Focus: Travers Smith, Solo empowered
04 April 2011 | By Gavriel Hollander
Without wanting to divulge too many tricks of the trade, the standard means by which anyone can discover the skeletons in the closet at a firm is to pick up the phone to its competitors, its former partners or anyone else with an axe to grind and let them unleash years’ worth of pent-up bile.
But the more calls one makes about Travers Smith, the more it becomes clear that few people have a bad word to say about the firm.
Which is all very lovely in a fluffy kind of way, but it leaves the lingering question of whether a firm’s modus operandi should be to be liked, or whether it is a sign that other firms simply do not consider Travers, despite a consistently impressive financial performance, to be a threat.
Managing partner Andrew Lilley, understandably, is not a subscriber to the latter theory.
“I don’t think the fact that people don’t badmouth us is because they don’t see us as a formidable firm,” he says, although he accepts that identifying direct competitors is difficult. “It depends on which part of the firm you’re talking about,” he adds.
Some direct competitors are clear. First and foremost there is the old-as-the-hills comparison to that other blue-blooded City stalwart Macfarlanes; while the private equity practice that has been the engine room of the firm for so long has gone toe-to-toe over the years with Ashurst, Clifford Chance and latterly Freshfields Bruckhaus Deringer.
Away from the transactional side - in areas such as employment and real estate in particular - it is the bigger regional and national firms that Travers comes up against.
Like Macfarlanes, the firm most often referenced as its great rival, Travers ploughs its own furrow. It steadfastly refuses to open overseas offices (the small, English law-only presence in Paris and its abandoned expedition to Berlin notwithstanding) while simultaneously fending off merger advances from a cavalcade of eager suitors attracted by above-average profit and a strong brand name.
But, again as with Macfarlanes, talk to anyone in the partnership and the word ’independent’ crops up time and time again.
A single life for me
The question is whether the wolves can be kept outside the door as the legal market changes.
“[Travers has] always been seen as a great target for a merger,” says a recruitment consultant. “But the fact is that they don’t want to do it.”
It is a pretty simple equation, and Lilley, like most of his colleagues, is open about how he sees the firm’s merger prospects.
“Some people have said for years that firms such as ours could get squeezed out of the marketplace, but we’ve seen no reason to believe that’s going to happen,” Lilley argues. “For us, if the model that we have now simply failed to attract the sort of quality of work that we’ve hitherto attracted, we’d have to look at it.”
Lilley adds that he has received on average at least one serious approach every two or three months, but nobody at the firm is under any illusion about what a merger would mean for an operation the size of Travers.
Recent Anglo-US deals have looked a lot more like takeovers than the fabled mergers of equals. The London hierarchies at Hogan Lovells and SNR Denton might argue the toss about their tie-ups, but few would disagree that Hammonds’ merger with Squire Sanders & Dempsey was anything other than an annexation by the US firm.
“A transatlantic merger would be a misnomer,” admits Lilley. “We’d be subsumed. I think we still have something about us that we’d be reluctant to lose.”
That ’something’ is an intangible mix of personalities, the type of work the firm handles and those aforementioned healthy profits.
“If you ask the question, ’Why are we here?’, it’s because of a combination of enjoying the company we keep, enjoying the work we do and enjoying the earnings,” muses Lilley. “We don’t want to be the biggest firm in the world.”
It is a culture that breeds loyalty. Of the 60 partners at the firm, more than half trained at Travers. And the Travers management also points with some pride to the fact that, of the 27 training contracts offered for the 2012 intake, 25 have been accepted.
Strangely, Lilley himself is among the minority of lateral recruits. He interviewed unsuccessfully for a training contract at Travers in the early 1980s before forging a career at Freshfields and returning to the fold in 1995. He recounts the story of facing the same interviewer on both occasions, although that partner was none the wiser until after an offer had been made.
Amusing as the tale is, it nevertheless shows the allure of the place. Travers’ positioning when it comes to recruitment is very much as an alternative to the magic circle but with an offering that mid-tier firms are unable to match.
Brand, not grands
Meanwhile, despite Lilley’s and others’ assurances that Travers’ lawyers are not typically motivated by the money they can make, there is no denying that profitability plays a big part in making a small one-site shop an attractive proposition.
