Most people are aware that the recent EU Gender Directive banning gender discrimination has generally resulted in higher life assurance premiums for women, and lower premiums for men.

Few are aware that the directive has also had the effect of hitting men’s annuity rates hard. You may already know that you can shop around for the best annuity rates, but did you know that lifestyle and health can make a significant difference to the income you receive? Although one in two people are eligible, fewer than one in four apply.

Whether you have already unlocked your pension funds and are in a Drawdown pension, or have not yet touched them, you may be able to benefit.

Contact sally.lockey@taitwalker.co.uk or Geoff.cavanagh@taitwalker.co.uk if you want to know more.

In the final installment of a series of blogs looking at mergers in the legal sector, Tait Walker’s Simon Brown, explains how the merger process works and gives her top tips for legal mergers.

Now that you’ve gone through the process of preparing your law firm for a merger, you reach the crucial stage of actually making it happen.

Mergers in the legal sector tend to fall into one of three main merger types each with its own set of challenges.

Different types of legal merger

There are mergers where a small firm gets swallowed up by a bigger firm. This tends to involve the sale of the clients and the transfer of staff to the larger firm, with the partners in the smaller firm possibly leaving the merged practice, or perhaps working in a consultancy capacity to ensure a smooth transition.

Then there are what I would call true mergers which involve two or more firms of a similar size and strength coming together and taking a merged name. These are more difficult as they involve two distinct groups that must be integrated. Challenges here include how two different cultures or ways of working will come together as a successfully merged practice.

Then there are mergers between different types of practices, such as between a partnership and a limited company. This presents questions over what is the right type of structure for the two practices to merge into.

Simon Brown’s tips for legal mergers

While no two mergers are ever the same, they all share common traits and there are some key pieces of advice that will serve law firms well in most merger situations.

Here are some top tips for a successful merger:

• You have to know in advance whether there is synergy between the merging firms. Identify shared values and goals at the outset of the process.
• If there is no existing relationship between your firm and the merger target, consider asking a third party advisor to make the approach on your behalf. This will enable the matter to be handled sensitively and discreetly.
• Identify potential sticking points early and have frank conversations at the beginning of the process. If some issues are going to be insurmountable then it’s best to walk away at the beginning than for the merger to fall at the final hurdle.
• Appoint a project manager to oversee the merger. This will allow you to keep the momentum of the merger process going and allow fee earners to focus on servicing client work. Having a project manager may enable the initial due diligence to be conducted in house.
• Similarly, set action points and deadlines for the due diligence process to stop it grinding to a halt.
• Ensure any potential issues affecting the merger go in the heads of terms document. This will help when it come to discussing indemnities and guarantees.
• Where possible, communicate effectively with staff members throughout the process to put people’s minds at ease and quash rumours.
• Plan well in advance for what will happen when the merger becomes official. This will involve a quite intense period of aligning cultures and working practices.

For more information and advice on any of the matters raised in this blog, please contact me on 0191 285 0321 or simon.brown@taitwalker.co.uk  

In the second in a series of three blogs looking at mergers in the legal sector, Tait Walker’s Simon Brown explains how law firms can make themselves an attractive proposition for other firms.

Once a law firm has decided that a merger is the right option for them, this is just the start of what can be the long process of ‘getting their house in order’ and making the firm as attractive as possible to a merger scenario.

There are number of issues to tackle here, but they will usually fall into one of three areas – staff, overheads and assets.

Scrutinising staffing structures

The knowledge that law firms really need to have when it comes to their staff is who is producing what – which teams are working flat out and which individuals may just be giving the appearance of being busy.

It’s important to have accurate management information to back this up. You need to know the cost structure behind every piece of work, how much is being billed, who are the main fee earners, and so on. Is client chargeable time being recorded effectively and is there a need to invest in better systems and procedures, such as case management software?

Only then can you make informed decisions on cutting out the deadwood and streamlining the firm accordingly.

Reviewing overheads and getting better value

You will also have to look at all other overheads across the business. Is it cheaper to outsource some functions such as HR, IT, marketing and payroll?

The profit and loss account needs examining in great detail so that you can determine how to maximise profits by reducing unnecessary expenditure or achieving better value for money on that expenditure.

Again, systems and procedures will need reviewing and bringing up to scratch. Do you have the right financial and reporting systems in place? It may require some investment to achieve this, but it’s a case of looking at the bigger picture and getting your business to a point where it is on a sound financial footing and is managing risk appropriately.

Recognising where the value lies in your firm

The advice I give to firms considering a merger is to have a think about what would go in a sales memorandum for the practice.

This means that when you’re having these discussions in the future for real, you know where the value is in your firm and how this will be communicated.

For example, I recently advised a traditional law firm where the two partners were looking to retire and sell their firm to a larger, more specialist law firm. On the face of it, there wasn’t much value in the deal for the larger firm. However, I helped the smaller firm identify the value it held in its wills bank, namely a list of potential clients and future probate work. It was also clear that the firm had some longstanding client relationships that were of value to the larger firm.

In the end we managed to get a good deal for the retiring partners, who are being retained as consultants to introduce the larger firm to some of the people who make up this valuable client list.

These are just some of the issues that need to be thought about when considering a merger. Look out for my next blog in which I’ll be discussing how the merger process works and my top tips for legal mergers.

