Pioneers thought they had a game-changer, but this profession is a tough nut to crack.
The mistake we legal commentators have always made is to treat alternative business structures as something new.
Sure, the addition of private equity money, entry to the stock market and competition from accountants/trade unions/local authorities are all novel concepts.
But the entities themselves face just the same pressures and dangers as any so-called traditional firm.
The ABS tag could never guarantee immunity from the realities of running a law practice. Different business model, same problems.
Earlier this year, I described initial ABSs as canaries down the mine of legal innovation. Some of those feathered fellas are now emerging, spluttering and warning interested onlookers not to venture inside.
Today administrators announced the break-up of one of the most prominent members of the ABS club (even referred to rather misleadingly as a ‘Tesco law' firm), Parabis Group.
Parabis was unusual for a couple of reasons: it had both claimant and defendant firms under one umbrella, and it was the first to attract significant investment from a private equity house.
The funding was new but the problems apparently weren’t: Parabis operated in a personal injury sector convulsing from reduced fees and government tinkering.
Similar problems have beset another of those ‘pioneers’: Slater and Gordon. The firm is listed on the Australian stock exchange and used the cash raised to mount an assault on the UK legal sector, culminating in the eye-wateringly expensive deal to relieve Quindell of its professional services division.
But with an investigation over accounts reporting and an uncertain claims industry dragging down the company’s reputation and revenue respectively, the share price is in freefall.
From a six-month high of $6.49 per share in June, the value is now $2.15. Today alone the shares’ value has plummeted almost 20%.
Slater and Gordon has every chance of turning things round but it will only be through the same good management that all legal businesses require, not the ABS licence.
It would be silly to start dismissing the importance of the liberalisation of the legal market on the basis of some high-profile struggles. There is no question that serious competition is on the horizon and law firms will have to be fleet-footed to meet that challenge.
But equally it is foolhardy to expect to make a quick buck from this profession. There are too many meddling ministers, over-bearing regulators and unpredictable elements to ensure that. No framed ABS certificate is going to guarantee success.