Legal Business Blogs

Comment: The ABS dilemma – join them sure, but shouldn’t you be beating them?

Amid all the hype surrounding alternative business structures (ABS) one story that emerged last month stood out – the aggressively-marketed Riverview Law’s eye-catching alliance with 48-partner practice DMH Stallard.

In an ABS market heavily focused on the high street and volume insurance work, the deal stands out for aiming to provide something different to corporate buyers of legal services.

The firms, which are in discussions about the impending launch of new fixed-fee products, will offer their respective clients each other’s services on a permanent basis, following a four-month trial.

Riverview Law, which launched last year, has aroused a mixture of admiration and suspicion for relentlessly pushing its ‘market-disrupting service delivery model’. It operates through two arms – Riverview Solicitors and Riverview Chambers – around 70 lawyers split roughly two-thirds barristers and one-third solicitors. The proposition is focused on providing small and medium enterprises with fixed-fee, commoditised legal advice.

Whether this will be a success is too early to call. Its parent, DLA Piper-owned LawVest, posted a loss of £3.2m in its first 16 months of trading, due to marketing and start-up costs, generating revenues of £170,036 during that period. The flip-side is that it argues that this heavy investment will soon pay off with a multi-million pound pipeline of new business.

DMH, on the other hand, is an established south coast player, ranked in the LB100 up until 2010 and defined as a ‘regional heavyweight’ by The Legal 500 in the South East. However, the local legal market has always been fiercely competitive, no more so than over the last five years. Firms have struggled with the costs associated with operating around the orbit of the M25, while getting squeezed by competition from firms in London and the South West. The firm’s revenues for 2011/12 were down 9% year-on-year to £19.43m, against its record 2008 turnover of £24m.

The alliance says some interesting things about the legal market. On the face of it, a sizeable business aligning itself with a small start-up new to its market is odd. The obvious question is why aren’t more law firms using their resources and legal know-how to launch their own ABSs? The answer is largely fear of disrupting their own model but such short-termism could be fatal.

There is also the question of how credible Riverview is. On this, opinions vary. There are some very credible figures involved – including DLA Piper’s Sir Nigel Knowles – and Riverview’s marketing panache has often shown law firm rivals a thing or ten about how to push the brand.

On the other hand, not everyone is convinced Riverview has the substance to match the style. Such claims have been fuelled by a gap at times between its happy-clappy rhetoric on one hand and its hard-nosed attempts to control its own image.

Overall, the venture does appear to be a low-risk and imaginative response to turbulent market conditions. The challenge to making it work will be structuring the union so that both sides have strong financial incentives.

Still, even if such law firm/ABS tie-ups prosper in the short-to-medium term, the suspicion remains that ultimately these two camps are heading for a head-on reckoning.