by Charles Christian
IT APPEARS that at least eight of the U.K.'s leading legal systems vendors are either up for sale or looking to dispose their legal I.T. arms to third parties. But if the discussions I have had with would-be purchasers are any indication, most are unlikely to find a buyer.
One problem: ludicrously high valuations of the companies. In the current depressed market, the most buyers are prepared to offer is five or six times annual earnings -- yet some suppliers seek valuations of between 12 and 30 times annual earnings.
A possibly bigger problem is that even if the price is right, many suppliers lack an effective "succession management" structure to run the business when founders retire. The result: Purchasers are only interested in talking to those companies where the current management is prepared to commit to staying on for a five-year buy-out period -- but most of them want out now!
Just in case any U.S. companies are thinking this situation could provide a useful opportunity to break into the U.K., there are also concerns that many of these suppliers -- who between them account for nearly 60 percent of the practice management systems in use in the U.K. firms today -- have substantial user bases still running older pre-Windows NT legacy systems. These include some very obscure versions of Unix, raising the prospect that any would-be purchaser will face awkward hardware and software maintenance and support issues.
Incidentally, while speaking at a keynote seminar at February's Legal I.T. 2001 event in London (yours truly was chairing the event) Andrew Levison, the head of Baker Robbins U.K. and European consultancy, predicted that the next 12 months will see a number of U.K. legal Web portals hit the wall. Levison said such services are doomed because they have no obvious business rationale and rely on advertising for their sole revenue stream.
LawyerLocator Launches in the U.K.
Martindale-Hubbell, a name well-known in the U.S. but only just appearing on the radar in the U.K., launched its new LawyerLocator service at the Solicitors National Legal Office Exhibition at the Birmingham National Exhibition Centre in March.
The new service builds on Martindale-Hubbell's Lawyer HomePages service, which has already been responsible for the design of more than 16,000 Web sites for smaller U.S. law firm. It now links to the LawyerLocator.co.uk search and marketing engine, to provide businesses and individuals with an easy method of identifying the law firms that best suit their needs.
Along with providing smaller firms with a professional approach to developing sites that are already e-commerce enabled, so they take instructions and payment online, Martindale say the benefit is the LawyerLocator element will help drive visitor traffic to their sites.
(Earlier this year American Lawyer Media Inc., in association with the iMark conferences and exhibitions group, acquired the Solicitors National Legal Office event and from next year will be running the event under its well-known LegalTech brand. ALM is the publisher of Law Technology News.)
Ninety-two percent of U.K. law firms say they are reluctant to adopt ASPs (application service providers), citing security concerns, according to independent market research conducted for legal systems supplier Keystone Solutions.
Keystone chief executive Graeme Frost says the study prompted his company has decided to delay the launch of an ASP offering -- even though Keystone has completed development work on an ASP version of its software, and is fully confident in the benefits to law firms of being able to lease or rent software.
Keystone will wait "until a move in market acceptance of ASP is detected," says Frost, who predicts the U.S. legal market is likely to be ahead of the U.K. in eventual acceptance of ASP.
The U.K. and European document management market has been stirred up by the arrival of a new face. The company, Meticulous Solutions, describes its namesake Meticulous system as a "high-function, cost-effective DMS, aimed squarely at small -- and medium-sized law firms."
The system will cost from approximately $300 per seat to buy (or $15 per seat per month to rent) with no hidden extras such as server licenses. There is also an ASP option on its way.
In terms of technology, users must have NT Server, 32 bit Windows on the desktop and SQL Server 7.0 however the software can handle both Word and WordPerfect.
The U.K.'s Legal Technology Insider newsletter has evaluated the software and while it has no delusions about competing with knowledge management systems, in terms of straightforward DMS functionality the Meticulous product represents a viable, bargain priced alternative to the Worldox, iManage and PC Docs systems. There is a free 30 day demo version available on the Web at www.meticulous.com.
The aforementioned Keystone is raising £11 million (approximately $17 million) via a fully underwritten share issue on the London Stock Exchange. In addition, Keystone has also announced an immediate cash placing to raise about $500,000 for the company. The funds will be used to strengthen the balance sheet and provide working capital to support the company's commercial operations.
With Keystone already the dominant systems supplier amongst the largest law firms in Australia and Asia, the company says it will focus its efforts over the next year on increasing its share of the U.K. legal I.T. market and rolling out the U.S. version of its software to its North American customers.
Since acquiring BISPoint Software last year, Keystone now has more than 180 U.S. law firms using the Javelan time-and-billing product. It hopes to convert those users to Keystone. The system is due to start shipping to U.S. firms in the third quarter of this year and a number of firms have already signed up for it under a "first mover" scheme.
They include Selman, Breitman & Burgess (Los Angeles); Balch & Bingham L.L.P. (Alabama and Washington D.C.); Christensen O'Connor Johnson & Kindness (Seattle); and Gordon, Thomas, Honeywell, Malanca, Petersen & Dahein (Tacoma and Seattle).
Keystone also is engaged in a major cost reduction exercise, focusing on the overhead cost structure inherited with the BISPoint acquisition and implementing measures to consolidate operations globally. It says that it expects, over the next 12 months, to halve the company's current $600,000-a-month burn rate.
CEO Frost predicts that the combined effect of the latest fundraising round, the cost reductions and a "more conservative" approach to business (after the rapid expansion of the past three years) will transform Keystone from a relatively small company with global ambitions, to a company with a strong balance sheet and a real international presence. Recent announcements also tease that Keystone "expects to sign two major contracts shortly."
Although officials remain tight lipped, market rumors suggest the two firms are both members of London's so-called "Magic Circle" law firms -- namely Linklaters & Alliance (where Keystone's competition includes the incumbent supplier ResSoft) and Clifford Chance (where Keystone is down to a two-horse race with Elite Information Systems Inc. ). At both firms Keystone is involved in a joint bid with Oracle Financials.
Charles Christian is the publisher and editor of the U.K.-based Legal Technology Insider newsletter and Legal Technology News.com ezine. He also is a consultant with American Lawyer Media Inc.'s Legal Tech shows, and a member of the LTN Editorial Advisory Board.