Types of businesses with the largest fixed legal costs?

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Anonymous User
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Types of businesses with the largest fixed legal costs?

Postby Anonymous User » Tue Mar 19, 2013 2:49 pm

What kinds of companies have to deal with the largest, continuous, and fixed regulatory compliance and transactional legal costs? Banks (FDIC), airlines (FAA), food producers (FDA), pharmaceutical companies (FDA), and utility companies all come to mind. Can you guys think of other business or industry categories that have to deal with significant and continuous regulatory or transactional costs, as a cost of doing business?

09042014
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Re: Types of businesses with the largest fixed legal costs?

Postby 09042014 » Tue Mar 19, 2013 2:53 pm

Anonymous User wrote:What kinds of companies have to deal with the largest, continuous, and fixed regulatory compliance and transactional legal costs? Banks (FDIC), airlines (FAA), food producers (FDA), pharmaceutical companies (FDA), and utility companies all come to mind. Can you guys think of other business or industry categories that have to deal with significant and continuous regulatory or transactional costs, as a cost of doing business?


Telecoms.

Anonymous User
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Re: Types of businesses with the largest fixed legal costs?

Postby Anonymous User » Tue Mar 19, 2013 2:55 pm

Anonymous User wrote:What kinds of companies have to deal with the largest, continuous, and fixed regulatory compliance and transactional legal costs? Banks (FDIC), airlines (FAA), food producers (FDA), pharmaceutical companies (FDA), and utility companies all come to mind. Can you guys think of other business or industry categories that have to deal with significant and continuous regulatory or transactional costs, as a cost of doing business?


Right now I think banks probably face the highest legal costs. Banks are already heavily regulated and now you have Dodd-Frank with the regular stress tests, living wills and a bunch of new and uncertain rules to deal with. Don't forget the continued litigation from the mortgage crisis that will probably continue for years.

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Re: Types of businesses with the largest fixed legal costs?

Postby Anonymous User » Tue Mar 19, 2013 3:06 pm

Anonymous User wrote:
Anonymous User wrote:What kinds of companies have to deal with the largest, continuous, and fixed regulatory compliance and transactional legal costs? Banks (FDIC), airlines (FAA), food producers (FDA), pharmaceutical companies (FDA), and utility companies all come to mind. Can you guys think of other business or industry categories that have to deal with significant and continuous regulatory or transactional costs, as a cost of doing business?


Right now I think banks probably face the highest legal costs. Banks are already heavily regulated and now you have Dodd-Frank with the regular stress tests, living wills and a bunch of new and uncertain rules to deal with. Don't forget the continued litigation from the mortgage crisis that will probably continue for years.


This is the business that comes to mind the most often. I see job postings all the time for "compliance" officers and managers. Would someone be able to provide a list of the day-to-day legal costs a given branch has to deal with?

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Renne Walker
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Re: Types of businesses with the largest fixed legal costs?

Postby Renne Walker » Tue Mar 19, 2013 3:08 pm

Desert Fox wrote:
Anonymous User wrote:What kinds of companies have to deal with the largest, continuous, and fixed regulatory compliance and transactional legal costs? Banks (FDIC), airlines (FAA), food producers (FDA), pharmaceutical companies (FDA), and utility companies all come to mind. Can you guys think of other business or industry categories that have to deal with significant and continuous regulatory or transactional costs, as a cost of doing business?


Telecoms.

+1

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guano
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Re: Types of businesses with the largest fixed legal costs?

Postby guano » Tue Mar 19, 2013 3:39 pm

Financial engineering.
Put simply, legal fees usually exceed all other costs combined (sometimes by a multiple)

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Re: Types of businesses with the largest fixed legal costs?

Postby Anonymous User » Tue Mar 19, 2013 4:57 pm

guano wrote:Financial engineering.
Put simply, legal fees usually exceed all other costs combined (sometimes by a multiple)


Fun fact: financial engineers at top NYC law firms don't just charge top dollar, they charge a premium on top of the already ridiculous top-dollar right for major NYC firms...

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Re: Types of businesses with the largest fixed legal costs?

Postby Anonymous User » Wed Mar 20, 2013 4:46 pm

Can we elaborate on that a little? What would you say "financial engineering" work encompasses? Who are the biggest targets for "financial engineering"? Do these businesses do work that involves "financial engineers" at major law firms on a continuous level?

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Re: Types of businesses with the largest fixed legal costs?

Postby Bobnoxious » Wed Mar 20, 2013 4:50 pm

Yeah, I know it's not commonly understood to be a business, but I'd add municipalities to the list. But then again I'm an ignorant puke.

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guano
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Re: Types of businesses with the largest fixed legal costs?

Postby guano » Wed Mar 20, 2013 6:57 pm

Anonymous User wrote:Can we elaborate on that a little? What would you say "financial engineering" work encompasses? Who are the biggest targets for "financial engineering"? Do these businesses do work that involves "financial engineers" at major law firms on a continuous level?

In layman's terms, it's either
A) creating new financial products
B) creating new mathematical/automated models for trading
C) finding new ways to use existing financial products

edit: realized that I only partly answered the first question.

When you look at the above, depending on what exactly is involved, there's a lot of contractual and regulatory work that needs to be done, in addition to whatever other work is involved (e.g. M&A, securitization, etc.). It's not unheard of for setup costs to run in the millions of dollars (if it's legally very complicated or pushing the envelope), the majority of which is in legal fees.

I don't know what you mean with who the biggest targets are
As for whether it's continuous, the answer is both yes and no. There will be a very large amount of non-repeatable (kinda) work required at the get-go, and then there will be continuous work as well. For example, a new product could cost a million bucks to set up, then incur roughly a quarter million dollars per year in operational work, and in addition there could be a $100,000 fee for each tranche (e.g. $100 million investment per tranche; every new round of capital involves new fees)

*note - numbers are pulled out of my ass because I can't disclose actual fee structures.
Last edited by guano on Wed Mar 20, 2013 9:59 pm, edited 1 time in total.

Pokemon
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Re: Types of businesses with the largest fixed legal costs?

Postby Pokemon » Wed Mar 20, 2013 7:32 pm

REITs? On top of securities, transactional and tax considerations, they also have to deal with zoning, construction and real estate issues.

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holdencaulfield
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Re: Types of businesses with the largest fixed legal costs?

Postby holdencaulfield » Thu Mar 21, 2013 1:03 am

Pokemon wrote:REITs? On top of securities, transactional and tax considerations, they also have to deal with zoning, construction and real estate issues.



I have a few REITs as clients. Very consistent work, but not as complex or expensive as you might think.




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