If you’re not already familiar with Practical Law Company (PLC), now isn’t a bad time to get acquainted with their services. Given the grim economic climate, clients are demanding value and efficiency from their law firms — which PLC can help maximize.
Do you find yourself overwhelmed by the prospect of running a closing, afraid that some small but crucial task will fall through the cracks? Are you confused about no-shop provisions — and wasting hours on background research that doesn’t tell you the nuts and bolts of drafting one? PLC can help.
Practical Law Company launched in 1990 in the U.K., where it has been operating successfully for almost 20 years. Now they’re crossing the pond, launching services aimed at the U.S. market. Here’s a good description of what the company does, from Am Law Daily:
[T]he company developed a set of Web-based tools meant to help transactional lawyers work more efficiently. PLC created — and continues to update — practice notes, document templates, standard clauses, deal checklists, and tools that lay out the basics of dealmaking for junior associates.
Initially midsize firms signed on. Today, 99 of the top 100 firms in the U.K. — including the Magic Circle firms — use PLC. The company’s pitch is that its tools not only help junior lawyers use their time more efficiently, they say their updates keep partners abreast with the latest regulations and market trends. PLC also provides U.K. law services to about 70 percent of The Am Law 100 firms with a London office….
We visited the PLC crew in their fabulous midtown offices — beautifully renovated, with amazing views, the former home of a hedge fund — to learn about their services.
Read more, after the jump.
Practical Law Company was started by two former lawyers at Slaughter & May, which is sort of like the Wachtell Lipton of the “Magic Circle” firms: relatively small in size, but big in prestige and profits. It also seems to share Wachtell’s “learn by doing” approach to training (which we experienced firsthand). As Chris Millerchip, PLC’s co-founder and chairman, explained in an interview with ATL:
The two of us were junior associates at Slaughter & May in London. We had the frustration of many junior associates: we were thrown into all these transactions, expected to sink or swim, without the needed know-how or backup. Our idea was to create the kind of magazine that we wanted to read, which would explain how these transactions worked.
And that’s how PLC began. The first issue of PLC Magazine appeared in June 1990. The publication was focused on the technical aspects of transactional practice: why transactions were structured in certain ways, and the business and legal reasons underlying different deal structures.
“We were demystifying how these complex transactions work,” said Millerchip. “We were trying to prevent junior associates from looking like deer in front of headlights.”
PLC’s business model was transformed by the arrival of the internet. Prior to the web revolution, PLC was more of a traditional publishing company. With the advent of the internet, PLC saw the opportunity to distribute its knowledge more efficiently to its law firm and in-house clients.
First, a bit of background. In the U.S., when you’re looking for a template or precedent, you might just email some of your colleagues (“does anyone have a model for”), or poke around in your firm’s document management system. It can be a bit haphazard — and hazardous. As explained by Jeroen Plink, CEO of PLC’s operations in the U.S.:
Many firms in the U.S., when they talk about knowledge management, are talking about an internal search engine that allows you to search the firm’s internal work product. But using that search engine can be like trying to get a glass of water from a fire hydrant.
You run a search for a particular type of document, and you get a thousand results. How do you know which one is a good one? The one you pick [as a model] is a negotiated document. It may not be relevant to your transaction. It may be out of date. It may have weaker clauses in it because it is a negotiated document.
The Brits take a different — and perhaps more rational — approach to such matters. In the U.K., greater emphasis is placed upon developing, organizing, and maintaining a firm’s institutional knowledge. From Chris Millerchip:
U.K. firms are quite different from U.S. firms. Most of the U.K. firms will have a significant number of lawyers who specialize in generating know-how. For example, Freshfields might have 50 or 60 lawyers in London, non-fee-earning lawyers, who are creating and maintaining know-how, and training junior lawyers. They’re called Professional Support Lawyers [PSLs].
And here’s how the web revolutionized the business model of Practical Law:
Professional Support Lawyers across the market were drafting the same documents. When the internet came along, we spotted an opportunity to look at the kind of work that PSLs were doing, and supply a product across the whole market.
