In our last blog we explored the background to the introduction in October of Alternative Business Structures (ABSs) and gave some thought on what this might mean for law firms.  Here, Kate Wilkinson looks at the broader picture.

Chances are we’ll see a combining of service providers to share economies of scale, either through mergers, fee sharing agreements, referrals or co-operation arrangements.  There may be even more novel ideas.

Existing legal teams providing legal advice internally to their own business clients (in-house depts., insurance company help-lines) will suddenly have the opportunity to be income- generating in their own right.  They’ll be able to extend their services to third parties without having to go through the rigours of setting up an independent law firm. DAS, the legal costs insurer, has already commented that it sees the Alternative Business Structure as an opportunity for it to extend the provision of legal services.

Smaller or niche firms might see it as a chance to merge with a bigger or more diverse firm.  Thus, they can benefit not just from economies of scale but to be able to offer a wider range of services to their clients.

Incorporation could ease the passage of the traditional law firm into the ABS age, giving it a more efficient model which could help it raise capital or merge with others. It may even herald the floating of law firm – Australian law firm Slater & Gordon did this in 2007.

Legal staff who are not solicitors, as well as firms who employ them, could also benefit. David McGrady, president of the Institute of Legal executives, has claimed that ILEX has ‘most to gain’ suggesting also that the Institute could become a regulator of firms which employ legal executives. It may also help ease the way for greater independent rights for legal executives, enabling them to deliver all the services currently delivered by solicitors – this would certainly fit the concept of increasing competition in the provision of legal services.

A number of larger city firms have recently embraced the concept of outsourcing elements of their support services, so why not legal advice?

Already we have seen some less conventional approaches. Quality Solicitors have proudly announced their tie in with WH Smith to promote legal advice in their stores. Lawyers2You already has stands in shopping malls promoting legal advice and taking the details of passers by so that a lawyer can call them later. Both are taking a very different approach to the provision of legal services and hope to reap the benefits.

And of course there is the might of the big brands.  The Co-op is already in the field and continuing its recruitment of legal staff to provide advice to their members. Tesco, Hallifax, Asda – all have expressed interest. But this in itself may be an opportunity for existing firms which could benefit from the franchise model and continue to operate albeit under the banner of another’s brand.

The Legal Services Reforms will also enable law firms to take on external investment. This is anticipated to help firms realise expansions and mergers to take advantage of the more relaxed market.

US lawyers have already seen the potential advantages of the ABS. Kobre & Kim, a New York law firm, are bringing English barristers into its partnership via its London legal disciplinary practice office.  This in turn has prompted the American Bar Association to launch a consultation last week on relaxing US law firm ownership rules. However although the ABA has already said it will consider non-lawyer ownership of law firms, it will not allow passive external investment by non-lawyers such as private-equity investment. Unless of course they see the impact of the relaxation in the UK market.

Enabling a single structure to be formed which would permit non-lawyer senior executives to become LLP partners might trigger a shift in emphasis in top management teams. This could also herald changes in profit structures and possibly also fee structures.

So many questions remain as well as challenges and opportunities.

We will continue to watch with interest and consider what could benefit our business and clients.

What would you like to see happen?  Leave a comment and share your views.

Kate A Wilkinson is Jordans Limited Head of Internal Legal Services (interim)