While the initial outlay may be significant, the advantages of having an in-house lawyer are considerable, and can generate major efficiencies and other business benefits. Here are the key areas where they can make a real difference.
1. Cost savings
In-house lawyers are a support function of the business and yet the cost of hiring them is not negligible. Bringing a senior corporate/commercial lawyer into the business can set you back £200k in the first year (adding together the expected base salary for a senior lawyer in the Financial Services sector, employment costs and recruitment fees).
However, having a senior lawyer's broad expertise on corporate, commercial (and ideally on certain finance and regulatory) matters can ultimately bring increased efficiency and cost-savings for ambitious, growing businesses, which means they soon pay for themselves.
The cost of external lawyers now regularly exceeds £500 per hour, which means companies can spend huge amounts of money on external lawyers' fees. Bringing salaried in-house counsel into the business can lead to significant savings on these legal fees, provided you select the right person with the appropriate confidence and skill set.
Let's take the example of a mid-cap company looking to make an Initial Public Offering (IPO) on the main market with an offer into the US. Costs here could quickly hit £1million in company and bank legal fees alone. That's not to mention the significant (bank on at least £50k) ongoing costs thereafter just to maintain the listing and deal with ongoing listed company obligations. And that doesn't even count pursuing M&A or capital-raising activities later down the line, which are all adviser-intensive.
It's true that such large and complex transactions as an IPO inevitably mean businesses will still require the assistance of external legal counsel, but a confident, well-experienced in-house corporate lawyer could carry out a significant amount of the preparatory and structural groundwork. They would also serve as an important conduit between the Board and its external lawyers and advising banks, freeing up the directors so that they can retain their focus on core business.
Then factor in a period post-listing of growing the business by acquisitions, carrying out corporate reorganisations and generally dealing with a high volume of commercial arrangements requiring legal finesse. Before long, committing to an internal adviser, for all the initial outlay, promises increased business efficiencies and significant long-term savings.
2. Reassuring key stakeholders and investors
Most companies are currently strengthening their legal, risk and compliance functions in response to the influx of critical changes in the regulatory field. It is crucial for businesses to assure shareholders, clients and key stakeholders that investing in the business is a wise and safe decision. Investors will be reassured to see that lawyers are an integral part of the business; increasingly, commercially-aware lawyers can be found sitting on the Board and contributing to thought processes and considerations for key strategic decisions.
3. Time savings and efficiency
Some external lawyers tend to become "insurance policies" for their clients since most of the legal work can be done in-house with lawyers who are embedded in the business. In-house lawyers understand the commercial needs of a business trying to be competitive and wanting to stay ahead of fast-changing markets.
Many of my clients (Heads of Legal and General Counsels) actually need to train their external lawyers on their sector- and business-specific requirements and their institutional approach to certain transactions. In-house lawyers are able to provide well-tailored and on-point advice to a demanding business. The best are also able to anticipate, identify and resolve legal issues before they become a material distraction or threat to the business.
4. Effective management of external lawyers
A sole legal counsel of a company may still need to instruct external lawyers to obtain specialist technical advice, such as on tax, litigation and pensions issues. The in-house lawyer is a reliable liaison between the company and the law firm.
In some cases, they have worked together in the past and the in-house lawyer can actually identify who may be best to use from their old firm, depending on the needs of the business or the deal under consideration. Since the in-house lawyer appreciates the complex legal issues facing the business and the likely work required, he or she will be able to provide more effective instructions to external counsel and translate complex legal jargon into terms that the business team will more readily understand.
How we can help
If you are considering recruiting your first in-house lawyer, we have access to a wide range of candidates and have successfully placed many candidates in financial, ISDA, commercial & industrial, and other sectors – please see our In-House Lawyers Section.
You can also talk to us about your requirements by contacting us.