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8 October 2015
The face of Birmingham's mid-market is changing. Although, arguably, once dominated by Martineau Johnson along with the Birmingham branch of Cobbetts, recent months have seen an invasion of firms seeking to grab a share of the spoils.
Bristol-based Bevan Brittan and neighbours Beachcroft and Clarke Willmott, Nottingham-based Browne Jacobson, Leicester-based Harvey Ingram, Norwich-based Mills & Reeve and Northampton-based Shoosmiths have all announced, or demonstrated, their intentions for major growth. A host of smaller, local firms also claim to be upping their game in the city.
With more than 10 firms now fighting over a work stream once dominated by a small handful, the question is whether there is room left for any new joiners. And more pertinently, is there enough work for those there already?
The new order
The jam in Birmingham's mid-tier stems from a mixture of newcomers and aspirational incumbents.
New challengers include Harvey Ingram, which launched a Birmingham office in April this year, and Putsmans, which is to merge with £8m outfit Shakespeares. Putsmans and Shakespeares are both Birmingham firms and the merger, effective from April 2007, will form a £20m player (The Lawyer, 16 October).
Clarke Willmott opened an office in Birmingham in August 2004. In a clear signal of its ambition, it acquired four-partner, £1.4m corporate and commercial Birmingham firm Vernon & Shakespeare six months later. It then moved to city centre offices in November 2005. Any lingering doubt about the firm's intent was removed this October, when it concluded its strategy review with the news that it was planning an aggressive expansion of its 10-partner Birmingham office, particularly in banking and finance, and corporate.
Cheltenham-based BPE Solicitors opened an office in Birmingham four years ago as it perceived the nearest major city to its Cheltenham headquarters, Bristol, to be dominated by Osborne Clarke and Burges Salmon.
As with Clarke Willmott and others, BPE's six-partner Birmingham team recently decided to ramp up, moving into new offices in the city centre last month. Aiming squarely for the mid-market, managing partner John Workman says the firm "aspires to be a sensible alternative to Cobbetts or Martineau, not to Wragges, Eversheds or Hammonds".
Workman describes the present Birmingham mid-market as "hostile" and says "breaking into it isn't easy". But like all of the newcomers, he is bullish about the possibilities. "It's a fierce market, but so what?" he says.
Shoosmiths' Birmingham office, which opened in 2003, has already expanded aggressively, making 14 lateral hires during the past 18 months, and growing its turnover by 81 per cent in the past year (The Lawyer, 27 November).
Meanwhile, Mills & Reeve has grown its Birmingham presence far faster than its bases in other locations. When Birmingham managing partner Guy Hinchley took over the office in 2001 the firm's total partnership numbered 57, of whom just seven were in the Midlands. Fast-forward five years and the total number of partners has increased to 78 (a rise of 36 per cent), while partner numbers in England's second city have more than doubled to 15. Firm turnover increased from £27.3m to £49.1m in the same period, a 79 per cent increase, while in Birmingham it quadrupled.
In October Mills & Reeve also elevated Hinchley to managing partner of the firm as a whole and, tellingly, has tried in recent months to steer its brand away from the term 'Norwich-based'.
Mills & Reeve senior partner Mark Jeffries says: "Birmingham is benefiting from good conditions, but also from a lot of confidence in itself."
He points to organisations such as Birmingham Forward and Birmingham Future that have helped the city to punch above its weight and have given confidence to local firms that the work stream will continue.
The way in
"Markets are parochial, and if you're coming in cold it will take two to three years before you've made your mark," says Paul Ray, head of Browne Jacobson's office in Birmingham, which opened in 1999. "If you want to get going more quickly, then you have to lateral hire."
Ray argues that there are four possible methods of getting into the city: lateral hiring; tapping a niche; mixing work won in the city with won outside it; and the 'slow-burner' approach of starting with people sent in from outside and slowly building the practice over time.
But while lateral hires may fast-track growth, they can also undermine firm culture, as a new office staffed with new people often fails to integrate into the wider network.
Mills & Reeve's Jeffries says his firm is making an effort to maintain its overall culture, but other firms are "hiring wherever they can". He says: "It's a choice of whether you want to build something sustainable in the long term, or whether you want to go for a quicker but short-term, production-line model."
Mills & Reeve's Birmingham strategy is to tap niche practice areas for which it is famous elsewhere, namely healthcare, NHS and private client work. Health clients include Nottingham Healthcare Trust, Sandwell and West Birmingham Hospitals Trust, Portsmouth Hospitals Trust, Shropshire County Primary Care Trust, and health authority NHS Blood and Transplant. Jeffries adds that the firm is also playing "a longer-term game" of building commercial and corporate strength, but has eschewed the rapid-fire hiring policy used by rivals.
