Category Archives: Corporate Services

Blockchain and Bitcoin – an introduction for beginners written by a beginner

I am pretty interested in finance and economics (often useful as a professional accountant) and I have worked with enough tech companies over the years to feel vaguely competent in understanding at least the business models of most technology businesses and the markets they operate in. It has however taken quite a while to get me to the point of feeling like I understand anything at all about blockchain, bitcoin, cryptocurrencies and the whole related world which seems to have become really prominent recently.

Talking to fellow professionals and business owners I realised that it wasn’t that I was a long way behind the curve on this – it was simply that this stuff has usually been really badly explained by the specialists who are all over it and generalists like me can’t keep up. I decided to try and shed some light on this whole topic and if some tech expert finds I have misunderstood it, please just correct me!

So first of all, “blockchain” – this really is a set of data “blocks” linked together in a way quite similar to a chain. Each data block is encrypted and the way the encryption works is that part of it is linked to the previous block in the chain.  Even if you can’t read the data (because you don’t have the key to the encryption) you can tell that the data in the previous block is unchanged because the link to that previous block in your current block still works – i.e. the chain is unbroken.

These data blocks are stored on a large number of independent computers linked together in a peer to peer network (no-one computer is in charge of the network) and the common feature is that they have all agreed to run the same protocol (i.e. programme). Because the computers are all linked any change to any block would be instantly highlighted – the “chain” on one computer would no longer work and would be different from the chain on every other computer from that point on.

This is therefore a very flexible and resilient way to store data transparently – and the fact that the data is encrypted and only the people with the key know what it actually means makes the process very private as well.  A really clever way of squaring the circle.

Bitcoin is a specific blockchain. An individual Bitcoin is a particular number that meets a set of criteria. There are only around 21 million numbers which meet these criteria and so there is a restricted supply of Bitcoins. Identifying numbers which meet the criteria is a very computer processing intensive exercise – this process is known as “mining bitcoins” and there are untold thousands of computers devoting processing power to it all the time. When you read that “bitcoin mining is using more power than the entire state of Mexico”, it illustrates just how much effort is being put into this computing.

So an individual number which meets the criteria is a bitcoin and forms one of the blocks. The block is encrypted but if you have the key to the encryption then you “own” it and have the capacity to transfer the key to someone else – this transfer of the key is the transfer of value and the encryption keys are therefore the real Bitcoin currency.

The potential of blockchain however goes well beyond Bitcoin. There are other cryptocurrencies (the most prominent of which is probably Ethereum) and a whole host of other applications which people are devising for using the squared circle of transparency and privacy that blockchain offers. An interesting idea I have seen is a register of all large diamonds – you can put the details into blocks in a blockchain with the physical details unencrypted and ownership and cost details attached but encrypted. This would allow much easier verification of the ownership of valuable assets.

I think the key value of blockchain is that it allows some transactions and relationships to be conducted very quickly, without needing to take the time to build trust as has previously been needed. In lots of ways, in the world we live in now, there is already a huge degree of trust and the extra admin of using blockchain is completely unnecessary. In other cases, it can be a game changer.

And if you think I am going to tell you what the future value of Bitcoin is, think again.  I am an accountant, not a prophet!


Are you aware of the new statements required under the Modern Slavery Act 2015?


Having received the regular newsletter from HRC Law, it occurred to me that I wasn’t aware of this new requirement and wondered whether our clients and friends of PM+M were also unaware. As finance professionals, your PM+M team cannot advise you on the law but we should raise the issue and build awareness.

Jane Wilkinson, a solicitor at HRC advised that if your organisation supplies goods or services and carries on (part of) a business in the UK it will have to publish an annual slavery and human trafficking statement (the Statement) for each financial year ending on or after 31 March 2016, if its global turnover exceeds the £36 million threshold.  This threshold includes the turnover of subsidiary undertakings too, so it’s not as huge a number as it first sounds.

The Statement must disclose what steps the organisation has taken to ensure that human trafficking is not taking place in any of its supply chains or its business; or state that it has taken no such steps (with the latter approach being a potential PR disaster!).  Home Office Guidance outlines what should be included in the Statement and HRC Law can provide further support and guidance.

Even if you’re below the turnover threshold, it’s probable that (some of) your customers and suppliers will be caught by the requirement to produce and publish a Statement.  As you will form part of their supply chain, they’ll be looking to you for assurances about your practices, procedures and supply chains.  Thinking about this and preparing accordingly could help you to outshine your competitors and stay ahead of the game.

So, from PM+M’s point of view, this isn’t a case of this won’t ever impact our clients – it very well could and it very likely already is.