In other words, the “why reinvent the wheel” mentality that applies within a firm — why draft a merger agreement from a blank page, when you can build one from models or precedents — can be applied across firms and in-house legal departments, too.
If you don’t have to spend (read: waste) countless hours sorting through irrelevant documents in your firm’s database, or doing background reading in treatises to figure out what should (or shouldn’t) be in your material adverse change clause, you’ll be more efficient. And more effective. And less expensive, to the client. According to Millerchip:
The hourly rate is still a main billing method, but the incentive to become more efficient isn’t exactly there. The underlying purpose of PLC is to make the practice of law more efficient. Some clents aren’t willing to have junior associates on a steep learning curve, all at their expense. Our in-house clients expect their outside law firms to use PLC.
This led us to wonder: will U.S. law firms, some of whom can be quite snobby about the quality of their proprietary work product, trust an outside service to provide them with know-how, updates on substantive law, or sample deal documents?
Chris Millerchip explained that there is sometimes initial pushback, but PLC has been able to win the trust of clients over time. It did so in the U.K., and it hopes to do so in the U.S. The extent and speed of adoption varies depending on the PLC service at issue:
Our updates [discussing new cases, laws and regulations] were adopted pretty quickly. Our practice notes have also done well. Firms like our clause banks and drafting notes, because they can compare ours with theirs. With standard documents, firms may be more reluctant to rely at first. You have to build trust over time. In the U.K., we’ve developed 18 years of trust with the big firms. Now we have to build that here in the U.S.
So will PLC’s product take hold in the States? Jeroen Plink, CEO of PLC’s operation here in the U.S., expressed optimism:
To build our growing team of U.S lawyers, I’ve interviewed about 100 people coming from big firms and in-house departments. Every single one of them said, ‘I wish I had this resource at my firm when I was a junior attorney.’ You get all those emails where someone says, “does anyone have an example of an xyz clause.” You don’t get those as much in U.K. firms because they have PLC to look at first.
It’s a way of getting better value out of their associates. From the associate’s point of view, it gives them comfort: they feel they know what they’re doing. From the firm’s and client’s point of view, it helps their associates become more efficient.
Ultimately it gets down to the charging model. If you’re on a fixed fee, it’s the law firm that’s saving the money. In-house departments are our allies [in pushing for efficiency from firms].
A good example of a value-creating service of PLC is their “What’s Market” product. In the past, associates would have to go into EDGAR and other databases to gather information about recent transactions — break-up fees, no-shop provisions, etc. — and prepare comparative tables. That is something that PLC now does. What used to take hours or even days to prepare now takes a matter of minutes. The savings could run into the thousands.
“The more price sensitive legal services become, the better it is for us,” said Millerchip.
“With deals becoming smaller, there is a bigger incentive to minimize legal fees,” said Plink. “You can’t submit a $300,000 bill for a $10 million acquisition.”
In these economically challenging times, PLC is a valuable resource for the cost-effective provision of legal services. But launching a new product in the middle of a deep recession, even a product aimed at maximizing value, can be tough.
Will PLC prevail? Here’s Bruce MacEwen’s take, over at Adam Smith, Esq.:
PLC’s business model is deeply intriguing. Think of it as outsourcing KM [knowledge management] for the profession to one provider who benefits enormously from economies of scale. This requires deep investment on their part, and, more importantly, impeccable quality and credibility.
Those last two characteristics are attributes which, as we know all too well of late, can be forfeited in a heartbeat. It’s a daring model for that, and a potentially chancy one. But based on their track record in the UK, their launch in the US is their next inevitable move. I for one will be watching PLC with great interest.
As will we. Good luck to the folks at PLC with their U.S. launch.
Practical Law Company Crosses the Pond [Adam Smith, Esq. (Bruce MacEwen)]
Earlier: Prior ATL coverage of PLC
Disclosure: PLC is an ATL advertiser.