James Hunt is a solicitor, serial entrepreneur and founder of Everyman Legal – a new type of law firm providing legal services for entrepreneurs. The company of solicitors is the first in the UK to announce it will take advantage of the new practising regime created under the Legal Services Act by seeking a stock market admission. The company intends to trade its shares on Sharemark – a stock market for smaller companies – in the last quarter of 2012. In an honest and open account for Real Business, James Hunt will be charting the ups and downs of preparing his company for an admission.
The three challenges for Everyman Legal in 2012 are to scale-up, convert to an Alternative Business Structure (ABS) to allow non-solicitor investors, and to float on Sharemark.
As the year starts to unfold, it becomes increasingly apparent that all three challenges are intimately connected.
Our stage two Alternative Business Structure application (we have 60 days to file it) asks for monthly balance sheets for a 12 month period: the Solicitors Regulation Authority is clearly fearful of the risk of large law firm failures.
How long, I wonder, before all legal businesses will need to file regular solvency statements as for businesses regulated by the Financial Services Authority?
This month has seen the announcement of two acquisitions of large personal injury solicitor firms: one for £19m and one for £54m, both to complete once the Alternative Business Structure registration of those firms, to allow third party ownership, has occurred. Both acquirers are listed companies and both are paying in a combination of cash and shares. The bigger acquisition is by an Australian personal injury law firm, Slater & Gordon. Australian liberalised its legal services market several years ago – and that liberalisation has given their legal business a headstart in the process of consolidation which will take place.
This merger and acquisition activity causes me to pause and think how fiercely competitive this new legal marketplace is set to become: “get big, go niche or get out” is the mantra of many commentators. I am sure this is something facing many businesses up and down the country, regardless of their business sector. But how do you get big without comprising quality of service?
I see patterns repeating themselves among owner-managed companies (our clients). This increasingly leads me to the view that there is considerable scope for standardisation and systemisation. While this may reduce choice, it will make the law much more affordable.
We have begun the process of developing some new legal products which will be launched in May 2012 and we’ve also begun the process of developing pilot local business hub franchises and writing our franchise manual.
But these processes will not be sufficient: legal services will always be a people business and people will always make mistakes. Since 1976 it has been compulsory for solicitors to have professional indemnity insurance. The same is true of many other professions including chartered accountants, architects and surveyors.
The test of any company and its people is how they respond when mistakes become apparent. Do they get out the shredder, as the California partners of Arthur Anderson did when the Enron scandal surfaced? Do they adopt the ostrich approach of burying the head in the sand and hoping the problem will disappear of its own accord?
Since the day I established Everyman Legal, I’ve known that our future success will depend on how we deal with our own mistakes. In fact, I envisage the most important chapter in the franchise manual that we are to write over the next three months will be on this subject. We cannot hope to scale up successfully unless we get this right.
Read the full Diary of a Sharemark float series here.
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