Luvvies’ leap

Too little, too late?

Olswang’s recent discovery of a world beyond Holborn, illustrated by an expansion plan funded with 10 per cent of annual net profit, has left rivals wondering what took it so long. And they are not the only ones.

“Ten years ago Bird & Bird was behind Olswang,” says one legal market recruiter. “Now it’s way ahead.”

Compare the two firms’ finances since 2000 (see graph, page 18). Back then Bird & Bird’ revenue lagged behind Olswang’s by £200,000, with the larger firm posting £35.1m to the former’s £34.9m.

As for average profit per equity partner (PEP), Olswang was way ahead on £525,000 compared with Bird & Bird’s £341,000.

How things change. Bird & Bird now has more than twice the fee income of Olswang, posting a ­revenue in 2009-10 of £201.8m, which places it 15th in The Lawyer’s UK top 200. Olswang’s revenue was £91m, leaving it in 32nd place.

Critically, Bird & Bird also ­overtook Holborn’s finest on PEP (£460,000 compared with £420,000, and that only after the ­latter firm posted a cost cut-assisted 38 per cent rise in PEP - do not expect to see a similar hike this year).

Olswang partners, and CEO David Stewart in particular, will claim that any comparison with Bird & Bird is unfair. Both firms have changed ­dramatically in the past decade. But then, that is kind of the point.

If the technology-driven Bird & Bird is not the closest rival to Olswang, then who is? Both firms’ strategies revolve around IP-rich businesses, which Olswang maintaining a traditionally far richer seam of high-profile media and entertainment clients. Olswang’s flirtation with putting a more tangible kind of property closer to its core took a battering when the market hit the buffers, but still persists.

But in the context of a decade of strategic change, during which time Olswang beefed up real estate as Bird & Bird spread its wings and invested overseas, it is the former firm that looks like the one that took its eye off the ball.

Tithe for action

Still, if it is playing catch-up - and it is - Olswang is at least playing aggressively.

As The Lawyer exclusively reported last month (31 January), the firm recently began setting aside 10 per cent of its annual net profit to fund an international expansion ­programme.

While £2.5m a year might not give the magic circle nightmares, it does at least show willing. And, as one of Olswang’s film or TV clients might put it, it is all up there on the screen.

Late last year Olswang made a blockbuster entry into Madrid, snaring key lawyers from arch-rival Bird & Bird, including local corporate head Javier Vasserot. The sequel came this month when it augmented Madrid with more lawyers from the same firm, including Bird & Bird’s former head of employment Daniel Cifuentes and head of telecoms Blanca Escribano.

But Olswang had not yet called a wrap. This month it opened its newest overseas office, launching in Paris with the hire of five partners, including finance specialist Stephan Alamowitch from Dechert.

The Paris and Madrid offices are primarily media- and technology-led offerings. According to Stewart, Madrid is already profitable, thanks in part to an investment by website LivingSocial in Spain’s Let’s Bonus (believed to be worth around $50m (£31m)), one of the first referrals from Olswang’s nascent relationship with US firm Cooley Godward Kronish.
Continental triers

The firm began ramping up its ­European office network in Berlin in 2007 with a real estate and finance focus provided by lawyers hired from EY Law and Freshfields Bruckhaus Deringer. It boosted Berlin in March 2008 with an IP team from ­Linklaters and again in May 2009, when Freshfields real estate partners Christian Schede and Martin ­Wiemann joined Olswang along with a team of nine associates.

Bearing in mind that until 2007 the firm’s sole overseas outpost was in Brussels, launched in 1999 and ­currently housing just four partners, the Continental shift amounted to a strategic U-turn.

It was a U-turn resulting from the realisation that Olswang was not only losing ground to its rivals in terms of size, but also losing big cross-border deals because it lacked an overseas capability.

Stewart, reliably candid although occasionally defensive, admits this. However, he claims his firm is now ready to move to the next stage of its development.

