Avoiding those higher-than-expected law firm invoices
Have you ever been surprised by a law firm’s invoice that exceeded the estimated cost? If so, chances are, you’re not alone.
We recently surveyed 160 senior lawyers working in private equity. This found that certain types of matters regularly go over budget. For example with investment financing, more than one in four matters always exceed the estimated cost, while a further 45% sometimes go over budget. In total, this means that upwards of 70% of certain matters that PE firms send to law firms are at risk of cost-overruns.
Legal costs connected to merger and acquisitions (M&A) transactions provide a further illustration. As Bill Priestley the Chief Investment Partner at Epiris, an independent PE firm, explained in a case study:
“You’d get a quote for the deal, work on the deal, and then invariably the cost at the end would be considerably more than the quote. You’d then have an old-fashioned discussion and haggle to make the fees more palatable, but it was always relatively unscientific and quite awkward.”
Surprise invoices create friction
Invariably a higher-than-expected invoice creates cascading friction inside and outside the organisation. The finance team is unhappy with the deal team, the deal team is unhappy with the legal team, and the legal team is unhappy with the law firm.
Sure, you can haggle and knock the price down a bit, but the deal team still has to justify the extra expense to the investment committee and finance team. The whole process is uncomfortable, adversarial, and it only addresses the symptoms as opposed to the root cause. Collectively, it damages the internal standing of legal within the business.
So, what’s the root cause? A lack of visibility into work-in-progress and law firm accruals, since legal fees are almost always invoiced at the end of a transaction. So if your matter is going over budget, you won’t know the details until it’s too late to change the scope of work involved.
Visibility into legal spend as it’s accrued
Apperio connects directly to your law firms’ time-and-billing systems to provide you with visibility into accruals on your matters as they are incurred. This provides you with live legal spend data so you can advise the deal and finance teams – or have a conversation with your law firm – before a matter exceeds the estimated spend.
Predictable costs outweigh total spend
Predictable costs are imperative for any fund manager to plan and forecast profitable investments. And legal fees are a big part of that equation. Apperio enables you to demonstrate command of your legal spend in real-time. In turn, this signals to the rest of the business that the legal department is concerned with more than just the letter of the law. It’s also focused on the fund’s business performance too.
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See Apperio in action: The Apperio platform provides in-house legal teams with a proactive approach to legal spend management. We’ve already partnered with more than 200 global law firms to provide clients with insight into WIP. See for yourself and schedule a live demo by emailing firstname.lastname@example.org.