Is it a Law Firm?

Times they are a-changing. Meet the international law firms with hardly any offices, no trainees, and the bare minimum of overheads. Clients are waking up to a very real alternative.

When Ryan Stafford, general counsel (GC) and vice president at $700m-turnover US manufacturer Littelfuse, was looking for a team at short notice to handle a transaction in Scandinavia and the Baltics, he wasn’t afraid to think big. He wanted a firm that could move fast, with people on the ground around the world, and a single contact point that he could speak to pretty quick. The usual suspects dropped the ball.

So Stafford chose Transatlantic Law, a London-based international legal services provider that likes to be different. It lists just 13 lawyers on its website, total. What Transatlantic Law does, in a way that clients appear to like, is co-ordinate counsel in all the key regions of the world, through a single global service centre. Instead of costly offices, it works with affiliated law firms and others in more than 80 countries, giving clients access to over 3,500 counsel around the world.

Stafford says: ‘They had teams in the two areas up and running within a day with the overall steps and strategy. There are lots of law firms that can do M&A, but the model of having global central control and dedicated teams from top notch affiliates working together is exactly the way general counsel operate.’

‘The speed with which we can field teams and
solutions, including the geographic scope, can
be rather impressive.’
Erik Lazar, Transatlantic Law

Michael Keefe, assistant GC at multinational food services group Sodexo, which employs 380,000 people, tells a similar story. His law firm of choice employs 108 lawyers who work flexible hours from home and are supported by a central office staffed by just 15 people. Keystone Law is another new generation legal services provider.

‘You tend to find that traditional private practice is more arm’s length – they don’t generally attend our offices, for example,’ Keefe says. ‘But also the style of the advice given is different. With Keystone, they act as though they are part of our overall business, whereas with the bigger law firms you are one of a number of different clients and it’s a specialist service you go to them for.’

Another Keystone client is Stephen Carter, director and head of finance at A J Walter Aviation, which is a world leader in aircraft spare parts. He says: ‘At Keystone, you get the main guy rather than the assistant, he’s a lot more realistically priced than City firms, and you can call on literally hundreds of specialities.’

He adds: ‘For the big, really complex stuff you still need the big firms. We’re a company that employs 300 people. We turn over £200m. We’re quite big now, but we still consider ourselves to be a small business.’

These innovative new providers – which just don’t look like law firms – may not be for everyone, or every piece of work, but they’re certainly making an impact.

 

Changing the world

Transatlantic Law was founded 11 years ago by Erik Lazar, a lawyer who has worked in European GC roles at NYSE-listed multinationals Tyco and International Paper. His idea was a new model focused on advising major multinationals and growing cross-border companies in a way that worked better for them.

‘What differentiates us from the traditional megafirms is three things,’ he says. ‘First, we are in more countries than anyone else as an integrated service provider – that is providing a single business law service under one roof and not as a referral network. Second, we are more cost-efficient because we have eliminated the unnecessary overheads of traditional law firms. And third, we are very fast indeed, because we are able to field the right lawyer on a case, often in a matter of minutes, anywhere in the world through teams that work with us on a constant basis.’

‘The industry is going through enormous changes
and the legal profession you see
now will be very different in five years time.’
Deborah Prince, British Heart Foundation

That offering is made all the more client friendly with one-stop billing worldwide, a single service system with one set of global service terms, and strong central management tracking every assignment alongside small leadership teams in each country.

Transatlantic Law clients include a media company present on every major continent, a $2bn global telecommunications leader, two worldwide chemical companies, an international hotel and leisure chain and two of the US’s largest software companies.

The most important aspect of the business is client service, Lazar says: ‘You have to be “on” all the time. One of our global clients in the telecommunications sector came to us on a Friday evening European time and wanted a full team to take over a deal Monday morning in Bangkok, which we did – and successfully. A few weeks later they had a major and urgent need that we supported in Chile – up and running in less than a half an hour – and then not long after that they required an urgent analysis in Nigeria.’

He adds: ‘The speed with which we can field teams and solutions, including the geographic scope, can be rather impressive.’

Turnover has been robust and growing even during the recession, says Lazar, while declining to reveal specific figures. ‘The challenge we have, as with every global legal business, is to maintain a distinctive edge, to continue to innovate constantly, and to make sure we grow our management capacities as well as execute daily on the ground in each country. We have been able to do this for the last decade and we are continuing to evolve the model to meet new mandates and expectations.’

