Law Firm Insolvency and closure is not confined to the UK
One of Canada’s leading law firms Heenan Blaikie is closing down.
So what you say, that’s in Canada, not in the UK, but the firm’s rise to fame with 500 lawyers with some being rather high profile (2 former prime ministers) meant it was one to watch, so the fact it is closing is something to take note of. Law firm difficulties and solicitor insolvency, is not something unique to the UK.
The firm’s turnover was $222m last year, with profit of $75m and the firm’s billings in December nearly broke records at $35m. It will be puzzling to most why it is closing down.
The firm suffered a slump in profit per equity partner, which saw a number of panic stricken partners depart for other firms and must have surely hastened the decline. The management team then performed an in depth analysis of the available restructuring options in the current context of Canada’s legal services market and decided winding down the practice was the best option.
One partner in the Vancouver office said “It’s a reflection of what a changed world it is in the legal profession, and what changes lawyers and law firms are going to have to make in order to provide good service to clients at reasonable prices.”
“Once you start having the inter-office fights or the finger-pointing, the question is ‘Do you want to continue in a national partnership?’ ”
Large firms are chasing a declining volume of high-end business law work. This type of legal work typically involves advising on mergers and acquisitions or other deals. “If you can focus, you keep the costs down, and it’s about providing a high-end service at a reasonable cost to clients,” Gall said.
In response, some firms are moving to a boutique approach where they specialize in certain practice areas, an approach that keeps their costs down.
Others, such as Norton Rose and Dentons are becoming multinationals, hoping to woo business by offering legal offices and services around the globe.
One such firm, DLA Piper, is “in discussions with a group of lawyers from Heenan Blaikie.”
How does this relate to the UK?
The problems that slowed down profits are all too familiar to the profession here: clients wanting lower bills or fixed fees, corporate clients turning to in-house counsel, client loyalty heading towards extinction and a weak transactions market.
Managing partners of firms throughout England, Wales, Scotland and Northern Ireland should be very concerned by the news. It doesn’t matter how big you are or how successful you have been (look at Halliwells), you have to both understand your market and move with it, but you need to ensure contingency plans are in place and followed not ignored blindly.
The Law Gazette commented that “In England and Wales, more than a fifth of the top 100 firms saw revenues fall in 2012/13, while the SRA has already said it has concerns for 32 of the top 200”.
“This is certainly not to stir an apocalyptic message that we are all doomed: plainly the market here is different to Canada’s. But the external forces are just the same – and Heenan Blaikie should be an item on every board meeting this month.”