Irwin Mitchell looks set to become one of the first leading UK law firms to take advantage of the Legal Services Act (LSA), with the firm already restructuring its business to make it more attractive to outside investment. The top 25 firm is seeking advice from accountants about restructuring in a more tax-efficient way as a corporate vehicle rather than as a partnership.
The corporate member model would allow the firm to avoid the maximum 50% individual tax rate for a portion of its profits in exchange for a 28% corporate tax rate – a structure that would be more attractive to external investors.
Irwin Mitchell hopes to have plans in place by the summer that would allow it to be ready for a float or private equity investment when the law changes and permits alternative business structures (ABSs) from 6 October 2011. Irwin Mitchell is seen as well-placed to take advantage of ABSs because of its highly leveraged volume business and low costs. It is understood that the potential float is being used as a recruitment incentive for new equity partners, who would benefit alongside existing partners if outside capital were introduced.
Irwin Mitchell managing partner John Pickering said: “Like any prudent business, we are exploring a number of options to ensure that we remain well-positioned to respond to any opportunities that will be created by the LSA. This includes potential structural changes. As always, our aim is to ensure that we are best placed to continue to offer the best service to our clients.”
The latest company targeting opportunities offered by the LSA is Investec, which at the end of last year launched a professional services finance unit that will invest up to £10m in each law firm looking to restructure as an ABS.
If you are interested in exploring options to restructure your business to tap into both tax and changing market opportunities, which could involve conversion to a new business entity (LLP, Limited Company, ABS etc) or management restructuring, the key contact on these topics at Inpractice UK is Allan Carton who is always willing to provide some input on options you are exploring.
This approach from Dickinson Dees hits the right notes for us – good, hard evidence to make it easier for their lawyers to prompt and initiate a discussion with clients (in a defined age bracket) about their wider legal needs; not just the transaction in hand. It also demonstrates some of the useful synergies between legal and financial services advice.
Their research has revealed that nearly two million homeowners in Britain aged 35-54 expect they will have to sell their home during their retirement to meet their or their partner’s care costs if they were to become infirm. Key findings include that 44% of British homeowners between the ages of 35 and 54 expect to have to sell their home to fund the cost of either residential or home care.
The research, based on a study of almost 4,500 adults, has led Nicholas Payne, a solicitor at Dickinson Dees, to urge families to talk about the issue of future care so they can take pre-emptive action. He said: “Our study reveals that more than half the British population believe the government should be picking up the bill for care costs for the elderly although it is most unlikely that they will: either in the short or long term. The stark reality is nearly half (44%) of Great Britain’s middle aged homeowners expect to lose their home if they have to foot the bill themselves.
“Families need to break the taboo of silence on infirmity and mortality that currently leads to two generations being robbed of a pleasant retirement, replacing it with the misery of a battle to meet escalating care costs. Plans need to be drawn up when people reach retirement, not once they are already drifting into infirmity and the risk of health problems.”
2011 is a crunch year for all law firms, when some will grow and tap into new opportunities while others will be swallowed up or go out of business – creating more opportunities for the more business-savvy firms and new entrants to the legal market for the first time from 6 October.
Any legal business that has satisfied clients who are willing to recommend their business colleagues, relatives and friends to them will be successful. But the stakes are being raised on client expectations. Historically, consumers have struggled to be able to compare one law firm to another … and they still do; but information and comparisons are becoming more visible and easier to make. The recession and availability of information on the Internet in particular – alongside suppliers in every other area of life constantly competing to produce better value to customers – has raised expectations of value for money from lawyers.
A number of discussions with people involved in mergers over the past week reminded me again how all the high level people involved in the negotiations tend to heave a huge sigh of relief once the heads of agreement are concluded … which is understandable as everyone involved tends to be worn out by this stage – but there’s a long way to go from here to enable the new business to operate to its full potential.
The heat is off with the deal done – but how well informed, engaged and prepared are the people on the ground who now need to agree how to bring the IT together in a way that works for the combined business going forwards? And, what is the plan to capitalise on the new client base quickly – not just telling them that a great deal has just been done, but getting people out there, under their skin, to find out how they think the merged business can do a better job for them?
Generally these questions aren’t dealt with as part of the discussions or the due diligence but they are critical to the success of business. When the heat is turned off, lack of continuty and agreed plans at a practical level in these areas in particular is likely to dilute and delay the benefits of the merger coming through. So why not get a team on the job to work on this in the background so the plans get implemented faster, without losing momentum?