Legal Trade Unions & Strange Looking Competition

Earlier this week, Modern Law Magazine hosted a conference entitled: ‘Evolution or Revolution in Legal Services’. Some great panellists, interesting debate and a ministerial speech of such vacuity, that only Malcolm Tucker will have smiled his way through to its conclusion. Amongst those with something more interesting to say was David Edmonds, the now departed head of The Legal Services Board (“the LSB”) who, on his last day in said role, was no doubt enjoying the  opportunity of such a platform. Indeed there was a certain irony, as another RMT strike action raged outside the conference hall, that he described the Law Society and Bar Council as “two very strong trade unions for their hostile attitude to change and acting out of self-interest, rather than in the public interest”. The LSB is a regulator of the regulators, in charge of overseeing the aforementioned titans of intransigent legal regulation. As an example of their approach, he pointed out that the many objections, points of resistance and regulators gnashing of teeth towards the introduction of alternative business structures (ABSs) proved misguided – well there’s a surprise.Most objective observers, without a vested interest in maintaining the status quo, had warmly welcomed the thrust of change being wrought and driven by the Legal Services Act, from which the introduction of ABSs were a key instrument of change. Not everything about the changes will work, benefit or endure but in David Edmonds words, “it’s created a fundamental shift in provision. The fact of their existence (the ABSs) has wrought immense market change… The big businesses aren’t churning out low-quality, bulk legal services – the legal equivalent of ‘value baked beans’ piled high and sold cheap – it’s just not happening.”
Whilst the ‘trade union’ attack on legal regulators (how he must have enjoyed delivering that thrust on the day before his departure) garnered the headlines (and our attention) it was also a speech that despaired at the length of the regulatory rule books … “I simply don’t accept that today’s barristers are so inherently less ethical than their predecessors or that they need a code which is 277 pages long. Or that solicitors need 468 pages of rules from the SRA… I’d go so far as to say that fewer rules make for better ethics.”A deeper review of the day is available via the ever excellent ‘Lawyer Watch’ blog from Professor Richard Moorhead. He focuses part of his blog review towards the issue of “why private equity might (or might not) invest in legal services firms”.It’s a fascinating area because the ability for external investors to enter the legal services market was a key pillar of change within the act and investment interest in the space is accelerating on both sides of the atlantic.During 2013 almost $500m was invested in US legal start ups, a figure expected to continue rising, and legal futures recently announced that US based ‘find a lawyer’ service (www.avvo.com) has received £22m in new capital.Closer to home, UK based Lawbite have twice achieved an over-subscribed raise via crowd funding platform Crowdcube. Legal services is hot and getting hotter. He focuses part of his blog review towards the issue of “why private equityThe conference highlighted challenges faced by PE backed vehicles entering the commercially anachronistic environment of legal services, particularly with the purchase of existing law firms. Richard highlighted the particular challenges explained by Andrew Grech (MD of Slater and Gordon) that when entering the UK market they conducted DD analysis on 300 law firms and almost none of which were investible. “A collective complaint running through much of the day was that the culture of partnership was inhibiting of change and not conducive to effective management. There was not a murmur of dissent on that.”This conference further cemented the fact that a tsunami of change is taking place in legal services and much of it against the backdrop sound of traditionalist and regulatory wails. The wise and interested attend or follow conferences like this to try and get a glimpse of what the future might look like because, in the concluding words of Richard Susskind … “the competition that kills you, doesn’t look like you”

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