Top firms plan to recruit non-lawyer partners

Around one in five of the top 100 firms are planning to set up ABSs to recruit non-lawyer partners, a survey of finance directors has found.

60 per cent of the top 100 firms said the change was in order to appoint non-lawyer partners, with 20 per cent saying they were likely to use ABS status to raise external funding. The majority would consider merging with another business such as a bank or insurance firm.

Researchers from Sweet & Maxwell, who spoke to 25 out of 100 finance directors, also found a lack of enthusiasm for private equity funding.

Only 23 per cent said they thought private equity funding was an ‘appropriate’ way of funding law firms, while just 12 per cent regarded flotation on the stock exchange as appropriate.

Finance directors were equally cautious about the impact of the new legal structures permitted by the Legal Services Act on their businesses.

Less than one in five, 19 per cent, were concerned that competition from other legal services providers could hit their profits.

This compares with the 58 per cent who cited downward pressure on hourly rates as a high risk to profitability, with 54 per cent highlighting the continued slowdown in corporate work as a risk.

“Private equity investors have been casting an eye over law firms as ripe for investment, because they think that the management processes they will bring to the law firm will make them more profitable,” Teri Hawksworth, managing director of Thomson Reuters Sweet & Maxwell, said.

“However, some partners feel that pressure from shareholders to deliver short term returns would radically alter the culture at their firms.

“Law firms have always prided themselves on a client-first approach and investment in their staff, that is not incompatible to delivering shareholder returns but not all lawyers or their FDs would relish constantly explaining that ethos to more impatient shareholders.”