Are You Sitting On Hidden, But Valuable, Assets?
A while back Integreon published an amusing blog about an LPO business buying a Law Firm. While that is almost legally feasible in the UK it is many years away from being feasible in the US. I just searched for it and, sadly, they have removed it.
The blog entry was amusing, but a couple of things have happened since then that could make the headline “LPO Provider Acquires Law Firm” at least partially true.
1. LPO Valuations Are High, Debts Are Very Low
The value of law firms has gone down and the valuations being placed on the LPOs are astronomical. There has been little M&A activity in the Legal Outsourcing space because the LPO Suppliers have not needed to raise funds and many did not start with significant outside funding. As they are strongly cash-flow positive, they have not needed to change this. What has prevented any kind of consolidation in the market is the valuations and the lack of motivation to sell. Why get out when the market is still growing 25+% a year. This gives privately, non-partnership Legal Suppliers a mighty sword should they wish to start acquiring. They will, of course, not be buying law firms, but they will be buying delivery capacity, which leads me to the second point.
2. Law Firms/GCs Are Sitting On Sellable Assets
In almost all law firms and GCs I’ve worked in the transactional activities are buried in the business, spread out across the service lines, and operated very differently. What Law Firms and GCs need to recognise – in 2012 and maybe 2013 at the latest – is that simple restructuring and aggregation of similar activities can create an asset that is, first, going to operate more transparently and efficiently and, second, could easily be sold to any of the highly liquid Legal Outsourcing suppliers.
COOs and leaders of the major law firms (examples below) have a once in a lifetime opportunity to realign how they deliver services while also unleashing an operation that, for a limited time only, will be of huge value to the LPO suppliers. This is where Outsourcing turns quickly into M&A and the valuations of the LPOs will trickle through to the law firms.
This is a complex subject to cover in a few hundred words, but it is too exciting and interesting an area to ignore. For those that dig deeper, real value will be unearthed.
(Baker & McKenzie, Skadden, Arps, Slate, Meagher & Flom, Clifford Chance, Linklaters, Latham & Watkins, Freshfields, Bruckhaus Deringer, Allen & Overy, Jones Day, Kirkland & Ellis, Sidley Austin, White & Case, Weil Gotshal, Greenberg Traurig, Mayer Brown, Morgan, Lewis & Bockius, K&L Gates, DLA Piper, Gibson Dunn, Sullivan & Cromwell, Cleary Gottlieb Steen & Hamilton) should