More change to come for law firms
The legal landscape has changed dramatically in Birmingham over the last five years and it is an insulated firm that does not anticipate further changes of note to arise over the next two to three.
This was certainly true because of the Legal Services Act and the increasing attractiveness to other national firms seeking a foothold in a city driven by professional services but the recession has accelerated this need for change.
It is widely believed but often denied that a recession does not create new problems so much as expose existing weaknesses. The slowdown in demand means one area cannot cover other under-performing practices any longer and this is driving the need for fundamental change in many firms of all sizes.
A worrying number of practices are unsure how to deal with these market changes and are consequently in danger of failing or oddly, existing against their will. In the course of researching and conducting merger projects in the first three months of 2009, a particularly emotive comment heard a concerning four times already this year, has been ‘I will have to work until I die’. This is mainly due to three events occurring simultaneously; pension fund value diminishing spectacularly, client income dropping off causing cash-flow problems and the spiralling cost of PI insurance and hence run-off cover.
There is a worrying number of firms placed into the special lending departments of the banks and into the hands of administrators because they are unable to find these escape routes or manage out failing parts of the business.
There is value to be realised from many firms that would otherwise be going under, as long as that value can be realised through making the right changes.
Clearly this means there are some golden opportunities for the discerning investor. Those firms that have geared themselves well in recent times, taking on board new business structures and effectively reorganising themselves as commercial and responsive businesses can reap the rewards with a solid plan and a strong stomach. A few will move forward a staggering distance while the market and a significant chunk of the competition declines. The questions we are constantly asking are designed to find out who those few will be.
Colin White is managing director of Ortus Professional Search, a company working with professional services firms to assess and facilitate strategic change.
