Spending power: Getting a handle on legal expenses

Speakers:

• Mariam Akanbi, senior legal counsel, ARCH Emerging Markets Partners
• Shauna Powell, partner, N4 Partners
• Richard Wilkey, corporate partner, HCR
• Nicholas d’Adhemar, CEO of Apperio
• Moderated by Alice Murray, The Drawdown
  
  

The Drawdown (TDD): How are budgets created?

Shauna Powell (SP): Our legal budget is split into three buckets; regulation at the fund level, overall fund costs and portfolio spend. The challenge is on the transactional side; the disparity between the fees quoted initially and actual spend.

Richard Wilkey (RW): From a law firm perspective, you’re trying to balance the relationship, manage the market rate for transaction fees versus internal pressures, which come from the rates being clocked up. As time goes on, the focus should be on finding the right balance, the right fee approach.

Nicholas d’Adhemar (NdA): Part of it is the initial price setting, but it’s also about the lack of expectation management. From my time working for a PE firm, if we’d had regular updates from the law firm, we wouldn’t have had such a surprising trip to the investment committee to get approval for more budget.

Mariam Akanbi (MA): I understand the pressure in private practice to get the work done and fee-earn, but regular updates are key for relationship building. For us, it means we can keep the investment committee up-to-date as the deal progresses, which builds trust for the next deal.

TDD: Are you satisfied with how you’re being billed, in terms of frequency and detail?

MA: My biggest bugbear is receiving bills once a year. Having regular updates of the work being done and regular billing goes back to the budget and being able to track against that, whether it’s ongoing business spend, fundraising or transactions. Having sufficient detail is important, especially if there’s a time lag between the work done and the invoice.

SP: We run a manual process with Excel files where we ask law firms to update us on where our work-in-progress is against our budgets and billing, which is an arduous process. We’ve had to be proactive in doing that, rather than law firms giving us the information.

RW: This isn’t rocket science. Law firms are traditionally behind on tech. There can be and should be easier ways to keep track of and manage time. Nearly all law firms have online recording systems.

NdA: It can be challenging for law firms. The leading practice management system is 30 years old. To actually get that information might involve the partner calling their PA, the PA calling accounts, back to the PA, then back to the partner.

MA: Ultimately, being comfortable with using such systems will eventually improve the recovery rate for the law firm as well. It prevents the delay when discussing the bill.

NdA: Actually, we initially set up our system for in-house GPs, but over time we found we benefitted law firms too.

SP: Admittedly, if I can’t understand the bill, it takes me time to get to it because I know it will involve more questions and conversations.

Watch the full discussion here.