Where is the value?

The recent research on mergers prompts me to ask you a direct question: is your firm an attractive takeover target? Whatever your initial response, I have a second question: how do you know?

If you are looking to be taken over or for opportunities to expand through acquisition, what really matters in being an attractive offer. Where is the evidence that your firm will continue to have access to profitable clients in a changing and uncertain market? Past history is no longer a useful guide to a firm’s potential future performance, so what other measures can be used.

A major part of a firm's attractiveness is going to be the attitude of fee-earners and staff. To gauge that attitude, there is no substitute for seeing it at work in a firm over an extended period to understand how it generates value from, and for, its clients. As was have seen in the Haliwells example, a strong attitude can drive ambitious change and also end in disaster. Like talent walking out of the door, the twists and changes in attitude are only a guide, but not something you can measure.

One sure source of measurable value in a law firm is an actively managed database of past clients. To access that value takes marketing management, time and effort, but it is an essential part of demonstrating the firm’s ability to gain past clients' future instructions and therefore its potential value. That will become increasingly difficult as more organisations offer ‘legal’ solutions and past clients' attention is distracted by new legal offerings. As almost all recent consumer research has shown, satisfied clients often remain loyal to a firm. The challenge is to keep reminding them you are their solicitor. The client's next enquiry, whether it’s a matter you can deal with or something you pass to a trusted alternative solicitor, has a value that you should work towards retaining for your firm.

If you can do that then your firm will be seen as more valuable. To keep improving that value, consider what you are presenting as a value proposition to the market or a potential merger partner. The same approach helps highlight value when you ask questions such as: who is the customer, what do they want and how do I maximise my value to that customer? For a hypothetical example, although a very unlikely one, think of it like this: a businessman like Richard Branson decides to set up a national legal services business by buying one good high street firm in each area. How is he likely to look at the value in each firm? I would suggest he will want to see your firm’s past client database. Next, he will want to see how much you know about each client, recorded in a usable form in the database. Then he will want to see how much profit you plan to make from each of those client records in the next two to three years, alongside the planned costs of how you will achieve that profit. Almost everything else is of debatable value.