North-West: new ways of working

Whether it is Blackpool or the Lake District, the first picture that comes to mind when thinking about the North West is possibly not one of a region whose lawyers are breaking new ground in the profession. Yet, the week that saw the Legal Services Act being given Royal Assent, law firms in the region would appear to be well ahead of the game and ready to tackle the challenges set by the new legislation.

No feeding frenzy

In two years, Napthens, one of the leading firms in Lancashire, has gone through three mergers: first with Roscoes, a firm with offices in Blackburn and Preston, in November 2006; and this October, with Blackpool's Cuddy Woods and Cochrane, and Chorley's Wallwork and Company. But for Ian Higginbotham, Napthens' executive chairman, the firm's acquisition spree is no feeding frenzy.

After carrying out an operational review of the firm at the end of 2005, Higginbotham, a banker by profession, said: 'It was evident that the DNA of the business was very solid, with strong personal values rather than an aggressive corporate attitude. But it was also clear that for a firm which sought to be a general practice, it was not big enough, there was not enough critical mass or know how across enough areas.'

At the time, there were nine equity partners and about 60 staff, so the firm had two options. It could either slim down and become a boutique firm specialising in commercial property and litigation, or it could expand and seek partners who shared its values and could fit the slots where expertise was missing. There was also a realisation that every time a client went to Manchester to buy legal advice in areas where Napthens could not help, the firm risked losing that client.

So growth seemed to be the sensible way forward and the firm has grown threefold since Higginbotham came on board in 2006.

'Each firm joining us had to meet a set of criteria he had defined as 'the four Cs': competence, character, chemistry and convergence,' he says. In other words, law firms that Napthens would invite to merge with would not only have to have skilled lawyers but also lawyers it could trust, who would culturally fit in, and there would have to be genuine complementary between the firms.

The first merger, with Roscoes in November 2006, raised two key questions: how would one build the new brand and around which name? Roscoes was almost as large as Napthens and with a history going back over 250 years. After much consideration, 'Napthens' would be the name of the new firm, leaving the door open for further acquisitions.

The actual joining of talents could have proved a more hazardous move, but this was avoided through working together very early on, before the deal was finally sealed. After the heads of agreement were finalised, the firms had a period of 'living together', where lawyers on both sides attended executive and partner meetings and eight groups examined joint issues, such as human resources and branding, so that any problem could be resolved before the merger.

Reasoned approach versus merger mania

Will it consider expanding further? According to Higginbotham, 'critical mass doesn't mean you have to be massive, just enough to achieve what you have set yourself off to do'. One example of such achievement is the new entity's ability to offer continuity of service in all the areas it covers. 'For instance, before the merger, each firm had one employment lawyer, which meant that if one was away, neither firm could ensure continuity; now we can, and we are more attractive to clients who continue to see us as Napthens, except even better than before.'

Higginbotham also warns that too many firms are in 'merger mania' but do not have the structure or vision to support their expansion. Napthens earmarked residential conveyancing early on as one of the key services it wanted to develop further. Expanding the business and increasing the efficiencies on its own would have involved costly IT investments. Wallwork and Company had done all that, with end-to-end transaction tracking including sms texting automatically alerting clients when a critical step is reached. In addition, it gave the firm a further foothold in the Fylde.

And this technology is not limited to conveyancing: as a client management system, the model could be rolled out to other areas. The firm has not yet decided on the exact product line to which this could be applied but Higginbotham is confident that it could find applications in most areas of private client work where people need to be kept up to date with their case, such as probate or personal injury claims.

Nurturing clients

Beyond the economies of scale, critical mass, and technological improvements, however, Higginbotham insists that it is the people who make the firm. 'Brand reputation can attract new clients, but it is the individuals in the firm who retain them', he says. 'There are few large companies in Lancashire, just the one or two local subsidiaries of a large plc. People have been at school together and there are strong links in the community.'

For all the goodwill that the firms now comprising Napthens have created over decade, with generations continuing to be clients, Higginbotham is also aware that the firm needs to be able to attract new clients by understanding their values. 'Young entrepreneurs like to deal with their age group; we need to create relationships between lawyers and the next generation in the family.

'Client relationship management is the next big challenge,' he continues. 'Many corporate lawyers tend to get over-excited about a deal and forget that the client is now richer and will have new personal needs, and this is an opportunity for a firm.'

