Why turning virtual engagements into ‘paid work’ is proving difficult for law firms
The immediate future for most businesses is fraught with uncertainty as the world grapples with the economic turmoil and other disruptions caused by the COVID-19 virus. Law firms are not exempt from this. Many of the law firms that we spoke to, indicated that before the crisis, they were on course to meet their projections for the year. They had positioned to increase, or in some cases, match their revenue for last year. But now, those projections are expected to take a significant hit, as they expect all collections to slow down. Ninety per cent of the lawyers we spoke to indicated that they had been unable to make collections since the lockdown began.
A partner in a mid-sized law firm, told the LBU that he expected litigation practice groups to be especially hard hit due to court closures and trial delays nationwide. Although the plan recently rolled out by the Honorable Attorney General of the Federation and Minister of Justice, Abubakar Malami, SAN are a step in the right direction, they will take some time to implement.
The Oil and Gas practice group is another area of legal practice that is expected to be hard hit, following the crash in oil prices. As many energy companies experience a drastic reduction in share price, suspend projects and slash capex, firms that service such companies will naturally see a significant decline in demand for services and even in payment of outstanding bills.
Whilst it is generally expected that mergers and acquisitions (M & A) practices will also experience significant decline in demand in the short term due to a halt in many deals, a recent analysis by Hogan Lovells suggest that unlike the previous recession, this time there is “a lot of capital on the sidelines waiting to jump in”. Hogan Lovells suggests that the economic disruption caused by COVID-19 in many industries could lead to “a significant uptick in M & A activities in the distressed space”. They however indicate, that this is unlikely to occur until the pandemic is brought under control. This view was also shared by many of the lawyers we spoke to.
Although many lawyers project that the economy is unlikely to rebound until a vaccine has been found with dire consequences for the legal industry, some are of the view that Covid-19 has also opened many opportunities which lawyers can take advantage of in the short term. A senior partner in one of Nigeria’s leading firm’s indicated during a recent webinar that many firms were beginning to get enquiries about estate planning and that it might be a practice area worth exploring in the immediate term by law firms. He further stated that because of the resort to various technology platforms by many businesses during the lockdown period and its aftermath, issues pertaining to intellectual property might begin to arise and there might be immediate opportunities for lawyers in the intellectual property law space.
Unfortunately, though many law firms say they are even busier than ever with clients seeking counsel across a number of novel areas; turning such engagements into paid work or longer-term engagements at this time is proving difficult. Even where the work is billable, most firms seem resigned to the fact that lawyers will not be at the top of the list for clients to pay in the months ahead.
This therefore appears to be the time for firms to invest in client relationships, hunker down and conserve cash to see them through the period and offer clients discounts to encourage payment now rather than later.
Whilst it is not clear how long the pandemic will last or how severe the economic fallout will be, there will be some winners at the end of the day. The question is, are you positioned to be one of them?
Even where the work is billable, most firms seem resigned to the fact that lawyers will not be at the top of the list for clients to pay in the months ahead.
Legal Market Outlook is an exclusive publication of BusinessDay Legal Business Unit (LBU). Mails to: [email protected]