Alternative mood music by Tony Williams, Jomati Consultants
This article was also featured as a opinion piece in the March 2016 issue of Briefing. To read the issue in full, download Briefing.
The first alternative business structure licences were issued back in March 2012. Some firms used the ABS to admit ‘non-lawyers’ – CFOs, CMOs and so on – to partnership, or to add specialists such as tax advisers and other consultants. These developments are fairly evolutionary in nature – but what of the new more high-profile entrants?
Well, private equity houses took a very close look at the legal services market and a number of investments were made. However, the earliest and largest – by Duke Street in Parabis – ended in tears at the end of last year when Parabis went into administration. This failure may deter some private equity investors - but the more likely impediment will be the lack of firms of scale currently prepared to engage with private equity houses.
What else? Quindell, which acquired a range of small law firms, found itself mired in corporate controversy, and was forced to sell the bulk of its business to the Australian listed firm Slater & Gordon. Slater & Gordon fared little better with the acquisition, as the market took the view that it had overpaid.
More happily, Gateley listed back in May 2015 and has performed well. It remains to be seen how Gateley develops and whether other firms will follow.
And ‘Tesco Law’? In spite of that famous label, it was only Co-operative Legal Services that entered the market. Since then the Co-operative Group has been rather preoccupied with problems in its banking arm. Co-operative Legal Services has not yet made the impact anticipated.
EY, KPMG, and PwC Legal have each obtained ABS licences. The sheer size, breadth, client relationships and clout of these organisations mean that they should not be ignored. Their ability to provide integrated services on a global basis may make them a potent force, if they can indeed develop in line with their stated ambitions.
A number of major corporates, including BT and some big insurance companies, have also obtained ABS licences. It’s still too early to determine exactly how these will develop, but they too may have a significant impact.
And finally, a number of newer entrants, such as LegalZoom and Riverview, have licences. They start from a small base – but as new, innovative businesses they’ve considerable scope to grow and develop their offering further.
In a new and untried regime we have, inevitably, had some early failures. But this is a period of innovation and experimentation. Hopefully lessons will be learned, and the next generation will be more potent and sustainable. The hype may have been overdone – but to discount the impact ABS may have over the next 10 years could be a costly mistake.