Buchanan: what went wrong?
Buchanan Ingersoll's London office is faltering. The original strategy of building a practice around PFI and projects work was shelved last year and, for the partners attracted to the firm on the promise of building a new office from scratch, the only option has been to hunt for new jobs. The question now is: how did it all go wrong?
The London office was launched in January 2000 with a six-partner team poached from Beachcroft Wansbroughs. The team, headed by Barry Francis, was rated highly, particularly for healthcare. Healthcare synergies and the fact that Beachcrofts and Buchanan had enjoyed a work-sharing relationship boded well for the office. The team accounted for around 4 per cent of Beachcrofts' £62.5m turnover in 1999. The team was therefore worth around £2.5m.
At approximately £60 per square foot, Buchanan spent an estimated £900,000 on its 15,000 sq ft space at the prestigious Tower 42, with an option for an extra 6,000 sq ft. Add other set-up costs, salaries and insurance and the firm invested up to £3m in putting its London office together. In last year's Am Law 100, Buchanan was ranked 86th, with a gross revenue of $179.5m (£123.1m) and average profits per partner of $515,000 (£353,200).
Few London offices of US firms make money in the short term. But with work coming from Buchanan in the US and a revenue stream from the Beachcrofts partners, London should have been safe from the chop for a couple of years. One partner said: "Creating any new business takes a certain amount of time. The Buchanan name wasn't known in the market at all, so a lot of what we had to do initially was profile raising."
At some point during the next 18 months, the plan went awry. A series of additional lateral hires in practice areas including intellectual property, media, tax, banking, private equity and technology gave the firm the feel of a legal collective. The original plan had been to spin off from the core PFI practice into corporate, banking, property and tax, taking it to its 50-lawyer target. The areas brought on board did not gel, or at least not as quickly as Buchanan wanted.
One reason often cited for the Buchanan contraction is that it simply did not allow its bolt-on partners sufficient time to bed their practices down. One former partner said: "They committed for a number of years, but they got cold feet." The firm also spent a lot of money on an abortive strategy.
A source at the firm commented: "If you have one loose thread, it all comes apart." Lawrence Bruce was the first of the original pack of partners to leave Buchanan. He was not able to comment on his time at the firm, but said: "I'm very, very happy at Field Fisher Waterhouse."
The writing was on the wall when Bruce departed. In June 2001 Thomas Van Kirk, chairman of Buchanan's management committee, told The Lawyer: "We've decided to focus our activities in the UK on the consulting practice and various other practices that we've been adding, such as corporate, IT and insurance." Managing partner Francis was next out with a move to Pinsent Curtis Biddle.
Instead of PFI and projects, the firm will refocus on Steven Blair's insurance and reinsurance practice and handle corporate work for US clients when necessary. Chief operating officer Marion Dunn anticipates slower but consistent growth in the future.
Spokesperson Lori Lecker said: "Buchanan Ingersoll is remaining in the London market. We're proceeding in accordance with the plans we discussed earlier this year when we announced we were re-examining the business model in London and reorganising the office."
Although Buchanan has been upfront and bullish about its decision to shift its strategic focus in London, insisting that it is here to stay, shedding partners and associates is generally best avoided.
The general consensus is that a provincial US firm does not really need to pursue international expansion unless clients require it. Pittsburgh-based firms have not been the vanguard of global domination. Local rival Reed Smith opted for a merger with UK firm Warner Cranston to give it instant large-scale UK capability. It has also benefited from the Buchanan fallout, taking partners Jerome Mansmann and John Muolo. One Reed Smith partner said: "Going it alone, as Buchanan did, was always going to be difficult."
One ex-Buchanan partner said that, given the prevailing economic conditions, US partners were wary of bankrolling an unprofitable office on the other side of the Atlantic. He added that over-optimistic targets had been set for London and, when the reality failed to match expectations, US partners were inclined to pull the plug.
Who knows whether playing a longer-term game may have reaped rewards. Certainly, the three partners who joined Addleshaw Booth & Co have had a storming time since leaving Buchanan. Diane Wilson, David Hartley and Michael Park joined Addleshaws last September, doubling its PFI practice. The move has paid dividends - last year the enlarged team scooped three new hospital PFI projects in a month.
One former Buchanan partner suggested that it might have been better simply to remove the management responsibilities from Barry Francis's shoulders. This would have enabled him to concentrate on fee-earning and driving the group forward. Francis did not return calls requesting comment.
The impression given by those who joined Buchanan only to find themselves surplus to requirements is that the office lacked a clear vision of how it would achieve its intended growth. Without this, grassroots partners in the US became increasingly unhappy about sustaining an office that many thought did not need to exist in the first place.
Buchanan in London is a case of 'we came, we saw, we went away to think about things, but we'll be back eventually'.
| From fifteen partners to four in one year | |||
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Oct 1999 | |||
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