For more information and advice on any of the matters raised in this blog, please contact me on 0191 285 0321 or simon.brown@taitwalker.co.uk

In the first of a series of three blogs looking at mergers in the legal sector, Tait Walker’s Simon Brown, looks at the issues driving an increase in mergers.

Law firms are being forced to ask themselves some tough questions as increased competition and other legislative changes put the squeeze on parts of the legal sector.

One of the big questions for firms in this position is whether they should consider a merger. Three key drivers of this are retirement and succession planning, the need to diversify, and the wider issue of risk management.

Retirement costs may force a merger

The sudden need to consider a merger is an issue I see time and again in traditional practices with an ageing partner group and where there is a lack of new blood to take over the firm.

The days of law firms waiting for someone to come and buy them out have gone as increased competition erodes the value in many traditional practices. This is coupled with the trend of lawyers leaving firms to start up their own practice, rather than buy into another firm and take on all that overhead and risk.

Some firms in this situation plan simply to shut the door when they retire, but for many the costs of making staff redundant, dealing with dilapidation issues on the building, and taking out run-off insurance cover are just too high. This makes a merger much more sensible.

The need to diversify 

Then there are the firms who may wish to examine a merger to reduce the risk inherent in the sectors they operate in. If we look at a traditional high street law firm, its work is likely to be higher volume, lower margin work, such as conveyancing and will writing, which is being threatened by new entrants to the market.

Again, the option of going in with another firm with more specialist services, where they can benefit from better economies of scale, is suddenly very appealing.

The big question here is how will they make themselves attractive to a potential merger firm? How do they convey where the value is in their firm and what their USP is? I will come onto this in my next blog.

Identifying a merger need through risk management

It’s not just diversification that drives mergers. The wider issue of risk management, where firms look at how they can reduce risk now and in the future, is also a factor.

Very often this process throws up the possibility of a merger as firms implement better housekeeping practices and make themselves more attractive to other firms.

I will talk in more detail in my next blog about how law firms can put their house in order and boost their chances of a successful merger.

For more information and advice on any of the matters raised in this blog, please contact me on 0191 285 0321 or email simon.brown@taitwalker.co.uk

What could be the most important piece of information for the North East, relating to corporate tax wasn’t in last week’s Budget.  It was a note of proceedings in the House of Lords relating to the proposed reduction of the corporate tax rate in Northern Ireland to 12.5% http://www.publications.parliament.uk/pa/ld201213/ldhansrd/text/130318-0001.htm

The logic behind the proposed reduction is strong and is well supported by businesses and politicians in Northern Ireland.    Having a physical border with the Republic of Ireland where a 12.5% corporate tax rate has existed for many years, has put Northern Ireland at a competitive disadvantage for attracting investment, it has also enabled the population to see at close hand what benefits a low tax rate can bring.

I have to declare a conflict of interest at this point, I grew up in Northern Ireland and visit family regularly there.   However, I have been in the North East for twenty years and so have a very strong affinity with our region (not least because my wife is from Cramlington and Tait Walker employ more than 100 staff in the North East).   So whilst I can see both sides of the argument I know where my loyalties have to lie!

Purely as a corporate tax adviser, I believe the outcome of such a change in favour of Northern Ireland could be highly damaging to the North East if some form of compensatory measures are not provided.

As an adviser, if I had to recommend to an overseas based investor the choice between two UK areas with similar strengths (educated work force, similar house prices, similar average wage, deep sea ports for logistics and good connections by air) then the region with a tax rate which is more than a third lower would be my choice, every time.  Even worse, I would also have to advise my existing clients in the North East if they wanted to set up a new business then the North East may no longer be the ‘financially sensible’ choice.

What could make matters worse is that it is evident from the proceedings in the House of Lords, where Northern Ireland go, Wales and Scotland are likely to want to follow.   So we could find that we become effectively priced out of the market for inward investment.   Scotland already has powers to adjust income tax and stamp duty rates, so in the imminent future we ourselves could find that we border with a devolved assembly (or even one outside the Union) with significantly lower taxes than ours.

And for the avoidance of doubt I am not saying the answer should be “no” to the request from Northern Ireland, rather the implications for the North East need to be properly considered and measures to rebalance the region also taken into account.   It isn’t just me who thinks this, for a concise summary of the issues and how the North East could  suffer, it’s worth reading the following from the Wilberforce Society of Cambridge University http://thewilberforcesociety.co.uk/wp-content/uploads/2012/09/TWS_Corporation_Tax_NI.pdf

Author: Alastair Wilson, Tait Walker

We weren’t expecting any great surprises in the spring Budget and George Osborne confirmed from the outset that his proposal would be fiscally neutral. However, there were some promises of tax cuts in the future, the headline changes being:

£10,000 personal allowance from April 2014

A new £2,000 Employer Allowance from April 2014

20% rate of corporation tax for all companies from April 2015

Mr Osborne also hopes to stimulate the construction industry with a new Help to Buy scheme. This will include loans for buyers of new build houses starting in 2013, and a new mortgage guarantee scheme starting in 2014.

The main changes affecting businesses are outlined in the following blogs.

Corporation Tax

Research & Development

Employment TAXES

Interest free and cheap loans

Family Taxes – Childcare Scheme

EMI Schemes and Entrepreneurs Relief