming weeks.
WHO WE ARE & WHAT WE DO
Jason Adderley’s Expense Reduction Analysts Legal Team (ERA Legal) works nationwide with law firms, patent attorneys, chambers and other professional services firms to identify and implement opportunities to save money, improve processes, appraise options and enhance service outcomes. The core team comprises seasoned professional services experts drawn from UBS, Hays & Thomson Reuters.