Top of the pops

Print This Post

By Legal Futures

11 April 2010


The Co-op: legal sales up 45% in 2009

Late last year, a conference in London speculated on who might be the biggest law firms in the UK in 10 years’ time. Instead of the global practices like Linklaters, Freshfields, Clifford Chance and Allen & Overy that currently fill the top slots, in first place was legal process outsourcer CPA, incorporating national law firm Eversheds; then Tesco; Freshfields incorporating Allen & Overy; Aviva; Clifford Baker Piper (the merged Clifford Chance, Baker & McKenzie and DLA Piper); and US/UK behemoth Skadden Linklaters.

Such is the scale of change facing the legal profession that few in the audience seriously argued with the analysis underlying what was entertaining speculation. CPA is expanding rapidly, the merger of City firm Lovells and US practice Hogan & Hartson could herald a new era of transatlantic mergers, and some retailers and insurers are openly lining up to enter the market.

White label

From 6 October 2011, so-called alternative business structures (ABSs) will be introduced, meaning the ownership restrictions around law firms will fall away. With non-lawyers then allowed to own or invest in law firms for the first time, all bets are off.

But change is already lapping around the legal profession’s knees. Given that the law makes only a relatively small number of activities the exclusive preserve of lawyers, an increasing number of retail brands and other non-lawyers have moved into legal services. What ABSs will give the likes of Halifax – which runs Halifax Legal Express, essentially a white label for a range of legal services providers – is the chance to join all the dots.

Eddie Ryan, managing director of Co-operative Legal Services (part of the Co-operative Group), pledges to become one of the first ABSs, if not the first. It will not be starting from scratch as it has been offering legal services to members for nearly four years. It now has nearly 300 staff and preliminary results this month showed legal sales up 45% from £14 million to £20 million in 2009, while operating profits before significant items more than doubled from £1.7 million to £3.8 million.

The company has already established itself as a significant provider of personal injury claims and management services, and leveraged its funerals company, as well as other parts of the Co-op as well as external partners, to make major headway in the wills, probate and estate administration market.

While it has been joked that combining funeral and probate services is horizontal integration in action, clearly there is a logical and persuasive case for them.

Working model

Others have also shown their hands. Legal expenses insurer DAS – whose insurance is often tacked on to motor and home insurance policies – intends to buy Bristol law firm CW Law once allowed.

Chief executive Paul Asplin says he anticipates handling routine work in-house and only having to go to external law firms for reasons of geography or specialisation. DAS’s sister company in the Netherlands handles 97% of legal work in-house. “It’s a working model that shows it can be done,” he says, reducing cost to insurer and policyholder alike.

It also seems inevitable that claims management companies (CMCs), which currently farm personal injury (in particular), financial misselling and certain other cases to sell on to law firms, will become ABSs. At a meeting of CMC trade body the Claims Standards Council last month, all 200 delegates agreed that, once allowed, CMCs would either buy or merge with a law firm.

Given that much low-value personal injury work is process-driven, says council chairman Darren Werth, a director of Accident Advice Helpline, there is no reason why he could not create a legal arm that handles this process “at least as efficiently or more efficiently than a law firm”. It is certainly a prospect he is interested in, suggesting that it might be easier for CMCs to recruit lawyers to work in-house than buy a law firm and try to change its culture.

The economics work for a CMC like Accident Advice Helpline, Mr Werth explains. Given the detailed work it does on a case before presenting it to a panel solicitor, the extra layer of cost of doing the legal side is “not prohibitive”. However, for those small CMCs which do little more than sell on names and phone numbers of potential claimants, “the transition will be difficult”.

A feature of all these models is increased remote operation from the client, with Internet contact in particular set to become more prominent. Already both institutions and law firms are using intelligent document-building software from Epoq, founder of Desktop Lawyer, to cut down the relatively low-level drafting work that lawyers do, allowing the lawyers both to charge less and concentrate on better-paid work.

At the larger end of the market, the possibility of law firms floating on the Stock Exchange or accepting significant external investment has captured a lot of attention. Lyceum Capital and Investec among others are working the City to generate interest, perhaps from firms that want to expand rapidly, maybe into new practice areas or new locations.

However, the likes of Allen & Overy say they already have access to all the capital they need, while it is thought partners at big firms will be unwilling to give up control of their firms.

There are more than 10,000 law firms in England and Wales, around 86% of which are four partners or fewer. But few predict they will all survive the wave of new competition. Paul Asplin says: “We have to accept that the sheer number of law firms will reduce.”

The full ‘Legal Efficiency’ supplement, published by Raconteur, can be accessed online at: http://np.netpublicator.com/netpublication/n89269938

Tags:



Leave a comment

* Denotes required field

All comments will be moderated before posting. Please see our Terms and Conditions

Legal Futures Blog

Are you ready to defend your firm’s reputation in the event of a cyber-attack?

Jonathan Hemus

With cyber-crime making the headlines more and more frequently, it is becoming increasingly important that law firms of all sizes understand how to handle such a situation professionally and keep their reputation intact. Here are some steps any law firm can take to help ensure that a cyber-attack or data breach doesn’t cost them their client base.

December 9th, 2016