David Edmonds, chair of oversight regulator the Legal Services Board, used a speech this week to confirm the ICAEW has finally completed all hurdles to be designated as an approved regulator. Jeremy Barnett 11th December 2013
David Edmonds, chair of oversight regulator the Legal Services Board, used a speech this week to confirm the ICAEW has finally completed all hurdles to be designated as an approved regulator. It is expected that an imminent announcement will be made to herald the introduction of major professional services firms entering the market at Alternative Business Structures [ABS].
This move has been anticipated since the introduction of Alternative Business Structures by the Legal Services Act 2007, and comes on the back of announcements of further consolidation in the market with mergers such as Slater Gordon with Pannone last week, and Wragges with Lawrence Graham, that was announced today.
This confirms the view that was expressed in early seminars and conferences on the future of the legal market when ABS was first permitted. Private Equity speakers indicated that there was ‘ a wall of capital ‘ waiting to enter the market for legal services, but it would not be deployed until there was consolidation as investors could not deal with a large number of small firms. It was inevitable that there would be mergers and takeovers, with the inevitable reduction in the number of smaller firms able to compete in a difficult market.
It is rather ironic that this announcement is made at a time when there is a demand for more competition in the Accountancy profession. Despite much hand wringing about the lack of choice of auditors for FTSE 100 companies, that the inevitable effect of the market consolidation is further reduction in competition.
The Law Society Gazette reports today that both KPMG and Ernst Young have confirmed that they are interested in the ABS market. Perhaps they should think twice before joining the party as many people will recollect the formation of Garrett and Co by Arthur Anderson a number of years ago. This exciting new venture hit the buffers when other law firms realised that there might be a substantial risk that they would lose their clients if they referred work to AA. Despite the tremendous reputation of Arthur Anderson, especially in M&A work in the UK (prior to the post Enron difficulties in the USA), the collective power of the major law firms seemed able to nip the consolidation in the bud. One wonders what will have changed 20 years on and what possible advantage will there be to the clients for the ‘big four’ to gain even further market presence.
The current market disruption is said to be in the best interest of consumers. It’s strange that the widespread view of a number both solicitors and barristers in current practice seems to be that those who regulate the professions are out of touch with both the clients and the lawyers in respect of a number of major issues. The only discernible result of the current fluctuations in both sides of the profession seems to be that the strong are getting stronger, and the weak or the small independent practices are going to the wall, faced with insurmountable difficulties such as the difficulties in obtaining PI cover.