Six law firms have joined the panel of a company making deals to allow others to leave the personal injury market.
Simpson Millar – shortly to be acquired by Slater & Gordon – Colemans-ctts, Antony Hodari, Edwards Hoyle and Grindeys are all on the panel of Recovery First, which allows firms to sell to multiple purchasers and maximise the value of their work in progress if they are happy to wait until the case conclusion.
For firms which do not want to wait for their cash, Neil Hudgell Solicitors – which runs the Webuyanyfiles website – is also on the panel.
Recovery First managing director David Johnstone – who has a background in law firm practice funding at Devonshire Capital – said firms need to consider entering into sale and purchase arrangements involving a deferred consideration as opposed to an immediate cash sale, which is unlikely to generate more than 50p in the pound of WIP at the very best.
He argued that many small firms “may not understand the financial model they’re operating” and that unless they invest heavily in systems and “deskill”, they will no longer be able to make a profit out of personal injury work. They also need to be “much better at risk assessment” – while a decade ago firms could make a profit if only three cases in 10 won, that is emphatically no longer the case.
Mr Johnstone said firms are seeing that an asset they had on 31 March is “being diminished, wasted on lifestyle costs of both proprietors and staff, inefficient operational processes and at the same time not being replaced by new work of the same value”.
He said large caseloads could be split in to manageable groups across several firms, spreading the risk for the exiting firm and at the same time having in place an administration system to oversee all aspects of the process for the life of the process – in any case, Recovery First can arrange for the transfer of caseloads to at least four firms, avoiding successor practice issues and many of the other issues that do justify the heavily discounted sale prices that are the current norm.
He said the sale prices currently being achieved can rapidly be matched on a deferred sale agreement basis as the book of cases settle, with everything thereafter being a bonus.
The operations director is personal injury solicitor Nicola Klimkowski, who has previously worked at north-west firms Mace & Jones (as was) and Duncan Gibbins, and legal expenses insurer LAMP.