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The last decade has seen a period of unprecedented change in the way the legal profession presents itself in the market. Individual firms’ commitment to, investment in and understanding of professional marketing has grown dramatically. Firms increasingly pride themselves on their knowledge of particular market sectors rather than relying on their technical expertise within purely legal disciplines.The myriad glossy brochures from City law firms stress how well they understand their clients’ business objectives, as well as promise commercial added value and a service focused on clients’ particular needs. They outline the many benefits clients can expect: no reinventing of the wheel, less partner supervision required, direct cost savings to the client, and so on. But how far does the training of lawyers help to deliver these promises?Lawyers are some of the most highly respected professionals in the market. The Law Society ensures that new entrants receive a thorough grounding in legal theory and practice at accredited institutions; once they have passed their examinations, they are required to go through additional legal training within the firm they join. By the time assistant solicitors at the major firms are assigned to their departments, they are probably some of the best-trained legal professionals in the world.Although there has been some emphasis more recently on general business development and soft skills training, the bulk of legal training is centred on legal theory and practice. As far as business training is concerned, apart from a basic accounting course, English solicitors study law. As assistant solicitors head towards partner level in a City law firm, there is additional training, but it becomes increasingly narrow in focus within the area of law in which they have decided to specialise. Although it is not impossible, it is relatively uncommon, particularly in company/commercial practices, for solicitors to move between major areas of the law as they become more senior. While technical skills are crucially important to the reputation of an individual lawyer, it has long been a common criticism of lawyers that they lose sight of the purpose of a transaction for the sake of the ‘legal dance’. On the other hand, it is recognised that one of the best recommendations is for a lawyer to be described as commercial or as someone who understands the client’s business, hence the repeated reference to this in the literature of many firms.Why are law firms so reticent about undertaking serious non-legal training, when enhanced commercial skills could have such a positive effect on how their lawyers are viewed? In an increasingly competitive legal market, a firm’s commitment to business-oriented training could prove a valuable means of differentiating a firm from its rivals. Such a marketing benefit could quickly recoup the investment and provide a direct input into profitability and profile.Financial institutions have become more open-minded in their view of training. Dutch group ING, for example, provides training sessions to help senior bankers understand the intricacies of insurance and fund management businesses. Insurance executives do the same in banking and fund management. This is considered highly appropriate where there is the potential for cross-selling of products. At the new entrant level, graduates are often given a broad understanding of the products and services of the institutions they join.In addition to understanding other parts of the group, bankers are often trained in tax, law and compliance as well as the specific industry analytical skills necessary to understand the clients they work for. It has been understood traditionally that lawyers involved in transactions will develop the product knowledge while working on the transaction or will have gained this knowledge in prior transactions. British banks previously adopted a similar approach when dealing with the intricacies of the rules of the stock exchange and the takeover code. However, the arrival of the bulge bracket investment banks from the US saw an upsurge in demand for real regulatory training, much of which the major law firms supplied for free as part of their relationship-building strategy. This has helped the big US houses accumulate the skills necessary to compete head-on with the UK domestic merchant banks and, as we have seen over the last few years, vie successfully for business against the long-established investing institutions.With solicitors, the intention must be to train them in the skills most appropriate to support their clients. The two key areas are probably valuation techniques and product skills.It is unlikely that a lawyer will need the same detailed knowledge as an investment banker. However, lawyers might need to have a broad understanding of the methods applied by the investment banker, in particular, the assumptions upon which they are made. In most merger and acquisition agreements, the investment banker must opine upon the fairness of the transaction. This fairness opinion is usually based upon the valuation of the target company. Valuation techniques, whether comparable company, discounted cash flow, economic value added or by any other method, are now among the standard tools of the investment banker, yet most lawyers have limited knowledge of them and thus will find greater difficulty in documenting the fairness opinion. Equally, when it comes to more esoteric investment banking products, lawyers need to have more than a passing understanding of products such as securitisation, equity derivatives and the ever-increasing array of capital markets instruments. The pace of innovation in these product areas raises a range of issues much wider than the obvious areas of documentation and tax. So much of investment banking today involves risk analysis and measurement, and it is the risk in these products that clients require their legal advisers to at least contain, or at best eliminate. In particular, more attention is being focused on the topics of suitability and the enforceability of obligations under these contracts.Clearly there is no call for a partner to train in a field in which they are probably expert; this sort of training is much more likely to be a requirement for the assistant solicitors. Giving solicitors below partner level a grounding in core investment banking products will help them be more productive in drafting and negotiating contracts. This should allow partner time to be freed up to negotiate the transactions. If this can be achieved, not only will partners be able to work more effectively, but profitability could be enhanced. Lawyers who have more commercial understanding of their clients’ business will speed up documentation, require less partner supervision and give the client more confidence in the capability of the firm as a whole. The challenge for the professional trainers is to ensure that their training programmes help to deliver these promises.Enhancing the productivity, profitability and reputation of the firm should be worth a reasonable investment. It could also provide firms that make such an investment with a tangible competitive advantage. Peter Wisher is CEO of BG Training, a subsidiary of the Baines Gwinner Group.

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