This business may walk and talk like a law firm, but beyond that it’s a very different beast. There are no trainees, for a start.

Lazar says: ‘Only attorneys who are experienced work on a task, as part of our basic service pledge, and rates are based on the type of work, not the age of the attorney, which means more savings because you eliminate the layers.’

Lazar adds: ‘What we do is what many service industries are doing.’ The large accounting firms have expanded this way for years, he argues: ‘The core is having a global central service platform and bringing on board lawyers and capacity from our affiliates that are dedicated to working with us in our way, not in disparate ways.’

When the Legal Services Act was introduced in October 2007, the idea was to offer clients more choice. Tony Williams, principal of legal consultants Jomati Consultants, says it has served its purpose by encouraging just these kinds of different approaches. ‘Whether it’s lawyers on demand, access to barristers or fixed-price services, so be it,’ he says. ‘It’s not to say that one model is right, it’s to say “Actually, provided you all play by the same professional rules, let the market decide.”’

 

Unlocking the revolution

Keystone Law is another UK-based upstart, with three partners and an expected 2011/12 turnover of £12.2m. Its founder and managing partner is James Knight, a former Trowers & Hamlins lawyer, who opened the doors in 2002 and originally branded the business Lawyers Direct before deciding he wanted to sound a little more upmarket.

The remuneration system is almost entirely performance-based, and fee-earners are directly financially incentivised to introduce clients to other lawyers in the business. Knight says the structure is built on foundations that are ‘free from management, politics, compliance and commuting’.

He argues that this suits solicitors who simply want to practise law without being caught up in the processes and bureaucracies that are part of a traditional firm.

Knight says: ‘When we started ten years ago, being different was considered quirky at best, suspicious at worst. But as business culture has changed in line with technology, over the last ten years, this has made “dispersed” law firms like us more acceptable and appealing.’

Keystone kicked off a recruitment drive in July with the aim of taking on 50 recruits over the next three years – 20 have already been hired. Describing the response as ‘incredibly strong’, Knight says there is clear demand from solicitors, let alone clients, for newer models. Recent recruits include former Salans partner Nick Ellis in real estate, one-time Thomas Eggar partner Shashi Sachdeva in family law, Ian Taylorson, a former corporate partner at TLT, and former Kennedys personal injury partner Cordelia Rushby.

Typically, these individuals have about ten years’ experience each. Many want a new challenge, as well as a new way of working. Today Keystone is fast-approaching full-service, with practice areas including antitrust, asset finance, data protection, insurance, IP, insolvency and restructuring, as well as the staples of corporate and commercial work, real estate and dispute resolution. The client list includes names like Dulwich College, ING Real Estate, Lloydspharmacy, Stagecoach, South West Trains, Neal’s Yard, Nickleby, Newsflare, Your Golf Travel, Hardy Underwriting, Maven Capital Partners, 247jet and AAH Pharmaceuticals.

Karena Vleck, head of legal at the Rugby Football Union, uses Keystone for commercial work and overflow. She says: ‘What I like about them is you get very senior expertise at very reasonable rates.’

 

A new view

If Keystone and Transatlantic are the big boys of these non-traditional models, then Riverview Law is the well-resourced upstart. Founded eight months ago and run through two arms – Riverview Solicitors and Riverview Chambers – there are 70 lawyers split roughly two-thirds barristers and one-third solicitors. The proposition is all about fixed fees for small and medium-sized businesses.

Owned by parent company LawVest, whose shareholders include a range of individual investors plus the management team, Riverview is also backed by DLA Piper and AdviserPlus Business Solutions, an HR and health and safety adviser.

Riverview is not a partnership but has a management team led by chief executive Karl Chapman and chief operating officer Adam Shutkever. Chapman read law at university before becoming a trust fund manager and then founding a recruitment and training business called CRT Group. Shutkever was called to the Bar and then worked in investment banking before joining LawVest. Sir Nigel Knowles, joint chief executive and managing partner of DLA Piper, is non-executive chairman.

Chapman tells LB that Riverview: ‘applies commonsense principles to an industry that has been protected from competition for too long. We only provide services on a fixed-price basis’.

