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Benefits of Joining a Consolidator

Andrew Roberts.

There is a new type of law firm slowly gathering traction in the legal market, and these are the consolidators. Primarily these have been in London but they are now spreading out into the regions.

 

So what is a consolidator and why are firms attracted to them?

 

Put simply a consolidator is a firm whose business is to acquire other smaller firms and by using economies of scale make the acquired firm more profitable for the benefit of all. To take an example, we act for Cubism Law in London which has grown from £0 to £8m in 10 years. As part of this growth, we have placed 6 firms with them, all of whose Partners report less stress and more profit. If one analyses the 9 CBD postcodes in London there are c350 1-3 partner firms. Most of these are good firms with long histories and run by good partners, but all are dealing with landlords, the bank, PII, SRA, recruitment, current staff, photocopier leases etc and myriad other non-law elements which are a distraction. Partners report that running the business of the firm takes about 1 day per week and therefore they are all losing 20% of their competitive edge to rivals. Joining a firm such as Cubism takes away all of these distractions and so immediately they are able to be 20% more productive.

 

"But we value our independence" is generally the stock answer to such an idea. That is not a problem, if your firm's brand has real value, then keep it as a trading name. However, be honest and ask yourself what is your independence really worth? By joining a larger umbrella organisation which will run everything from the offices, to billing, to marketing, to compliance in return for a % of fees generated what have you lost apart from your problems?

 

Simply calculate what your draw currently is, and if it is less than the 60-70% Cubism would pay you then such a move will make money. Then consider the ability to cross-sell to other members of the group. One of our firms was primarily a conveyancing business, but the partner had a client with a major litigation matter. He could not deal with this but passed it to his litigation colleagues and earned 20% of the fee, in this case a six figure sum. Finally consider that your succession is now dealt with and suddenly independence might look like an expensive luxury.

 

There are a few other firms out there doing this, Gordon Dadds is a great business looking to go national and there is Star Legal and now Echelon Law as well, so if traditional merger with a similar firm is not the answer, and often is not because you just get a larger firm with the same issues, then the consolidator route could be for you. One thing to note, with this type of fee % model there is nowhere for unproductive partners to hide, but for those that are driven they offer a very sensible option.

 

We act for a number of consolidators, if you would like a conversation about whether this option might be for you, please get in touch.

 

 

 



 
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