The strategy makes sense. With rocketing property prices and increasing competition for mainstream work, dipping your toe into the water with an established strength is a safer option than a full-scale plunge.
Browne Jacobson's Ray agrees. "In the Birmingham mid-market there are a number of new players, but they're not full service," he says. "New firms can't just come in as a 'me too' and put up their brass plate. They need to have a differentiator to support their bid."
Opened in 1999, Browne Jacobson's Birmingham office contributed around £12m of the firm's £74.7m turnover last year. It splits its revenue streams between corporate and its specialisms of insurance and public sector work.
Bevan Brittan is another to have opted for the 'existing strengths' strategy. Although it is seeking to boost its numbers in both corporate and employment, the firm's Birmingham branch does a lot of healthcare work, and also specialises in pensions.
Bevan Brittan's Birmingham office head Sara Woffenden also recommends firms hedge their bets by ensuring a split work stream between Birmingham work and that gained outside the city. "We're working out of Birmingham, but we're not geographically dependent on it for work," she says. "If we were serving the traditional Birmingham industrial or car markets, I'd be a lot more worried."
All of the firm's tax and pensions work is handled in Birmingham and the office also deals with health, employment and local government work for clients including the London-based Pension Protection Fund, Bedfordshire-based Laurel Pub Company and Bristol City Council.
Another problem for new entrants to the market is Birmingham city centre's escalating property prices. While Birmingham once offered temptingly affordable rents, its commercial centre is limited from further growth by a "concrete collar" of roads and flyovers, and has consequently become crowded and expensive since the mid-tier invasion.
Bevan Brittan opened an office in the city in 2001 and moved from Alpha Tower, outside the city centre, to 20,000sq ft offices at the central Interchange Place in 2004.
"I'm glad we moved when we did," says Woffenden.
Despite the confidence of his new rivals, Graham Muth, head of Cobbetts' Birmingham office, claims that the current opportunities for new firms are unlikely to continue.
"The West Midlands has reinvented itself, and one of the reasons that firms have come in is because of confidence in the work in the region," he says. "But ultimately if the numbers don't add up, someone's got to go."
Some firms have already bowed to the pressure. Although Beachcroft, for example, boasted an 18 per cent increase in turnover at the financial mid-year (www.thelawyer.com, 13 November), the firm has since withdrawn its two-partner professional risks practice from Birmingham after admitting that it has not delivered.
"We feel we're going for the top-tier work, and the deals we're doing now don't bear any resemblance to the deals we did five years ago," he argues, citing the firm's involvement in the £40m Project Ore private equity deal this month, its role acting for UK-listed Scarborough on its £80m double reverse-takeover of two Australian-listed mining companies, and its involvement in the $35m (£18m) Astrac deal, in which it handled the sale of employee-owned software developer Astrac to US technology group Rocket Software.
Muth says Cobbetts is "as busy now as ever", but for all his bullishness, the firm has lost a stream of lawyers to new competitors. In November, Cobbetts lost Birmingham commercial head Simon Bates to newcomer Harvey Ingram's commerce and technology practice, while in September, local banking head Duncan Murray quit to join Midlands firm Needham & James.
"We have to be wary of everyone, but I don't feel that our main competitors have changed in the past two or three years," says Muth. "Our experience has been that the newcomers haven't made a difference. None of the new people have registered on our Richter scale."
That aside, Cobbetts' ambitions to tap bigger deals mirrors those of other firms traditionally associated with the mid-market. Shoosmiths, for example, posted excellent mid-year results which it attributed to bigger-ticket work - offering its role advising residential developer Persimmon on the £98m regeneration of the Rugeley Power station site, advising Wolverhampton & Dudley Brewery on its newbuild programme of 20 new sites, and contentious and non-contentious work for Electrolux and Peugeot as examples. The firm has also recently made associate hires from the likes of DLA Piper, Eversheds and Wragges, out of a total 14 hires in 18 months.
Shoosmiths' Joel Kordan says the firm does not look to compete with the mid-market firms, but with Wragges and Eversheds. "We take work that would otherwise have been done in the City," he claims.
The reality may be more prosaic. As with other regional cities, as the bigger firms target top-tier and international deals, gaps are opening up for the firms in the tier below. As Mills & Reeves' Jeffries puts it: "Lots of traditionally mid-market players are competing for crumbs from the Wragge & Co table, while Wragges itself is going international."
But there are only so many crumbs available. Cobbetts' experience in losing some of its stars to the competition is unlikely to be an isolated example if the current focus on Birmingham continues. As Jeffries puts it: "Birmingham is England's second city and it's ambitious, but ultimately there will have to be consolidation."