Regional law firms need to sacrifice some of what has been sacred to survive

Regional UK law firms are under threat. The threats they are facing are twofold.

First, the increasing internationalisation of legal work has left all but the largest multinational firms exposed, requiring them to reassess their role on this new global stage. In part, this reappraisal has led to the emergence of legal process outsourcing, with regional firms using their lower cost base as leverage to pitch and win work that might previously only have gone to the bigger legal players. It has proved to be a win-win situation for both the firms involved and their clients. The firms are able to provide the same quality of service as City firms, while enabling greater partner involvement in transactions.

The second and equally big threat ?to regional firms comes from alternative business structures (ABSs). These ?are targeting consumer services such ?as personal injury and conveyancing, ?with some now also expanding into ?other areas.

It has become increasingly clear that regional firms need to find either a way of competing with ABSs, or move into niche/sector-led work where they can provide an added-value service that clients are willing to pay for. In my experience, savings in bulk and process only go so far. A lot of clients don't just want a conveyor-belt service, and are willing to bear the cost of something more bespoke.

Is consolidation key?

Consolidation has become a buzzword in the current legal market. Whether it be between two regional firms (such as Bond Pearce and Dickinson Dees) or between ?a London firm and a regional firm (such as Thomas Eggar and Pritchard Englefield), many see it as the answer to the current volatilities in the market.

While growth is certainly good, the challenge remains to grow while retaining control of your overall business strategy. ?A merger can work, provided there are?good synergies. There is no doubt that, ?if you manage to find the right merger partner, you can access new markets ?and make yourself more attractive ?to the highest calibre lawyers, who ?might otherwise gravitate to a City ?or national practice.

However, I don't believe that this is ?a strategy that should be pursued at all costs; the financial standing of any potential merger partner must always be ?a priority, along with a proper assessment of what the merger benefits will be.

There are certainly alternatives. Strategic alliances with other law firms can often work just as well, if not better. The advantage of an alliance are that it involves less cost and risk to all those involved. Cripps has had an alliance with Hogan Lovells for over ten years, enabling us to work closely with PRUPIM. This has had major benefits for all involved. Hogan Lovells has been able to provide a much broader-based service to one of its longest standing clients, while Cripps has been given the opportunity of showcasing itself to one of country's largest institutional investors.

London calling

Some firms see a fixed London ?presence as the only way to grow. ?While London is certainly the hub of a lot of legal and commercial activity, a firm outside of London does not need to suffer as a result of this.

At Cripps, 40 per cent of our work comes from London. While we have a London presence, we do not believe ?that it is the key to our continued national growth. Being in the right location is certainly crucial; in our case, being ?based only 40 minutes by train from the capital has allowed us to tap into London activity, while being able to continue to service the legal needs of the southeast's affluent population.

Evolve or perish

All commercial entities have to continually evolve in order to remain relevant. For law firms, it is important to find new ways of delivering legal services.

There is a lot to be learned from ABSs in terms of their structure and their client charging models. The time has come for all law firms to respond to this, driven by the needs of their clients, and be more creative in the services they offer, how they deliver these services, and how they charge for them.

While partnership and LLP models still have much to commend them, one thing is certain: we all need to develop a harder commercial edge. Inevitably, this will involve sacrificing some of what has been sacred to us. It's a sacrifice not all will be willing to make.

Gavin Tyler is managing partner at regional UK law firm Cripps Harries ?Hall (www.crippslaw.com)