The recent announcement of EY’s proposed acquisition of one hundred percent of the shares in Riverview Law (closing at the end of August, 2018) has elicited a number of different responses around the globe all speculating on what this transaction means for the future of legal services? Was this a lifeline to Riverview Law? Will clients really want legal and accounting to be done by the same firm? Aren’t the Big Four just marginally less clunky than Biglaw? Will BigLaw be worried? Some of those comments are here.
But like all fast-breaking stories, there is some fog. So it’s helpful to look at the evolution of Riverview Law to this point because Riverview Law has already taught the market some important lessons. The precursor to Riverview Law was AdviserPlus Business Solutions, which created automated workflows to guide human resource decisions as part of outsourced HR solutions. Soon clients were asking the obvious, “When are you going to move into legal?” When England and Wales permitted non-lawyer ownership of law firms at the end of 2011, Karl Chapman and other investors in AdviserPlus saw huge green fields in legal services. It was a once-in-a-lifetime opportunity to use all the experience garnered from operating AdviserPlus and apply that knowledge to legal services. Riverview Law came into being in early 2012. (Let that sink in for a moment. Riverview Law has not yet seen its 6th birthday….)
Riverview Law had no clients and was not interested in luring big name lawyers (and their client base) to the operation; it was going a different route. “Riverview is capital-driven, not income-driven,” Karl told me. “So, we’re interested in long-term sustainability to get that capital back. This drives very different behaviour in terms of how we reward our people and how we invest in technology. It also helps us create a team ethic, rather than an individual ethic.” It also resulted in a propriety mix of people, process and technology that delivers a unique client experience that is hard to copy. Clients soon began to trickle in – attracted by the unique customer experience, not because of a particular lawyer.
Thomas Alan’s recent piece in Legal Business speculates that Riverview Law’s revenue has risen from £200,000 in year one, to £10,000,000 in the last fiscal year. I’m hard pressed to recall any traditional law firm starting from zero and organically achieving that kind of growth in only five years – all of which suggests that Riverview’s structure and operations have a number of advantages over those of a traditional law firm. Riverview Law has also lead the way in normalizing the concept of managed legal services in the market place. Nonetheless, Riverview Law management will confess that being acquired or integrated into a large organization was not part of their long-term strategy – the culture and nature of Riverview Law would simply reject it.
But, in early 2017 Karl Chapman met Cornelius Grossman of EY Law, while sitting on a conference panel together. The meeting lead to further meetings and discussions about where the market was going and how their businesses were addressing different needs. Interestingly, EY Law was granted Alternative Business Structure status in 2014, the same year Riverview Law was granted its ABS licence. Those discussions eventually lead the teams at Riverview Law and EY Law to work together on joint bids – there seemed to be a cultural and a strategic fit.
Eventually, tension began to build: “Will they, or won’t they?” Followed by the inevitable, “Why wouldn’t we?” So, over the past 12 months both sides have been spending a great deal of time working out what type of arrangement would make sense for each. It’s my understanding that Riverview Law is not being acquired as a subsidiary to EY Law, nor as a subsidiary to EY UK, but rather, it’s being put into a vehicle that allows it to grow globally as part of the EY global family and will be known as EY Riverview Law. As one Riverview Law employee later said at the townhall meeting to announce the acquisition, “We’ve just created the industry’s first ‘safe disruptor’…..combining the innovation, creativity, speed and culture of Riverview Law with the assurance, global reach and scale of EY.” This is quite different from the Deloitte Conduit experiment in Canada that lasted for only a short period of time; the Big Four in North America operate under stricter regulations around legal services and are far less aggressive in the legal services market than their cousins on the eastern shores of the Atlantic.
And what about Kim Technologies? The workflow and process automation platform configurable by individuals with no IT or development expertise, that was formed out of a US technology acquisition, incubated by Riverview Law, then spun out in 2017. Kim is now solely owned by the founders of Kim, Karl Chapman and other shareholders, including DLA Piper (the firm as a whole). As part of the Riverview Law acquisition, the new EY Riverview Law will sign a 10-year non-exclusive agreement to use Kim’s software to deliver managed service and project solutions to customers on a global basis.
Now back to some of those questions. Was this a lifeline to Riverview Law? Ah, no. EY has acquired a profitable and scalable platform that it can use to scale globally – more quickly and more effectively than either Riverview Law or EY can do on their own.
Will clients really want legal and accounting to be done by the same firm? Apparently so. EY Law already has over 2,000 lawyers globally, and the remainder of the Big Four have thousands more. Besides, the mantra of BigLaw and global law firms has always been a client’s desire for a “one-stop shop.”
Aren’t the Big Four just marginally less clunky than BigLaw? My limited experience with the non-EYs indicates that they can be. We’ll have to wait and see if EY is different.
But what I find more interesting is the lessons that can be already learned from the Riverview Law journey:
Business people use ideas, systems and processes from a non-legal business to create new legal business.
Then new legal business:
- is run by business people, not lawyers;
- has a mix of investors who are not all lawyers, and who do not expect an immediate return on investment;
- retains earnings and invests them for the long term;
- creates unique customer experience that’s difficult for incumbent legal service providers to copy;
- attracts customers based on a unique customer experience that does not walk out the doors of the business every evening;
- does not attract customers based on personal relationships with individual lawyers who could leave at any time;
- experiences massive growth over first five years of existence; and
- is bought by Big Four firm because of the unique and successful mix of people, process and technology which creates a tangible, stable investment.
We can argue and speculate as to what these mean for legal services over the next ten years, but what is undeniable is that the ownership and operational model of Riverview Law is a success and worthy of review – and perhaps emulation – by new players in legal services, or by traditional law firms seeking to set themselves apart.
The other Big Four firms will carefully watch how EY Riverview Law plays out, then make acquisitions of their own.
BigLaw will continue to ignore it.