“We’re moving from being a spotty adolescent to a grown-up with a six-pack,” he says.

A fundamental part of that ­growing up has been the increasing number of structures and internal disciplines Olswang has been putting in place ever since a strategic review 18 months ago.

The firm realised that not only did it need to grow internationally, it also needed better systems in place to facilitate that growth, such as a more structured approach to customer relationship management (CRM), regular training for partners to encourage them to cross-sell and more flexibility on alternative billing arrangements.

“Telling people what to do rarely works,” says Stewart. “The key is to try to find a way to convince people to adopt to a new approach.”

Olswang brought in new blood to help push through its new grown-up agenda, including Ali Halliwell and Sharon Burrell in 2007 and 2008 respectively, both from Allen & Overy, and Michelle Elstein, Linklaters’ former head of business development, in January 2010. Client feedback suggests it is working.

“Olswang’s always been prepared to innovate,” says Andrew Garard, group legal director at Olswang client ITV. “And they seem to be ramping up their efforts to get closer to clients, with more value-adds. When we did our panel two and a half years ago we were clear that we expected proper account management. Olswang’s delivered.”

On pricing and alternative billing in ­particular, Olswang looks to have turned a corner.

“We’ve made a big investment in pricing issues,” claims Stewart, ­pointing to the hire of external price consultants SKP Partners for two days. “We were the first law firm they’d ever advised. They encouraged us to think more laterally.

For Olswang, our primary focus was to pull our socks up, become more disciplined and use our market differentiation to win more premium work.”

Image conscious

So that is the key challenge for Olswang: to highlight its sector ­capabilities while broadening its appeal. And, like growing up, it is not going to be easy.

“Its brand’s going to be a difficult tag to shift,” argues a former partner of the firm. “If you meet someone at a dinner party and say ’Olswang’ - assuming they’ve even heard the name - they’ll say it’s a media firm. Perception may lag reality, but it is still an issue for them.”

It is a touchy subject around Olswang to suggest that it is no longer young and cool, but rather serious and middle-aged.
“Olswang’s entrepreneurial brand has always been what differentiates us,” insists Stewart. “Across the firm lawyers are more entrepreneurial, savvy and focused on their sectors than is typical. Olswang’s unique.”

By ’unique’, Stewart is referring to Olswang’s sector knowledge. The imbalance between supply and demand in Olswang’s stomping ground of the mid-market means firms that fail to differentiate themselves will be left competing primarily on price. Not a good place to be.

Rob Bratby, the firm’s head of ­commercial, which includes media, communications and technology, insists that there is no conflict between broadening the firm’s appeal and ­winning bigger-ticket deals.

“The issue for firms is how you get to market and, as a sector-led firm, this is our way of distinguishing ­ourselves from the competition,” he argues.

Or, as Stewart puts it, “our culture is what defines us, but also what makes us attractive to other clients”.

Sectors nous

Certainly, the clients The Lawyer spoke to - provided by Olswang - bear this out.

“They focus on industry sectors rather than having a standalone real estate department,” says F&C Reit general counsel Paul Meads. “Their boundaries are less regimented than at some other firms with more ­traditional models. All the firms say they take a sector approach, but that doesn’t mean they all genuinely do.”

So while Stewart is delighted to confirm that Olswang is broader and deeper than it used to be, he also claims that the underlying sector knowledge “that goes back to our roots” is still there in a range of areas.

TMT (including the crossover into life sciences), plus related areas such as publishing, advertising and marketing, are still the core of Olswang, although real estate is an equal contributor purely on revenue terms.

In the year to date real estate sector clients represent 20 per cent of Olswang’s revenue, with media contributing 24 per cent and technology 20 per cent.

All of Olswang’s industry sectors are backed by sector-focused practice groups in corporate (including private equity), litigation and finance. Of these, litigation was the biggest money-spinner last year, a fact ­Stewart insists was not affected by the departure of former group head Martin Davies to US firm Quinn Emanuel Urquhart & Sullivan, where he joined another former Olswang litigation partner, Alex Gerbi.

