NEWLAW is here

Article in BizNis Africa and Polity Online Publications

There has been much merger activity amongst the legal giants of the world and it is no exception in South Africa where the legal market has become increasingly competitive.

With firms such as Bell, Dewar and Hall, John & Kernick and Findlay and Tait, who all used to be well-known in legal circles, no longer existing and Deneys Reitz merging with global firm Norton Rose, which then merged again to create Norton Rose Fulbright, Webber Wentzel forming an alliance with magic circle firm, Linklaters, Baker McKenzie taking over the team from Dewey Leboeuf and launching in Johannesburg, Routlege-Modise first merging with Eversheds and then more recently with Hogan Lovells and Eversheds tying up with Mahons Attorneys, it is fair to say that the large law firm market is becoming decidedly crowded.

BigLaw has long established itself in South Africa and it is expected that this will continue in 2014 with more international law firms either setting up their own offices or merging with local firms.

This is especially true for those firms wanting to access new markets in Africa but not having the local know-how and therefore needing to merge with established firms on the continent. The result is massive consolidation at the top end of the legal services market with some even predicting the emergence of a global “Big 4” law firms, similar to the accounting profession.

However, Biglaw has long been in crisis worldwide and the message, for some time now, has been for the larger law firms to adapt or die.

This message will continue to be even more relevant in 2014 and onwards particularly with the emerging trend towards NewLaw. NewLaw is a term coined by Dr George Beaton, an ex-South African associate professor at the University of Melbourne who has written at length about disruption of the legal service industry.

Basically, his argument is that law firms operate as a hierarchical partnership pyramid where lawyers churn the hours and fees in the hope of making partner and one day sharing in the partnership profits. It is a model that has not changed much in a century and arguably pits the interest of the firm against that of the client.

The global economic downturn has worked against these old style law firms, placing pressure on their fees. It has also given impetus to the growing number of alternatives to the traditional law firms.

These firms are different to traditional law firms in almost every respect other than the use of legally qualified and skilled professionals.

They focus on process and efficiency, not hours billed, have flexible working arrangements, deploy disruptive technology and charge client’s fixed fees. There are an ever increasing number of these service providers in the UK, USA, Canada and Australia with some of these countries enacting legislation to encourage their development.

While international interest resulting in mergers, consolidation and associations is fairly old news in South Africa now, it is clear that Africa will see an increasing interest in NewLaw with clients becoming more demanding of transparency, affordability and no longer wishing to be held hostage to those unknown billable hours.

The future is therefore bright for tech savvy companies with catchy names, innovative business models and attractive fee arrangements that are looking to mop up a large portion of the legal service market by appealing to all but those who need specialised skills and are willing to pay high hourly rates to secure them. Newlaw is here.