What the EY Acquisition of Riverview Law Really Means

EY’s acquisition of Riverview Law has created a great stir in the legal industry. Legal pundits of all types have proclaimed their views on the subject. Here’s a couple of views on the subject and my own view:

Mark Cohen of Legal Mosaic has stated that the deal shows that legal practice and legal services are being separated as ALSPs (Alternative Legal Service Providers) get more legal market share and show legal consumers such as corporate legal departments that law firms aren’t the only alternative for legal services. In the past law firms were the only legal service providers, but now things have changed and legal consumers have many alternatives to satisfy their legal needs.

Mitch Kowalski says,  “Riverview Law is not being acquired as a subsidiary to EY Law, nor as a subsidiary to EY UK, but rather, it’s being put into a vehicle that allows it to grow globally as part of the EY global family and will be known as EY Riverview Law…But what I find more interesting is the lessons that can be already learned from the Riverview Law journey:

Business people use ideas, systems and processes from a non-legal business to create new legal business.

Then new legal business:

  1. is run by business people, not lawyers;
  2. has a mix of investors who are not all lawyers, and who do not expect an immediate return on investment;
  3. retains earnings and invests them for the long term;
  4. creates unique customer experience that’s difficult for incumbent legal service providers to copy;
  5. attracts customers based on a unique customer experience that does not walk out the doors of the business every evening;
  6. does not attract customers based on personal relationships with individual lawyers who could leave at any time;
  7. experiences massive growth over first five years of existence; and
  8. is bought by Big Four firm because of the unique and successful mix of people, process and technology which creates a tangible, stable investment.”

In the above comments I believe Mitch effectively agrees with Mark that we are witnessing the evolution from lawyers determining what legal services are to now having business people and corporate legal departments take control and defining legal services as it meets their needs.

Given these events, law firms need to take action to ensure their clients know what unique value they offer as this evolution takes place. The Big Four have been developing their legal chops for some time and see legal work as an opportunity to add more profitable work to their top line and do it more efficiently than even the largest law firms. They are being very innovative as they penetrate further into the legal market and are unbounded by past legal industry norms.

How Law Firms Should Respond to Disruption in the Legal Industry Today

Some interesting ideas on how law firms should respond to significant disruptions impacting the legal industry today:

 

 

 

 

 

 

 

 

Panel Discussion – Profitable Practice Management

I was honored to be asked to speak at Dye & Durham’s October 6, 2016 “Here and Now of Legal Innovation” event in Vancouver. I participated in the panel discussion on “Profitable Practice Management for Partners and Business Managers”. Here is the text of my presentation at the event:

“I’ll be talking about some of the major trends that impact Canadian law firms today. My focus is on changes in the business model and how law firms must respond to the current challenges to maintain their profitability.

So, what’s changed in the last 10 years?

The first big change is the dramatic arrival of the global law firms in Canada, marked specifically by Norton Rose’s blockbuster move in 2011 when it acquired Macleod Dixon and Ogilvy Renault in one fell swoop and has now completed its sweep across Canada with its recent acquisition of Bull Housser here in BC. The arrival of global law firms like Norton Rose and Dentons has changed the Canadian legal landscape in a big way. This trend is leading to more consolidation of law firms in size and fewer firms, as regional and midsized firms are being gobbled up and shrinking quickly in numbers.

The second big change is the re-awakening of the Big 4 accounting firms in the legal market, with examples such as Ernst & Young moving into commercial law work and Deloitte’s recent acquisition of Conduit Law. The Big 4 accounting firms are ten times the size of the biggest law firms and will be a major force in redefining the legal industry in the coming years.

The third big change is the movement towards forming NewLaw firms such as Cognition and Conduit law. These firms focus on being outsourced general counsel and have reduced their overheads dramatically by working in client offices or virtually as required. They are aggressively using fixed fee billing to cut legal fees and are taking work away from large and small firms. Of course, Conduit is now affiliated with Deloitte, so this partnership will have even more disruptive impact now, and law firms of all sizes should be concerned.

The fourth big change is the rise of alternative fee arrangements (AFAs) and fixed fee billing. This trend has been picking up steam in the US and Europe since the 2008 financial crisis, but not so much in Canada until recently. With the continued proliferation of global law firms and Newlaw firms, fixed fee billing should continue to build in Canada and we’ll catch up fairly quickly.

The trend toward more fixed fee billing also puts much more emphasis on efficiency and has driven the trend towards more legal project management in large and small firms.

How can your firm lead in the next 10 years?

To respond to the above changes, Canadian law firms of all sizes must do the following:

  1. Centralize your management structure and give more power to your Managing Partner to drive strategic planning and execute the firm plan. Firms must recognize and compensate for firm and practice group management in a much bigger way. Firms must focus their practices to meet specific client needs, be more client-centric and be much more selective in the clients they take on to maintain their profitability.
  2. Restructure your business model in response to the new competition from global, accounting and NewLaw firms. You need to carefully examine how to reduce your costs and change your staffing mix to optimize use of the technology. The days of levering work down to junior associates at high billing rates and getting clients to train law firms’ junior lawyers are over. Processes must be re-engineered in conjunction with the technology.
  3. Hire business savvy lawyers, not just brilliant academics. Clients want lawyers who can help them solve their business problems, not just their legal problems.
  4. Offer value based and fixed fee billing to your commercial and litigation clients. Firms that hesitate will be quickly overtaken by the new competition and will lose their best clients.
  5. Revamp your compensation system to recognize partners’ firm building tasks such as training, project management and building the systems required to increase efficiency and effectiveness using all this new technology.

And finally, firms must consider client goals and KPI’s and focus on helping clients achieve their business goals, not just the law firm’s profitability goals. Your focus should be on attaining a long term strategic partnership with your clients, which means offering better value and innovative ways of delivering legal services.”