“People don’t come here because they’re money-driven,” says Lilley. “[The profit level] has always been something we want to keep a close check on, but that’s more because it’s tied to our branding.”
Of course, not everyone agrees. “It’s all about the money,” says one former partner.
But given the reliance on transactional activity, part of the deal when it comes to being a Travers partner is that you have to accept some fluctuating fortunes.
A decline in average profit per equity partner (PEP) of 39 per cent to £460,000 in 2008-09 would have been hard to swallow for many. Turnover that year stood at a five-year low of £64.5m.
Last year represented a recovery on the back of a string of good private equity deals, but this came at a price, with a number of redundancies in the associate ranks contributing to a 17 per cent decline in lawyer headcount between the financial years 2008-09 and 2009-10.
Costs have also been kept tight during the recession, as evidenced by the delay to the refurbishment of the firm’s Smithfield offices, which has now been completed. Lilley is aware that cashing in on the good times is something that, historically, has not been considered the Travers way.
Despite the associate exits, at partner level the group has remained relatively stable. Real estate and employment were both hit by retirements, while funds partner Bob Barry’s move to US firm Proskauer Rose was seen as a blow to that practice. But the decline in earning power was not met with anything like the kind of exodus that other firms would have experienced given those circumstances.
Travers has for several years ringfenced 5 per cent of its profit pool for discretionary bonus payments to allow it to cushion sudden drops in PEP. But more than that, the ethos is about educating partners to accept the slings and arrows of the dealmaking landscape - in other words, to stay close to clients and ride out the bad times.
“We’re not fair-weather relationship lawyers and would never want to be seen as that,” insists Lilley. “The sort of good run that we had a year ago takes a lot of luck, but it also came as a result of good relationships.”
That good run included roles on two of the standout private equity deals of the past 18 months: the sale of Pets at Home to KKR by longstanding client Bridgepoint and Apax’s takeover of pharmaceutical giant Marken, with the firm again winning the sale-side mandate. More recently Travers acted for Arle Capital on its acquisition of Candover Partners.
However, all of the above deals are in the firm’s traditionally strong area of private equity and Lilley acknowledges that Travers has been slow to build when times are good.
“In the years when, from a transactional perspective, we’ve been extremely busy, sometimes we’ve been distracted from our determination to expand the business,” he admits. “That’s a criticism you could level at us and something we’re addressing, but we wouldn’t go running out and building a team of people just because we’re busy.”
Margaret Chamberlain’s regulatory practice and a tax practice spearheaded by Kathleen Russ are two of Travers’ boom areas outside of mainstream corporate. The latter has started to offer a pre-transactional tax structuring service - something that is usually the preserve of accountancy firms. Litigation, meanwhile, now accounts for nearly 15 per cent of firmwide turnover.Travers may not want to be seen as anything other than a corporate powerhouse, and an English law one at that. The hire of Clifford Chance equity capital markets partner Charles Casassa in February is a telling admission by Travers that even blue-chip English law outfits need to cover the US angle. Furthermore, if the recession has shown anything, it is that a reliance on big-ticket transactions is never enough.
A world of difference
The one area where Travers Smith stays distinct from many of its rivals is its international strategy.
The firm maintains a close-knit network of best friends in its key jurisdictions. It is a roster that is guarded closely, although it is understood to include Garrigues in Spain, Gianni Origoni Grippo & Partners in Italy, Gide Loyrette Nouel in France and Noerr in Germany.
Like Macfarlanes and Slaughter and May, Travers’ philosophy is to reject the one-stop shop approach in favour of nurturing overseas relationships. In a legal market where globalisation and consolidation are the prevailing themes, it is an outlier of a strategy.
A group of partners, including Phil Cheveley, Andrew Gillen, David Patient in Paris and former managing partner (now senior partner) Chris Carroll, regularly travel the globe with a remit to develop and enhance those relationships.
Lilley plays down how unique this policy is.
“Every firm has a best friends strategy to a greater or lesser degree,” he argues. “We’re distinct in some respects, but not as distinct as people sometimes think.”
Nevertheless, the use of single engagement letters on some deals shows that the firm is keen to convince clients that its international strategy is as formal and coherent as those of competitors that maintain large overseas networks, and one that can service clients equally well.
“The thing that informs our foreign policy is getting the work done and getting the best solutions for our clients, not to get reciprocal work,” Lilley says.