Pssst! Wanna Buy a Law Firm?

Bruce MacEwen has an insightful post on external investment into law firms, in which he puts the scale of the proposed Clementi reforms on a par with Big Bang in the 1980s. He's right.

Big Bang led to the disappearance of many British finance household names as the American banks came over and bought them up. Now the competition is a hotter because in addition to investment banks we've got private equity funds and hedge funds and various derivatives' specialists. MacEwen compares law firms to utilities, good, steady income streams.

Big Bank took everyone by surprise (it was only meant to be a minor change in the Stock Exchange rulebook). And the Brits weren't prepared for the onslaught. They are about to do it again.

Let's face it: law firms are populated by intelligent people but are they worldly-wise? No. Once they take the banks' shilling--and they will despite what they say--law firms are in for a big shock. Over time I see the prospect of the following happening:
  • the erosion of partnership. Banks are corporate entities, so what do they need with bureaucratically wasteful entities? Employee status looms
  • lockstep--what was that? Eat what you kill and hope to get your bonus just like any other banker
  • the ultimate abandonment of any pretense of maintaining any professional ideals. Add in the encroachment of tougher money-laundering rules and one can envisage the lawyer-client privilege disappearing like a teenager's last pimple before adulthood.
The question will be: What does it mean to be a lawyer? I don't know. And how are the American law firms going to deal with this? They will have to face it eventually. Very interesting times ahead.


Legal Eagle said…
Like your blog. Have put a link to it on my site.

Tim Kevan said…
Hi John, I've put this article in 'Best of the Blogs' in my 'Weekly Law Review' on my blog and in my newsletter. See All v best Tim
John Flood said…
I received an email with an interesting comment on this post:

As one of the original committee member of the Legal Services Action Group in the pre-Clementi days, I enjoyed your blog.

Want to buy law firms? Sure I do! I have fixed several, delivering well over 95% of the value added to the proprietors of the previously underperforming firm.

How much better a business model to buy the firm, fix it, and sell it on...?

Not rocket science and should be highly lucrative. They are very simple businesses and don't take a lot of guile to fix provided you can move (or remove) some of the rather intransigent obstacles (aka partners).
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