Are there any realistic alternatives to the traditional partnership set up?

In December 2015 we looked at where we thought the legal profession was heading in 2016 and predicted that there would be “a rise in alternative external sources of legal advice including in-house lawyers setting up as consultants, and barristers increasing their direct access opportunities to allow individuals and clients to instruct barristers without an intermediary”.

Not all of you were in agreement however, with Kevin Wheeler suggesting in his most recent post that the impact of ABS on the legal market “has been over-hyped and [he doesn’t] expect the sort of transformation in the legal services market predicted by others. The impact of these regulatory changes on the larger commercial legal practices will be negligible”.

I take a more pragmatic view of the viable options.

It is no surprise that the traditional law firm partnership set up, with the bulk of profits being distributed amongst a small number of equity partners sitting at the top of a rather hierarchical (and often patriarchal) business organisation is becoming a rather outdated concept. The introduction of alternative business structures (ABS) in the wake of the Jackson reforms, coupled with societal changes and financial stresses has certainly triggered a rethink. Indeed, recent research indicates that the majority of junior lawyers believe the partnership model is outdated. We might be in agreement that the model is outdated, but is there a realistic alternative?

ABS

The first alternative business structures were licensed in 2012 and numbers have grown steadily, with a recent search for ABSs on the SRA website (as of 1 December 2015) producing some 444 results. One of the benefits of the ABS model is that capital can be injected by companies or individuals outside the legal sphere, who may also bring with them a different approach to doing business, disrupt outdated processes and breathe new life into stagnant partnership structures.

Knights Professional Services was an early adopter of the ABS model, selling a stake in its practice to Hamilton Bradshaw, a private equity firm founded by Dragons’ Den star James Caan. It is now reportedly “in advanced talks” to acquire regional firm Darbys Solicitors which would, according to Chief executive David Beech, push the firm into the top 100 UK law firms by revenue. Commenting on resistance shown by the legal industry to moving away from traditional business models, Mr Beech