Reed Smith is considering converting its London office to an alternative business structure (ABS) as the global legal giant examines the possibility of joint ventures and profit-sharing arrangements with non-lawyer businesses.
The Am Law 100 firm, which would be one of the largest U.S. firms to date to make use of an ABS structure, is considering the switch to enable it to work more closely with third-party nonlegal outfits, particularly in the consulting and technology spheres.
An ABS conversion allows law firms to bring nonlawyers into the equity and share profits, and Reed Smith is attracted by the potential of closer integration with teams or businesses run by nonlawyers that could offer something different to the firm’s clients. The ability to share profits would help Reed Smith attract and retain senior staff on the consulting side.
“We’ve been taking a very careful look at what the firm of the future looks like, and we are willing to be different in how we approach clients and what we can offer them,” said the firm’s Europe and Middle East managing partner M. Tamara Box. “We have to figure out what clients want, and that takes more than just lawyers these days.”
While no decisions have yet been taken, Reed Smith is keen to “future-proof” itself so that the firm is ready to take advantage of opportunities as and when they arise. The firm is working with a number of external advisers, including global accounting giant Deloitte, on the plans. All of the firm’s partners around the world are also being consulted, with London partners first learning of the potential move around two months ago.
“All of the London partners have been raising a lot of questions,“ said one partner who requested anonymity when discussing internal affairs. “We want to make sure any reputational issues are addressed.”
Reed Smith told staff about its potential London plans in an internal announcement on Nov. 28. While an ABS conversion enables law firms to take on external capital or pursue a public listing, Box said that those options are not currently under consideration by Reed Smith.
“As we have progressed [with] this opportunity, we have had some great feedback from our partners in London, which has helped our thinking,” Box said. “However, as it is a complex situation, we won’t be rushing into anything.”
The news comes amid a concerted innovation-focused push for Reed Smith, which last October launched an insight and innovation team led by Alex Smith, who joined from LexisNexis as the firm’s first innovation manager. The team focuses on helping in-house legal groups with operational transformation projects.
In London, Smith works with chief knowledge officer Lucy Dillon and counsel Siobhan Hayes, alongside an eight-strong U.S. practice innovation team led out of the firm’s Pittsburgh headquarters by senior manager David Pulice.
Reed Smith is also considering replicating its U.S. records and electronic discovery practice—one that is considered a market leader in Big Law—in the U.K. In the U.S., Reed Smith has a team of more than 70 lawyers providing such services, and the firm believes an ABS switch could present opportunities to build out a similar offering for clients in London.
A number of major British firms have made ABS conversions since the U.K.’s Solicitors Regulation Authority began accepting applications in 2012. Many firms, such as Kennedys, Mishcon de Reya and Weightmans, have brought nonlawyers into their equity tier, while three U.K. firms have now floated or set out plans to float—Gateley, Gordon Dadds and Keystone Law. Other firms to have taken external investment via an ABS switch include Parabis and Keoghs, the latter of which once unsuccessfully bid for parts of the former.
In 2015, Cahill Gordon & Reindel became the first major U.S. firm to register its London office as an ABS, a move the firm said enabled it to “avoid creating a two-partnership trust.”
One corporate partner who has previously advised on a law firm ABS conversion said that law firms today are increasingly being run more like corporations.
“Partners have a say in the business, but they have a management team that decides its priorities,” the partner said. “In many ways, the model of an ABS can match more what corporate clients have—and that is where law firms are moving in terms of future culture and structure.”