Tesco law '“ every little hurts

Like most medium-sized firms, Napthens has been watching the development of 'Tesco law' and in particular how it might affect conveyancing. Higginbotham thinks that the market will eventually be made of two types of organisations: the 'conveyancing sheds' which will be web-based and possibly based overseas, and the personalised services with lawyers knowledgeable about the local property market and a phone call away.

Other practice areas are not immune either. 'The balance of power is changing in the legal market,' says Higginbotham. 'Knowledge is more readily available to non-lawyers, mostly via the web. Access to expertise means that lawyers will need to be more than general practitioners; the public will be the GPs, so the lawyers will need to develop stronger sector expertise.'

John Chesworth, managing partner at Preston-based firm Harrison Drury, has similar concerns. Like most local firms serving the local community, the 100-year old Harrison Drury has a loyal client base built through family recommendations but Chesworth says the marketing power of large retailer brands should not be underestimated and has the potential of distorting the market. 'The residential conveyancing market on the high street will change,' he says. 'The introduction by lenders of legal services as part of their mortgage offer will undoubtedly be attractive to buyers.'

Chesworth adds that this pressure will be felt on other process-driven transactions, such as will making. The firm's response has been to strengthen the commercial side of its conveyancing practice, an area in which Chesworth believes the bulk providers will not be able to get involved because it cannot be deskilled. 'Organisations which deal with transactions on a bulk basis, tend to deskill the process; you may be able to speak to someone but they will only be able to answer questions about one specific step, not any other steps involved in the whole process. Dedicated conveyancing lawyers offer experience and are able to inform their clients about the whole process.'

Like Napthens, Harrison Drury has heavily invested IT, not just to increase cost efficiencies but also to improve client management. Ultimately though, Chesworth says that for all the trigger technology available which automatically updates clients of key stages in a transaction, people still want to talk to their lawyer '“ and this is what they are offering.

Looking beyond the immediate future, Chesworth's eyes are firmly set on growth rather than boutique high street, but unlike Napthens, he intends to grow his firm organically from its present 18 staff to 25'“30 in the next five years. 'There is some natural movement of lawyers between firms,' says Chesworth, 'but we want to recruit actively. Typically we will be looking for lawyers who have been working in Manchester and are looking for better quality of life or are hitting a glass ceiling at associate level, or simply would like to come back to their root.'

Growth plans aside, as a three-partner firm, Harrison Drury may face a succession crisis but this is an issue which Chesworth is already working on '“ and one which is not as grim as that faced by legal aid firms.

Legal aid

Sustainability includes attracting younger solicitors, and David Ruscoe, business manager at Farleys, is confident that the local profession has its own succession plans in place. The firm, which started in Blackburn, has developed on the back of organic growth and healthy succession planning from nine to 14 partners and 190 staff across seven offices in the area. But maintaining an active legal aid department poses succession problems far more acute than for firms undertaking solely privately funded work.

'In respect of publicly funded work, a recent LEGG report shows that students are reluctant to enter a career in legal aid: while 60 per cent of student solicitors may wish to enter legal aid, only 21 per cent actually do enter, the reasons being the perceived low salaries, limited career prospects and poor working conditions,' says Ruscoe.

The fact that the Legal Services Commission is now funding traineeships may be promising but it is also indicative of the government's concerns about a depleting legal aid supplier base. 'But it's naive, because we can take a trainee to qualification, but afterwards there is still the question of how much they are going to be paid and how much revenue they are going to bring in,' adds Ruscoe. 'Any young solicitor with an eye on a seat at the equity partner table has to be working in an area of the law that brings a decent return of profits. That is unlikely to be the case with publicly funded work.'

As a large practice, Farleys is in the comparatively favourable position that it could weather a temporary downturn in its circumstances, but like many other firms in the North West, it will require all of its distinct departments to maintain good levels of profitability, particularly those undertaking publicly funded work.

As to the effect of the Legal Services Act as a whole, nobody is yet prepared to make any firm predictions and the North West is no exception. Lawyers in the region who have decided to grab the bull by the horns have gone into one of two possible directions. They are either expanding through acquisitions or organically, or they are focusing on their core sectors. In both situations though, they are running lean, cost-efficient,

IT-savvy businesses, and they are showing up their expertise as experienced lawyers. Some transactions can be improved by automated processes but only the lawyers operating them will be able to provide personal advice tailored to individual needs.