Accountants for Solicitors and Legal Professionals
The legal sector is undergoing an unprecedented period of change:
The Legal Services Act
Full external ownership of law firms is now being permitted in England and Wales. A similar process is underway in Scotland, although the external ownership in Scotland will be limited to 49%. Some firms are gearing up to float and use that as a springboard to act as a consolidator. Private equity houses and other new entrants are beginning to invest in law firms and consolidators.
Membership organisations are well placed to offer legal services to their members. New entrants to the market include household names with large marketing budgets. They are aiming to acquire work on a large scale, operating on low profit margins. Some are concentrating initially on high volume, low value work types that they believe can be commoditised, although others are not taking the commodity route. New alliances are being launched with the aim of building recognised national brands for lawyers to compete with the new entrants.
Legal Aid Reform
The Legal Services Commission is looking to reduce the number of legal aid suppliers and move towards best value tendering. This may lead to work being concentrated on the larger providers. Certain work types are now being removed from the scope of legal aid.
Personal Injury Reform
LASPO has brought an end to referral fees, recoverability of success fees from the defendant and recoverability of insurance premiums from the defendant; damages-based agreements; and qualified one-way costs shifting. Fixed recoverable fees in the portal have reduced and there are also proposals in place to extend the range of fixed fee fast track cases.
Difficult Trading Conditions
Transactional work in particular has reduced. Other practice areas that rely on transactions are becoming more difficult to complete. Redundancies have been made, but potentially not to a level that reflects the reduced workloads. Whilst benchmark profits per partner have been reduced as firms still need to cover fixed overheads, cash-flow has been impacted to a greater degree as matters are taking longer to complete and payment terms are extending. The cost of obtaining finance from the banks has increased.
Mergers & Acquisitions
After a lull in law firm M&A activity during the credit crunch and recession, activity is now picking up. The issues outlined above are pushing the market towards consolidation.
The SRA has moved away from a rigid rule-based regulatory approach towards a more principles-based, outcomes focused form of regulation. This is tied in with the Legal Services Act reforms and firms are required to re-evaluate their processes as a result.
Specialist Advisers to Solicitors and Legal Professionals
To help law firms respond to these issues and opportunities, Armstrong Watson has a specialist team that:
- Focuses exclusively on the legal profession
- Understands the issues that the legal sector is facing
- Provides timely and proactive advice in response to those issues
- Assists in formulating strategy via our partners’ strategic workshops
- Improves your business via our:
Works with you to assist in:
- Partnership disputes
- Business valuations
- Court appointed expert witness duties
- Financial planning for you and your clients
And of course, we also prepare your accounts, SRA Accounts Rules reports and tax returns in a knowledgeable and efficient manner.
Legal Sector Resources
Our specialist legal team has developed a wide range or resources, from ongoing issues which may impact your firm such as partnership disputes and mergers & acquisitions through to new legislation such as The Legal Services Act and its likely impact on your law firm. Click here to see our Legal Sector Resources.
Contact Andy Poole, our Legal Sector Director to arrange a meeting on 01228 690200 or 0113 221 1300 or by email at email@example.com You can learn more about Andy and the team by clicking here.
To see some of Andy's experience in training courses, mergers and acquisitions and providing consulting services to law firms, take a look at the PDF's below:
Legal Sector Case Studies
To see some case studies explaining how we have helped our clients recently, click the links below:
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