Can West End property forms survive?
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The last 12 months have seen a significant number of mergers among West End firms. Last year the spotlight focused on niche media and entertainment practices; this year it has been the turn of niche property practices. But against this background of mergers, what of those firms whose current strategy is based on independence? Why have some firms managed to thrive in a marketplace that has driven so many to merge?
The short answer is having a skills set and critical mass appropriate to the transactions on which a firm wants to act. Having strength in depth outside the property arena is key to remaining independent in today's West End marketplace, and a credible corporate department is of paramount importance.
The transformation of the property market in recent years is one of the major factors behind today's merger trend. Many of the developments began more than a decade ago and it is the speed at which a firm recognised these changes and its ability to adapt that has engendered success, or otherwise.
The climate of today's property market is very different from the heydays of the 1980s. The increasing sophistication of property ownership and advances in the financial markets have all made their mark on the structuring of the real estate business. As all areas of commercial transactions have become more complex due to the popularity of tax-driven structures, so the demand for the combined skills of property, tax and corporate lawyers has increased. Quite simply, the cross-disciplinary team has come into its own.
Most firms recognised the need to adapt to these developments some time ago, but for a substantial number in the West End, a management conundrum existed. In order to build up the corporate skills required for the new-look property teams, how could firms attract good corporate lawyers if they were only offering the opportunity of a support role to a property practice? Most able corporate lawyers would have greater ambitions for practice development.
Fladgate Fielder first articulated its views on these developments in the early 1990s. Its business plan of the time considered how it needed to adapt to remain at the forefront of its marketplace. It believed strongly that no commercial firm could be credible without corporate expertise, and its recruitment strategy sought to take advantage of a time of downturn. It was easier to attract strong corporate candidates in a difficult market for employees.
Although the firm initially brought in expertise to develop a standalone corporate practice, this approach has also benefited the development of the property practice. Practically all of Fladgate's larger property transactions now involve property and corporate colleagues working together as one team. As far as the City is concerned, this is nothing new. For property-based practices in the West End, however, this has been something of an innovation and has involved a steep learning curve.
Given the natural rivalry that exists in partnerships, it seems likely that some readers may be bemused as to why a property departmental head would extol the virtues of his corporate peers. My response is that corporate expertise is a necessity in any of today's major property transactions; to think otherwise is perhaps what has made many of the niche property practices vulnerable.
So, is it still viable for those firms which are struggling to maintain their independence in today's market to pursue a similar strategy? Nothing is impossible, but the sophistication of today's market will make it much harder. Indeed, it is a matter of public record that firms such as McGuinness Finch understood only too well the need to develop their corporate capabilities, but failed to find a team. However, with the projected downturn starting to bite, conditions similar to those of the early 1990s may soon exist for those firms brave enough to take a strategic recruitment gamble. If the experience here at Fladgate is anything to go by, then my advice would be to go for it.
Allen Cohen, partner, Fladgate Fielder