Building property

As for the apparent oddity that is Olswang’s property team, Stewart insists that it has “survived the ­recession well”.
Well, all things are relative. While it is true that Olswang’s global real estate group is larger in headcount than it was at the start of the recession, the UK end is 25 per cent smaller than three years ago. And while it continues to act for some substantial institutional clients, such as Legal & General and F&C Reit, the chances are that if Olswang was setting up shop today real estate would be a far smaller part of its offering than it is. Not that Stewart or his fellow senior management buddies would admit it publicly.

The push into property is a legacy of Stewart’s predecessor Jonathan Goldstein, when the firm went hell for leather into real estate in the early years of the past decade.

“Real estate at Olswang has ­obviously been affected by the state of the commercial real estate market,” says one lawyer familiar with the firm. “I think what they’re doing now strategically is nothing more than a reflection of what’s going on in the market. Real estate’s a bloody awful place to be at the moment. Olswang had to look at where markets are strong and tailor accordingly.”

Grave Stewart

So the firm has cut and culled and, by ­definition, real estate looks to have taken a back seat in terms of driving Olswang forward. Dare to make the suggestion to Stewart, however, and it is forcefully rebuffed.

“Real estate’s had a really difficult time as a sector, but my message is that we’re committed to our real estate lawyers and real estate as a ­sector,” stresses Stewart. “And the ­revenues from our real estate clients are more or less the same as from media and technology. Real estate was a great investment after the ­dotcom crash, a great contributor. But currently the best opportunities for growth are in tech and media. Real estate’s coming out of a deep recession and the past year hasn’t been the time to focus on growing it, but this has absolutely not acted as a handicap or a brake on our growth.”

Certainly, Meads at F&C Reit reveals that Olswang’s property-led push into Germany, where the ­company has traditionally used local firm Jebens Mensching, has ­benefited his company.

“As our business has become larger and more sophisticated in Germany we’ve ­needed different kinds of lawyers,” Meads explains. “Once Olswang made the Freshfields hires, they were exactly what we needed. Now they’re getting an increasing amount of our work. The relationship with Jebens Mensching is deep, but there’s a degree of work they can’t do and Olswang’s in the driving seat.”

It is a theme echoed by Garard, who ­confirms that Olswang’s overseas push has gone down well at ITV.

“We’ve already used them in Madrid, and while we use Hogan Lovells and DLA Piper in Germany, in Paris, where we recently opened a production office, we intend to use Olswang,” he says.

Cooley beau

So for some clients at least, Olswang’s international push is the right move. And with an Asia opening being talked about for later this year, it is an accelerating trajectory that leaves one obvious question unanswered: what is Olswang going to do about the US?

Following the end of its always odd-looking alliance with Greenberg Traurig, Olswang struck an informal referral deal with US West Coast firm Cooley, a partnership that on paper looks to make considerably more sense.

Cooley is more consistent with Olswang’s technology focus, while the current heat in the dotcom market suggests having a close cooperation deal with a firm steeped in Silicon Valley culture is no bad thing.

“A merger’s definitely a possibility,” claims one former partner. “There’ll be a big gap in profits and the usual cultural and other challenges associated with a US merger, but opening a European office network will make them much more attractive to a US deal. I think Stewart will want it. He may aim to time it for when he’s coming to the end of his second term.”

Stewart’s current line is that Olswang has no interest whatsoever in a merger.

“The goal is to take our practice to the next level with regard to the value of the transactions and disputes we handle, and to make Olswang a fully integrated international practice in Western Europe and other ­jurisdictions with a credible strategy,” he says. “We hope to accomplish that over the next three years.”

After that? Any management ­consultant - and many an Olswang partner - will tell you that merger is not a strategy. But as a way of makiing up the ground lost to a certain firm in Fetter Lane - not to mention getting a leap into the global market proper - it is hard to beat. Do not bet against it.