Knowledge Center

Monday, February 01, 2010

GC Advantage™ Provides A Cost-effective Integrated Legal Solution For Middle-Market Businesses

by Keith H. Berk and Alan D. Leib

Overview

Middle-market businesses, defined loosely as privately-held companies with $5 Million to $500 Million in sales, should carefully consider whether they are using the right legal counsel. Often times, middle-market businesses outgrow the legal counsel that helped incubate them because they now require an increased depth and breadth of legal services. Large firms with well known names appear to be an easy alternative. The reality is that the large firm business model is to provide sophisticated legal advice to an in-house counsel capable of managing day to day legal processes and converting technical legal feedback into workable business solutions. The large law firm model is like a surgeon with a large staff capable of performing amazing work to solve a specific problem, but is not designed for the firm to act as a long time legal advisor to the business.   Typically, it is not cost-efficient for a middle-market company to take on the overhead associated with staffing an in-house legal department. The HMB GC AdvantageTM provides an integrated solution specifically targeted to satisfy the unique needs of middle-market businesses by providing a seasoned general counsel to coordinate the full complement of routine and specialized legal services on a cost-effective, "as needed" basis.

The Middle-Market Legal "Service Gap"

By virtue of their entrepreneurial nature, middle-market businesses have unique needs for legal services. Unlike public companies, which typically have a substantial annual legal budget and an "in-house" legal department, middle-market businesses are typically less systematized, rely on one or more outside law firms for their legal needs and tend to seek legal counsel late in the business process, and often only after a matter has become adversarial. The result is that outside counsel is viewed as a "necessary evil" rather than a key player in the business's management team.   [Furthermore, by virtue of being privately-held, personal matters affecting business owners often impact legal or other aspects of the business.] So, it is vital that legal counsel for a middle-market business also fully understand each owner's personal situation, goals and objectives. 

The traditional alternatives for legal services that have been available to middle-market businesses fall short of meeting the unique needs of those businesses. As middle-market businesses grow, the need for legal services-both in terms of volume of services and level of sophistication-also increases. Because large law firm fee structures for routine legal work are cost prohibitive, many middle-market companies retain small or mid-size law firms as outside counsel. While these firms generally do a fine job handling routine legal work, they often do not have the expertise to adequately handle the full-range of legal services required by the business and its owners. Compounding that concern, small and

mid-size law firms are often reluctant to bring in the right outside expertise (which is found in other law firms) because the firm is concerned about safeguarding its client relationship. 

In response to this service gap, some mid-size law firms have expanded the range of services offered to middle-market businesses to include specialized practice areas such as intellectual property, labor and employment and bankruptcy/creditor rights. However, unlike large law firm specialty practices or boutique specialty firms, specialty practice areas in mid-size law firms generally do not have the scale required to make the requisite investments needed to attract top talent and deploy state-of-the-art technology.

A common approach taken by middle-market companies to address their legal needs is to hire a lawyer to serve as "in-house" general counsel. The analysis, which in theory seems compelling, is that the costs of employing an in-house lawyer are less than the annual legal fees paid to the outside law firm. However, in practice, middle-market companies find that there are a number of shortcomings to this analysis. The individual hired as in-house counsel is likely a senior associate or junior partner in their law firm and may not have the full range of legal and business experiences that make a truly effective general counsel. In addition, the individual likely has expertise (and enjoys) certain practice areas, but may not be particularly strong (or enjoy) other practice areas that are important to the business. The reality is that one person will not likely be able to handle the lion's share of the legal needs of a sophisticated business and its owners. Accordingly, the business will continue to incur substantial legal fees with its outside law firm and/or the in-house counsel will be in the position of performing legal services that are either above or below his or her ability level.   Finally, businesses underestimate the size of the human capital and technology investment associated with being able to effectively manage the legal function.

HMB's GC AdvantageTM Program

As a result of having served the unique legal needs of middle-market businesses and their owners for over 30 years, HMB has created the GC AdvantageTM to close the gap in the legal services market that has disadvantaged middle-market businesses' ability to compete against larger companies.   The GC Advantage consists of the following core aspects:

Understanding the Business: Every middle-market business is unique. HMB believes it can maximize the value of its legal services only if its legal services are provided in the context of truly understanding a client's business, including its industry, management team, legal and operational structure, communication style, priorities and goals. At the start of the relationship, HMB invests its time-at HMB's expense-to learn the client's business and incorporate critical business data into HMB's corporate database management system. With this foundation of business knowledge, HMB can ensure that the client will receive practical, targeted advice.

Seasoned General Counsel: Every GC AdvantageTM client will work with a seasoned HMB lawyer to act as the client's part-time general counsel and, in such capacity, oversee all aspects of the client's legal function. HMB lawyers who act as general counsel have substantial experience serving as outside general counsel to a wide range of sophisticated middle-market businesses. Several HMB attorneys have hands-on business experience managing middle-market businesses. The HMB general counsel will interface with the client's owners, executives, managers and outside accountants and other professionals as a trusted advisor and key member of the management team. 

Dedicated Team of HMB Professionals: The HMB general counsel will oversee a dedicated team of HMB professionals to service the regular ongoing legal needs of the business. By maintaining a consistent professional team, HMB leverages the institutional knowledge gained from the ongoing representation of the client. In addition to the HMB general counsel, the HMB team typically consists of an experienced attorney who will handle day to day legal work under the supervision of the general counsel and a junior attorney and paralegal who will handle routine administrative and maintenance functions on a cost-effective basis. The HMB general counsel will also coordinate the work of other attorneys and paralegals from HMB's litigation, real estate and estate planning practice groups, as needed. 

Leverage HMB's Network of Recognized Legal Specialists: HMB believes that its middle-market clients are best served by bringing in true subject matter experts to handle legal matters requiring specialized knowledge. To that end, HMB has established longstanding professional relationships with recognized experts in specialized areas of the law such as intellectual property, securities, labor and employment, bankruptcy and creditor's rights, and regulatory matters. These subject-matter experts typically work in a specialized practice area of a large law firm or a boutique law firm concentrated on a specialized practice area. HMB's general counsel will (subject to client approval) engage the expert, establish the scope of the project and interface with the expert to tightly manage the project to completion in a cost-effective manner. By working closely with various subject matter experts across a large number of clients, HMB can use its leverage to obtain the best possible service and terms for its clients. To the extent HMB's current network of legal specialists is not optimal for a specific situation, HMB's general counsel will find the best legal resources available to address the issue. 

Leverage HMB's Other Professional Relationships: Over the years, HMB has developed a strong network of professional relationships that have added substantial value to middle-market clients. These professional relationships include areas such commercial banking, investment banking, risk management, appraisals, accounting and investment services.

Conclusion

HMB's GC AdvantageTM platform provides a compelling value to middle-market businesses by providing a cost-effective integrated suite of best in class legal services. By having an experienced general counsel overseeing a dedicated HMB client service team and recognized legal specialists, GC AdvantageTM clients receive cost-effective, practical and targeted legal services when needed, and do not pay for a "learning curve" or theoretical advice not applicable to the client's specific business context. By taking advantage of HMB's GC AdvantageTM, middle-market businesses can now benefit from best in class legal services that were previously available only to large public companies. 

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