Survey: commercial firms eyeing up ABS opportunities, including MDPs and external cash

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By Legal Futures

26 June 2012


Williams: ABSs acting as a catalyst for change

Creating a multi-disciplinary practice (MDP), spinning off new services and accessing external investment to finance growth are the main goals of commercial law firms considering converting to alternative business structures (ABSs), a new survey has found.

Four in ten firms have already responded to the new environment, it said, changing their management strategy as a result.

The report by legal research company Jures, commissioned by City partnership law specialists Fox Williams, also found that a similar number of the 100 commercial firms surveyed – which ranged from those in the top 50 to others with turnovers of less than £5m – have either changed or are thinking about changing their partnership structure, mainly to bring in non-solicitors.

Half of all respondents said they were aware of their competitors considering, or actually applying for, ABS conversion.

Forming different types of one-stop shops – whether with accountants, insurers, claims companies or other professionals – was the model those firms considering becoming an ABS were most likely to adopt.

There was also significant interest in spinning off new legal or non-legal services through an ABS, accessing external investment to fund growth – whether through private equity or a public listing – and in forming a membership organisation with other firms to share common services as a part of a network. Nearly a third of those surveyed (29%) ruled out becoming an ABS.

Nonetheless, respondents cited the prospect of modernising their firm’s management and business process as the most compelling reason for an ABS conversion (61%). A third thought ownership by a recognised brand a compelling reason.

Asked about the financial considerations of an ABS conversion, 77% identified access to finance that is not available from partners or traditional bank borrowing as either ‘important’ or ‘very important’; 72% said incentivising partner and staff performance and 68% cited improving the firm’s cash flow.

Nearly two-thirds of respondents considered loss of control as the biggest barrier (62%), followed by resistance from partners (51%) and management time commitment (42%).

Fox Williams senior partner Tina Williams said: “The possibility of using the ABS model as an opportunity to refinance firms to enable growth or better to facilitate survival in a newly competitive environment is clear to see from our research.

“And it is clear that the introduction of ABSs is acting as a catalyst for change in the profession as many of the new legal businesses, like the network and franchise operations, could have been put in place before the Legal Services Act.

Almost half of all respondents (49%) said they were ‘not confident’ in the Solicitors Regulation Authority’s ability to manage successfully the ABS application process.

The full report can be found here.

 

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