Tough at the top
6 August 2013 | By Hannah Gannagé-Stewart
4 February 2014
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DLA Piper managing partner Nigel Knowles on the prolific growth of the firm.
For the second consecutive year DLA Piper can claim to be the largest British-headquartered firm in the world.
In 2010/11 DLA topped the table with turnover of £1.4bn. Over the last year the firm has added another £100m to that figure and growth at the firm is relentless.
For managing partner Nigel Knowles all this must have seemed like a pipe dream when he stepped into the role in 1996. Knowles has become one of the profession’s best known figures and many that are familiar with him might have predicted his success at the outset of his tenure.
A year after he stepped into the role, Knowles set out his vision for the firm. The advantage of being in a larger firm, he said at the time, was being able to offer comprehensive service, geographical coverage, and critical mass. “That”, he said, “is what you have to offer to be relevant to corporate clients”.
It is a vision that remains largely unchanged today. In that time, Knowles and his management team have built up a global law firm, separated into its international (Europe, the Middle East and Asia-Pacific) and US components under a Swiss Verein structure, with global turnover of £1.5bn.
The figures do the talking. Global net profit went up 8.5 per cent from £351m to £381m at the end of the 2012 calendar year, giving it a profit margin of 25 per cent.
DLA Piper’s net profit is calculated on the basis that only those receiving a salary of more than £400,000 qualify as equity partners. Yet last July DLA switched to an all equity partnership model gifting it a windfall of £30m. The move was aimed at reducing the exposure to bank lending.
Knowles said there were other factors behind the move: “[The switch to all equity] was done for a number of reasons: to align us with the US side of the firm, to give everybody the same interest in the firm and to take away artificial barriers to earning.”
A year on and Knowles says the change has had an impact on culture at the firm. “It’s difficult to say if it has had a financial impact but partners sense of belonging in the firm is improved,” he explains.
DLA Piper reports only those 462 partners earning above £400,000 as equity partners. At that level average profit per equity partner (PEP) stands at £825,171.
Calculated on the basis that all 1,301.7 partners in the global firm are in the equity, then PEP would drop to £292,870 – a 64 per cent drop. That would shift DLA’s PEP figure out of the top 10 UK firms, down to about 60th.
Perhaps that wouldn’t be a fair reflection of what has been achieved by Knowles et al.
Knowles’ strategy for growth has changed little since 1997. He still uses the same soundbites to hammer home his vision.
“We want to be a leading global business law firm with a full range of practice groups and expertise, and we’ve got differentiation globally, in practice areas and sector expertise,” he says. It is a line that could come from any partner in a top 10 firm, but it doesn’t make it less true.
Where DLA has managed to steal a march on competitors, Knowles claims, is by responding quickly to client needs (another management line there).
“We’ve seen that more people are aware of the firm and favourably disposed to the firm than they were,” says Knowles. “So we’re focused on doing more work for clients we share and less for those that we don’t share.”
Essentially, this means putting more effort into selling across departments and jurisdictions. If one part of the firm is acting on work for a major multinational, Knowles wants as many sector departments and local offices as possible being instructed by that client, unlocking as much of their legal spend as possible.
The rapid rate of consolidation and growth of the profession cannot happen without sacrifices and DLA is no exception.
In November the firm put 251 staff on notice of redundancy consultation following a review of its domestic business (13 November 2012). DLA went on to confirm the closure of its 75-staff Glasgow office in January (24 January 2013).
“We have a concept called One DLA in the UK – so we’ve taken out some inefficiencies,” Knowles says. “We have work that’s secured in London and undertaken in regions [and] we took out excess capacity.”
He continues: “We did what we did and we’re now fit for purpose and taking market share.”