ODGERS INTERIM OPINION
Paul Smith, Head of Financial and Professional Services, discusses whether there are now more questions than answers in Professional Services marketplace...
There is so much change occurring in this volatile economy and every sector is experiencing its own ‘upturns’ and ‘downturns’ on an almost quarterly basis; none more so, however, than the professional services. Clients seem reluctant to throw money at a problem - or an opportunity - and are not keen on spending their budgets on ‘advice’. As a result, professional services firms are finding it more and more difficult to ‘sell’ their services, which in turn, is making relationships even more key and the strategy around business development critical.
All of these issues are magnified and exacerbated in the Legal industry by the advent of the Legal Services Act which seeks to liberalise and regulate the market in England and Wales and to encourage more competiton. Nobody really knows what the real impact of this legislation will be with some believing there will be no or little impact; whilst others predict the practice of law will change forever.
The Legal Services Act has meant that many law firms are now working hard to secure their futures; whether this is by becoming more commercial in their approach, being more efficient in their practice or by indulging in merger and acquisition activity. Law firms of all sizes across the country are assessing where they sit in the bigger picture and - more importantly - what their exposure is to takeovers, mergers or at worst closure.
A recent trend has seen many mid-sized law firms looking to grow in order to protect themselves. It’s great in theory but with this growth comes significant change. DWF, for example, has acquired Cobbetts, Biggart Baillie, Buller Jeffries and Fishburns all within 12 months. The positives are clear if you choose this route: turnover increases and there are greater efficiencies in the back office function and across the core legal disciplines on offer. However, who integrates the different IT, finance, HR and procurement systems? Who sets up the projects and delivers them? Who has helps the lawyers put the strategy together?
These kinds of questions really drive the theme of this article as the industry is now being dominated by uncertainties. For example ... As time progresses; what about the magic circle and silver circle law names; will there be a greater dominance of ‘super global’ legal firms? A good example of this is the merger of Norton Rose with Fulbright and Jaworski – could this be the first of many? Will a ‘Big 4’ emerge just as it has in the accountancy sector with the dominance of KPMG, PwC, E&Y and Deloitte? And will we see any of the magic circle merging just like Price Waterhouse and Coopers and Lybrand did back in 1998?... How does Slaughter and Allen sound?!
Other worries include... Which will be the first law firm to float on the stock exchange or is this going too far? Will we see a mushrooming of legal internet only businesses as in theory knowledge can be sold online?
The interesting fact is that we are only just beginning to talk about these changes and we are only really at the very beginning of the cycle. It will be interesting to see if firms can learn from the accountancy sector and whether they choose to employ consultants who have been through this kind of transformation as they are the ones who are perfectly placed to help. The biggest danger is if they choose to not listen to advice or if they think that they can cope with the changes themselves.
One thing is clear: those who bury their heads in the sand may not exist in five years time whilst those who are transparent, forward thinking, innovative, adapt, listen to advice and - most importantly - embrace evolution are the ones who will flourish. The key message for firms is that there are individuals out there who have been through these kind of challenges and can help. They may even have some answers for our questions....
If you would like to learn more about Paul or his work, please do check out his profile.