We recently presented to over 50 accountants who advise law firms on some of the challenges their clients may be facing as well as potential opportunities for them.
The one hour webinar was hosted by Rik Heap and Andrew Poxon from Leonard Curtis, Andrew Gregory from Leonard Curtis Legal and Sally Dunscombe from law firm exit specialists – Recovery First.
If you missed it, it’s available to watch here now.
Our speakers provided an in-depth look at some of the challenges the sector is facing right now (highlighted in a recent review commissioned by NatWest Bank that Leonard Curtis Legal commented on), some key warning signs that those accountants advising legal practices need to look out for, as well as some of the options available to firms experiencing issues. They also discussed some of the key areas of risk management that need to be resolved if law firm owners are to remain in control and protect both their firms and themselves.
Here are some of the key points from the session.
Covid has had a big impact – but it’s not the only challenge
Covid has impacted legal practices just as it has all professional services businesses – they too have been operating in an environment where factors like government support packages and restrictions on creditor enforcement action have been in play. But other challenges such as succession planning, difficulties accessing funding or renewing PI cover and a need to invest in IT are also real issues for legal practices right now.
Advisers can watch for key warning signs
Those accountants who advise law firms should be alert to:
- Poor MI, the lack of good management around WIP and lockup or a weak understanding of financial performance by partners
- Staffing issues such as partnership disputes, reliance on/loss of key staff
- And regulatory/compliance problems like an inability to renew PI at appropriate levels or breaches of Solicitors Accounts Rules
There are a range of options available
Law firms do have options available to them ranging from turnaround, sale/merger to solvent wind down. Those experiencing more severe issues can still protect value in an insolvency situation if they act quickly enough. The sector is very active with many players out there looking for opportunities.
Leonard Curtis have dealt with a significant number of law firm insolvencies over recent years and, working alongside Recovery First – who specialise in maximising value when a legal practice exits the market – have been able to protect continuity for clients, enhance recovery for creditors and minimise financial and reputational impact on partners personally.
One of our real USPs is that, by offering recovery specialists from Leonard Curtis as well as Leonard Curtis Legal to operate as Solicitor Manager we are able to present a united front to the regulator – the Solicitors Regulation Authority (SRA) – something that’s rare in this sector.
Risk management is key in any distressed situation
Maintaining the support of the SRA is key to retaining control – they need to be certain that clients are going to be looked after and any client monies are protected.
The key messages are that this is a sector with challenges – but one where strong and acquisitive firms can thrive.
There are some warning signs that advisers can watch for. If problems are identified early and advice sought, then there are positive options available to allow owners to remain in control.
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