Helen Clayton – Corporate Services Partner 

Helen Clayton On Mergers & Acquisitions In The Legal Profession

Some of the latest challenges facing the UK legal profession in recent years include succession, exit planning, gaining market share and competitive advantage through merger or acquisition and dealing with the financial and other related impacts of regulatory changes. This applies from the largest firms to sole practitoners.

As law firms continue to develop into businesses with much more of a corporate feel, more advance thought is being given to the future, the threats and opportunities available and therefore how a firm’s strategy is developed.

Acquisitions often form part of a firm’s medium or longer term strategy, whether through acquisition of an entire firm, in part or simply through the acquisition of assets such as work-in-progress. Being part of a firm’s strategy is one thing but making them work and be successful in the short and longer term is a real test. Being the only strategy therefore is a sure fire way to standing still, resulting in the financial and personnel challenges that then inevitably brings. It cannot just be about the numbers and aiming for the two plus two equals five.

Culture and People

Research shows that almost a half of all transactions fail to meet expectations for cultural reasons. So, perhaps it is not about the firm but about the people. A law firm is a people business, whether through the ownership and the people employed or whether through the end user of its services. You cannot ignore the people element of a transaction and what they need in order to be able to contribute to making an acquisition successful – on both sides of the deal.

Communication at every stage will be critical. Whispers and rumours will be afoot and heading these off in advance can only help smooth the transition. A key risk will be loss of people, including leadership and management; this can create great uncertainty for employees and they could follow. Whispers in the profession can lead to competitors seeing an opportunity to sweet talk clients.

The combined culture of the firm will be important to understand for all involved. Do the cultures currently align? If not, which firm is the dominant and will it be this culture that wins through? Is that the right answer and who and how will they make this work?

Change can be a barrier for people especially if they feel vulnerable. Getting them on side early enough will be important; however depending on the persons involved, the stage at which they are made aware of the proposed or impending transaction will matter.

There will be a need to address upfront who will form the future leadership and management team. Do shared roles really work? For example, two managing partners. The partners need to like and respect each other, understanding each other, reporting responsibilities and lead by example. Will there be a board and how many from each side will it comprise? When it comes down to it, people have pride in their titles and this can be a sticking point. Further, the name of the combined firm will be high on people’s agendas. Dealing with these politics at an early stage will avoid unnecessary time and cost at a later date, which can inevitably lead to a breakdown in negotiations totally.

If there are multi sites post transaction, how will the reporting work? How will the culture alignment across various offices work?

Due Diligence

Therefore, and not just for financial reasons, detailed due diligence is critical to achieving a successful transaction – on both sides. Getting underneath the reasons for the transaction will drive each side’s focus for diligence. These might include competitive advantage through market share or wider service offering, geography, client relationships amongst other reasons. Financial reasons will always be up there, driven by the on-going desire for increased PEP, though these should not be the focus. Understanding the financial impact will still be important however.

Going back to why a firm wants to enter into such a transaction – if the firm is struggling in some way, then it is also likely going to struggle to have a significant voice at the boardroom table moving forwards. If there are internal issues to be resolved, then these should be dealt with before diligence commences as they will be highlighted and used as a mechanism for driving down ‘price’; for example, old debt or work-in-progress that holds no value, internal disputes, poor claims history etc. When I refer to price, often in law firm transactions there is no price unless it is a clear exit mechanism; however, resulting equity points, for example, could be reduced compared to others.

A consideration, which may depend on the size of the transaction, will be to who actually performs the diligence. There should be financial and non-financial diligence performed, with experts carrying out the work. It may be that an element of this can be performed in-house; however I suspect that a great deal of diligence for two law firms to a transaction is performed by professional advisors. In a scenario where both firms have the same advisors, there will need to be a discussion as to how this conflict is resolved.

Project Management

Throughout, from initial conversations through to diligence, transaction day and beyond, project management should never be underestimated. There are so many stakeholders, which generally results in an increasing amount of internal politics, that a formal project management team with a respected leader is essential.

Initial conversations will need to be confidential and managing that process will always prove difficult. Meetings will need to be held off site but not in a local hotel or coffee shop where other professionals and clients may meet. Risks will need to be considered at every stage of the project.

Agreeing on timelines, deliverables, accessibility and availability will be vital to being able to progress as both sides wish. Ensuring there is commitment to delivering will be key however it should not detract from the day job of leading or managing the existing firms nor delivering to clients.

The project management team will require a variety of skills other than project management! Areas such as IT, infrastructure, property matters, finance for example. These roles need to be assigned early in the process, skill gaps identified and resources sought to fill them. Undertaking such a project in the right way is not inexpensive.


Whilst I believe that financial reasons should not be the driver for a transaction, understanding the financial impact will be very important.

