Law firms looking to exit personal injury (PI) should ignore the “fevered environment” which has created the idea that small law firms need to sell up quickly and instead spend more time considering whether they are better off running down their cases, it was claimed yesterday.
Lesley Graves, managing director of PI consulting law firm Citadel Law, said: “Contrary to popular belief, it is still a sellers’ market if sellers would only realise the true value of their work.
“If there is no value in PI, why are so many in the sector grouping together to swoop in and make a steal? New business models have been created on the back of LASPO and ‘exit specialists’ are appearing almost weekly to value PI work to feed a growing number of large acquisitive buyers with deep pockets.
“In most situations, a measured trade-out of PI will make a law firm more money; keeping the maximum return on investment in-house is better than selling if you can.”
She said Citadel Law recently advised two law firms looking to exit PI and focus on other areas of work. The lower-value work that made up the vast bulk of their caseloads was likely to be completed within 6-18 months, and the rest in up to 24 months.
“While many might consider a quick sale so that they can move on with their strategy, my advice has been for the firms to consider the costs of motivating employees otherwise losing their jobs within three months, and instead having a 9-12 month period to work at the cases, provide the highest client service and as a result, generate fee income in-house that is likely to provide a greater return on investment than selling for say 40p in the pound and paying redundancy and other associated costs.”
In these cases, given that the firms wanted to stay in business, they had their market reputation to consider, Ms Graves added. “Shipping their clients out to another firm for a cash value may not sit well with a consumer of legal services. I’m not sure firms could get away with that if the client was a large corporate rather than a consumer.”
Even when a sale is the right approach, she advised that firms need to be confident in the true value of the PI work in their firm before they make a decision.