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How to tell if the Charles Russell Speechlys combination will work out
How do you judge the success of a law firm merger? For Speechly Bircham and Charles Russell partners, who voted last week to combine in November, judgment day is a few years off, but there are some clear markers.
Let’s start with the overheads. Both firms took on flashy new City offices just as the credit crunch took its grip, in 2008 and 2009 respectively. According to The Lawyer’s UK 200, combined rent and rates at the two firms for 2012/13 totalled £8.9m.
Speechly took on 80,000sq ft over six floors at New Street Square, before gradually reducing this to about 64,000sq ft. Rent and rates cost the firm £3.5m. Charles Russell, on the other hand, resides in 78,000sq ft at the City’s 5 Fleet Place, which costs it an annual £5.4m.
It is not lost on Speechly’s managing partner James Carter and Charles Russell’s senior partner Christopher Page that this is one overhead that needs to give.
“It’s obvious that we want to get together under one roof,” Page says, adding, “Our priority for next week is to talk to landlords and our adjoining tenants”.
But there are bigger plans afoot. Once the two firms have smoothed out issues with IT infrastructure, they will relocate staff between their offices which are, fortunately, a stone’s throw from each other.
In addition, support staff are to be moved out of the City and into legacy Charles Russell’s regional offices in Guildford and Cheltenham.
It’s an efficiency drive intended to appeal to clients and partners alike. As Page puts it, “office space is at least £60 per square foot in London, and more like £15 in Cheltenham”.
While the pair are making their bid to manage overheads, they cannot ignore the need for growth.
Charles Russell has just hit a 10-year revenue high, pushing up turnover by 6.5 per cent, to £73.4m. Revenue from its six international offices accounts for about a third of total fee income. The combined firm will want to maintain this.
By contrast, growth at Speechly has stalled in recent years, although the firm did open four international offices between June 2011 (Luxemburg and Zurich) and November last year (Geneva and Paris). Revenue has hovered around the £57m mark for three years, dipping from £57.5m to £56.8m at the latest year-end.
There will be a push for growth outside the UK for the combined firm.
“The balance of the firm will undoubtedly shift to become more international,” says Page. “That’s a great driver. It gives us extra ability to invest in our international presence.”
Some consolidation has happened already. Charles Russell has some lawyers operating from Speechly’s office in Luxembourg, while in Geneva Speechly staff are preparing to move into Charles Russell space.
For Carter and Page – both of whom will retain their titles in the new regime – there’s a sense the merger is an opportunity to conduct a major overhaul.
In five years’ time, partners will be able to judge the success of this merger by whether Charles Russell Speechlys has taken control of its rental burden and achieved revenue growth outside the UK.