Reed Smith weighs up alternative business structure conversion for London office

Reed Smith is considering converting its London office to an alternative business structure (ABS) as the firm eyes up the possibility of joint ventures and profit-sharing arrangements with non-lawyer businesses.

The US firm – which would be one of the largest to date to make use of an ABS structure – is considering the switch to enable it to work more closely with third-party non-legal outfits, particularly in the consulting and technology spheres.

An ABS conversion allows law firms to bring non-lawyers into the equity and share profits, and Reed Smith is attracted by the potential of closer integration with teams or businesses run by non-lawyers that could offer something different to the firm’s clients. The ability to share profits would help it attract and retain senior staff on the consulting side.

Europe and Middle East head Tamara Box (pictured) said: “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. 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 it is ready to take advantage of opportunities as and when they arise. It is working with a number of external advisers - one of which is understood to be Deloitte – on the plans.

All Reed Smith partners globally are being consulted on the plans, with London partners first learning of the potential move around two months ago. One partner said: “All of the London partners have been raising a lot of questions. We want to make sure any reputational issues are addressed.”

Box added: “As we have progressed this opportunity, we have had some great feedback from our partners in London, which has helped our thinking. However, as it is a complex situation, we won’t be rushing into anything.”

While an ABS conversion also enables law firms to take on external capital or pursue a public listing, Box said that this is not something Reed Smith is considering.

The firm told staff about the plans in an internal announcement earlier today (28 November).

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 US practice innovation team led out of the firm’s Pittsburgh headquarters by senior manager David Pulice.

Reed Smith is also considering replicating its US records and e-discovery practice in the UK. In the States, the firm has a team of more than 70 lawyers providing such services, and it believes an ABS switch could present opportunities to build a similar offering for London clients.

A number of major UK firms have made ABS conversions since the Solicitors Regulation Authority began accepting applications in 2012. Many, such as Mishcon de Reya, Weightmans and Kennedys, have brought non-lawyers into their equity, while three UK law firms have now floated or set out plans to float - Gateley, Gordon Dadds and Keystone Law. Firms to have taken external investment via an ABS switch include Parabis and Keoghs.

In 2015, Cahill Gordon & Reindel became the first major US 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: “The way law firms are run nowadays is more like corporates. Partners have a say in the business but they have a management team that decides its priorities. 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.”