He says that, traditionally, law firms look at their costs and work out how many billable hours are required to generate a profit, but Riverview does not. ‘We started from a different point, the customer,’ says Chapman. ‘We were able to build our model from the customer up, not from the law firm partner down.’

‘At Keystone, you get the main guy rather than
the assistant, he’s a lot more realistically priced
than City firms.’
Stephen Carter, A J Walter Aviation

To that end, Riverview is able to keep overheads low by not having expensive London offices, not having partners, and not rewarding its teams for the number of ‘billable hours’ they generate.

Instead, they are measured by how much they satisfy the customer, says Chapman. ‘Our performance measures range from the technical accuracy and commerciality of the advice provided, through the timeliness of its provision. Additionally we hold regular client review meetings and conduct regular client satisfaction surveys,’ he says.

Financially lawyers are rewarded through a combination of salary, bonus and, if appropriate, equity incentives. Riverview says it also aims to create clear career paths and a flexible working environment that aids retention.

There are no partners and so a chunk of the profits is retained to invest in growing and developing the business.

 

Panels and pressures

The pressures facing today’s in-house legal departments are huge, with GCs under pressure to stay within budget and reduce internal headcount. Choosing to instruct alternative law firms, who are rarely on the panels, is therefore a risky business.

Lazar says: ‘If a company or legal department already has a legal panel, they are inclined to keep all well and good. However, most inside counsel, even if they are satisfied, are always looking for innovation and new ideas, which is what the legal industry is responding to and is what we are all about.’

One of Transatlantic Law’s clients says that there really is a need for global ‘one-stop services’ given the speed of law across borders. ‘Very few global firms get this right,’ says the GC. ‘At least not at the right price. From what I’ve seen, Transatlantic Law has an excellent alternative to meet this need.’

Chapman of Riverview, whose clients include telecoms giant Vodafone, says that the UK legal profession is going through significant upheaval. ‘Everyone talks about the change point being regulation,’ he says. ‘While that’s important, the customer is driving the change and the biggest winner in this is the customer.’

Deborah Prince, head of legal at the British Heart Foundation, agrees: ‘It’s true to say that the industry is going through enormous changes and the legal profession you see now will be very different in five years time. I know from my days as a lawyer at Which? that alternative business structures, for example, will bring changes to the high street, as will the internet.’

Lazar says that for international law firms a global system is only as good as it is managed. Some traditional global firms still have problems getting their offices to work together, he says. A boutique firm, in contrast, can co-ordinate specialists all over the world in certain areas, such as antitrust filings, as well as, or better than, the larger players.

‘The traditional firms are first rate for what they do, and we wouldn’t want to compare to any particular firm, but we do things differently,’ he says. ‘We have responded by making changes to the traditional model, and providing a service that is really nimble, but still global and able to execute broad segments of work across many countries as well as specialisations.’

According to Lazar, Transatlantic Law’s model is more cost-effective head-to-head, with the same or higher service levels thanks to a very tight central management team accountable for service in every country.

He adds: ‘That being said, it’s clear that the larger firms are moving in the same direction. But for traditional firms, lowering overheads and costs will be a challenge, we think.’

Knight of Keystone Law says that his own model of satellite services and performance-based pay would not suit everyone. What’s more, it’s almost impossible for the traditional law firms to do it now, he says. ‘If you try and do that with a conventional law firm – reverse-engineer it, if you like – that would be a very bad mistake.’

What the old-school firms need to do is concentrate on service. For most of these new players, the innovation is nothing more than breaking down barriers in firm structures, creating the right teams and focusing darned hard on what the clients really want. Lazar says: ‘We transform our pool of talent into a truly global service structure without the high overhead, complications and headache of the alternative traditional structures. It’s a model that works and can expand into many specialisations.’

He concludes: ‘We think that the future of legal services is just that – looking at how to deliver and making sure you are always delivering services in new and effective ways.’

It’s certainly a new dawn, and the big firms would do well to take notice. ‘Traditional firms might sit back and say “Well, that’s not what we usually do,”’ says Jomati’s Williams. ‘Well, even if they take away just a small percentage of your business, that can be death by a thousand cuts. This is a tough market. This is an overlawyered market for the first time in a generation, and if someone takes away three to five per cent of your business, that can have an impact. Traditional law firms need to wake up and recognise that this is serious, and not just be dismissive.’

Too true. Welcome to the revolution. LB

 

miriam.fahey@legalease.co.uk