Reshaping relationships with powerful suppliers
Investing for the long-term: how a financial services organisation’s most trusted advisors became better business partners
Intent on expanding and reconfiguring the business at a time of market consolidation, senior executives at a major financial services organisation depended on - and held in high regard - the expertise of their M&A lawyers in structuring and helping to execute deals.
When business-critical mergers and acquisitions have been at stake, participants understandably become protective of relationships with trusted, high-profile advisors, and are resistant to change. And this management team was no exception. Wary of jeopardizing what they deemed to be a special relationship with their primary law firm, one from which significant added value (not to mention ‘magic dust’) was derived, senior executives were sceptical that sufficient rewards could be reaped in commercial terms to justify the perceived risks of scrutiny and challenge.
Occumen set out to demonstrate that value for money could indeed be improved significantly - at no ‘cost’ to this special relationship. Quite the contrary, in fact: long-term benefits on both sides of that relationship could be achieved by transforming the client’s purchasing capability and approach to procurement.
Occumen proposed a wide-ranging review aimed at ensuring that the organisation was paying a fair price for its legal services, while simultaneously avoiding disruption and creating the environment for enhanced, long-term relationships with suppliers.
A key step was segmentation of all the legal services provided. This revealed that while around 60% of the annual £8-10 million of legal costs were driven by high-end M&A-related services, the balance related to more general, standard legal services such as conveyancing. Over time, these more standard services had come to be procured in a highly fragmented fashion, so we examined the benefits of rationalisation and of realigning suppliers against services based on the degree of complexity and customisation involved.
A second major component of our analysis consisted of benchmarking the primary law firm’s charges and practices against key competitors. This entailed a review of both rate cards and discount thresholds.
Also central to our approach was the development of the organisation’s in-house purchasing capability. Executives were coached in effective supplier negotiation, and equipped with the key reference points they needed for discussion with their primary legal advisors. We also provided the client with an ongoing operating model for its procurement function.
“Occumen provided us with the information and tools we needed to re-set a relationship which, although very successful, had come to be perceived as untouchable. We’re now confident of deriving the best value for money from all our legal advisors without jeopardising the development of strong, long-term relationships.”
Head of LegalFinancial Services Organisation
As well as delivering 15-20% savings in legal costs overall, our solution enabled the client to preserve its special relationship with its top legal advisors while lowering discount thresholds and adjusting the rate card to secure improved commercial terms with them.
“We believe our analysis and approach helped demonstrate that there’s nothing to lose – and everything to gain – from challenging suppliers in a professional manner, no matter how high-profile a particular supplier may be.”
Simon AtkinsonManaging Partner, Occumen