There is the risk, through management being distracted, of not focusing on each individual firm on the lead up to completion, which could result in a loss of clients, income, profit and key talent. Such impacts will undoubtedly change the structure of the deal on the table. This validates the need for a focused project management team who can oversee and deliver the transaction aside or over and above the day job.

Funding will be an issue at some stage and will need to be addressed. Do the combined financial forecasts indicate the requirement for additional funding in the short to medium term and where is this going to come from? If the same bank is involved on both sides, understanding their appetite for the combined firm going forward will be vital, together with potential additional funding.

Referring back to partners working together, understanding each other’s personal financial position will also be important for a transaction to be successful. Whether partners have savings or equity to inject could become an issue.

What if the transaction doesn’t materialise?
Simply, it’s back to the drawing board on strategy. Understanding why this transaction didn’t work will be important to be able to draw experience, make changes and establish guidelines for future potential transactions. Reverting back to the drivers for entering into such a transaction should not be overlooked.

What if it does happen?
Hopefully, this is fantastic news and everyone is on board, including clients, as to what the combined firm is able to deliver, matching the initial reasons for each respective firm to enter into this deal, which no doubt will have taken months, if not years, to get over the line.

The hard work now begins in ensuring it does deliver. The project management team will still be vital to provide focus on this, enabling the leadership and fee earners to focus on quality service delivery and financial results in what may be a new office with new infrastructure. Settling in time can be minimised through an effective project management team.

In conclusion, there are so many aspects to consider in striving to get a deal over the line and for it to be successful, delivering all that was hoped for. Communication is the one word I would use to facilitate all of this; communication at all levels, internally and externally but this needs to be managed and, yet again, validates the undoubted need of a skilled project management team.

Helen Clayton – Head of Corporate Services

What Is Your Strategy For Clinical Negligence Services?

shutterstock_219074173It has been confirmed that the introduction of fixed recoverable costs in clinical negligence cases is still planned for 1 October 2016.  Whilst research shows that it has been more difficult for those on lower incomes to pursue claims, it is evident that there has been an increase from those on middle incomes.

There has been and will be much debate on this subject. My concern lies with how and indeed whether law firms are considering their strategy for delivering these legal services.

We have already seen a great shift in firms delivering personal injury legal services; downsizing, doors closing, focusing on other services, selling off books of WIP and of course those with deep pockets being able to purchase books of WIP and firms in their entirety.

If the limit comes in at £100,000 as planned, what does this mean for your caseload?  What percentage of your firm’s clinical negligence matters are below this threshold?  Do you actually hold this data?  For many, it could be as high as 80%, if not more. What does this mean for funding, staffing, space requirements to name just a few considerations?

Where we have seen PI firms succeed is where there is process and control with strong infrastructure.  Does your firm have this? If not, what is the plan?  Do you have working capital to throw at building the infrastructure in what is now a short timescale or are you prepared to take on additional external borrowing, if available, or inject additional partner capital? Cash is the answer here (as ever) if you want to succeed in the new world.

Success will also be built on readily available data on matters. The IT you have in place should be adequate to give you this information so that you can make quick strategic decisions. Economies of scale are going to produce the financial results you need for your firm to flourish and deliver the type of service you want to your clients.

Is now the time to get out of delivering clinical negligence services before the market is potentially swamped with firms trying to offload work that is draining their resources? Or are you ready to be a consolidator?

Yet again, we are about to watch significant change unfold in the profession and I wait with bated breath to see how firms react in the next few weeks – assuming they are proactive and not reactive.

Helen Clayton – Head of Corporate Services

Company Audit Thresholds Increase!

shutterstock_239428402We have known for some time now that any UK company with a year end on or after 31 December 2016 will be able to apply new size limits when preparing their accounts.

This week the government has decided that the statutory audit threshold will increase in line with the new limits. The new limits are set out below. In order to remain exempt from an audit, companies must stay below two out of the three limits for two consecutive years.

This means from next year approximately 7,000 more businesses will be exempt from the requirement to have a statutory audit. The government estimates that, out of these, 5,000 will potentially continue with having an audit for a number of reasons.

Reasons to continue with a voluntary audit include the fact that it gives comfort over the accounts to business owners as well as outside shareholders, banks and lenders, customers, suppliers and potentially prospective buyers of the company.

The new limits are:

  • Turnover: not greater than £10.2m (previously £6.4m)
  • Balance sheet total: £5.1m (increased from £3.26m)
  • Number of employees remains the same at 50

There is also an option to early adopt these for accounts presentation purposes, but that does not change the audit limits currently in place.

If your business will be affected by these changes or you are unsure, please call Chris Johnson (Corporate Services Director) on 01254 679131 to discuss the options available to you.