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Conclusions

The way the market for legal services will develop beyond the introduction of ABS is as yet an

unknown quantity. In other deregulated and fragmented markets, the introduction of external

capital and consolidation of existing players have been key features. However, law firms have a

number of features and peculiarities that may as yet make their market an exception.

Many partners in existing independent law firms will naturally resist any attempt to usurp their

authority or to appropriate their equity. Retaining equity ownership will of course remain attractive,

and partners – as business owners – are likely to want to keep their say in how their business is run.

However, the forces that we believe will transform the profession will be hard to resist. Over and

above the opening up of the market, globalisation and low-cost competition, complemented by

technological change, will bring strong pressure to bear on firms to change their business models.

Most of the interviewees we spoke with were confident that the market for their services would

survive these changes intact. The questions we most commonly encountered were focused on how

firms could respond to external changes, in order to survive and prosper along with their market.

The introduction of external capital into the market, or lack thereof, was an issue on which there

was much disagreement. Opinion was divided between those who predict an aggregation of smaller

firms, and others who believe that external investment will be concentrated higher up the market.

Our view is that both are likely in the medium term. It will only take a small number of investors to

change practices throughout the market and, ultimately, those firms that embrace the need to

retain and reinvest capital will succeed where others fail.

Business models must change if firms are to retain their independence. The overwhelming majority

of interviewees identified technology as a crucial factor on the independence agenda. New models

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