City: The battle of mid-way
17 June 2013 | By Natalie Stanton
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It’s all kicking off in the mid-level corporate sector, with upstarts such as RPC, FFW and Irwin Mitchell looking to cash in as discerning clients look for value. By Natalie Stanton
There are changes afoot in the corporate mid-market. A number of firms that are not traditionally renowned for their corporate ventures are slowly but surely beefing up their business service offerings.
Take RPC and Irwin Mitchell. They are two very different firms but both are taking bold steps further into the corporate arena. How will they go about this and what effect will it have on the corporate market in general?
The move towards corporate work does not seem an immediately obvious one for a firm that is almost 50 per cent insurance-focused, such as RPC. However, it has been on a lateral hiring spree of late.
In early 2012 the firm picked up a three-strong team of corporate partners from Wragge & Co, including former managing partner Richard Haywood, head of corporate Maurice Dwyer and David Marshall. Just last month it made another notable hire, bringing in Anthony Shatz, a corporate lawyer with a real estate focus, fresh from a five-year stint at SJ Berwin.
As it stands, RPC’s corporate team consists of 41 lawyers and 13 partners. The group’s revenue blossomed by 20 per cent in 2011/12 and the firm is confident it will be able to announce a similar level of growth this year. This looks likely given its preliminary firmwide results for 2012/13, released on 11 June. RPC’s total revenue jumped by more than 20 per cent in the past year, from £68m to £82.1m.
The firm’s corporate head Tim Anderson says: “Our strategy is to grow a profitable corporate commercial practice, acting for FTSE 100, FTSE 250 and multinational clients. We have a long history of acting for that type of client base, and we want more of that kind of work.”
So far, so good. The firm has a range of FTSE 250 clients on its books including Amlin, Carillion and UBM. In 2011 it advised Daily Mail and General Trust on corporate aspects of the tie-up of property sites including Findaproperty.com with Zoopla.co.uk. More recently, it advised Sports Direct on its purchase of ailing retailer Republic.
So how does Irwin Mitchell compare? This litigation-heavy firm is also fostering corporate ambitions, hedging its bets for growth on its business legal services division.
CEO John Pickering has stated he wants to increase the firm’s “relatively modest” corporate transaction capabilities.
According to Jon Vivian, head of real estate and business legal services in London, “We’re looking to grow our corporate offering and critical mass to be the best we can. We’ve been involved in a number of large corporate real estate deals recently.”
The group has added 12 new
partners since June 2012 including Nabarro corporate partner Andrea Cropley, Nabarro banking partner Dean Gormley, and Squire Sanders banking duo Andrew Watson and Jon Bew. The group is now home to 72 partners and 110 solicitors in
total. It is yet to take a slice of the FTSE 250 pie but its clients are
becoming increasingly prominent and international. In September 2012 the firm advised Dutch property Redevco on the sale of a €200m (£160.8m) property portfolio to Blackstone in what it claims to be its first-ever international property deal.
RPC and Irwin Mitchell are not alone in their corporate adventures. Other firms not necessarily known for their corporate offerings are puffing out their transactional chests. Field Fisher Waterhouse (FFW) is trying to grow its corporate side, recently described by managing partner Michael Chissick as “underweight”. The firm announced that Eversheds’ ECM head Neil Matthews will be joining in August, and it has a raft of further corporate hires in the pipeline. Almost bed-fellow Osborne Clarke is on a similar track, pinching Eversheds’ UK head of corporate Mark Spinner in February.
Andrew Blankfield, corporate chief at FFW, explains: “We’re certainly looking to build quite substantially. Like many other firms we’ve been treading water a bit in the worst of the recession. There is now a real opportunity for us to build our corporate group, which is a profitable business in itself and a feeder to other parts of the firm.”
So why now, and how will these firms go about this? Well, it is largely a result of increasing client sophistication. As a result of their purse-strings being tightened during the recession, clients are becoming increasingly discerning about the true strengths of law firms, as well as about the value of legal services to their business.
According to Ashurst global corporate head Stephen Lloyd: “We tend to see the magic circle firms showing more of an interest in the FTSE 250-level companies during down periods, but focusing on them less when times are good.”
Huge bet-the-company deals are still likely to fall at the feet of an elite cluster of firms, but for smaller scale projects up-and-coming business services teams may be in with a shout.
Anderson says: “We want to be seen as peers to the magic circle, not necessarily on the largest deals, but definitely on the upper mid-market and significant or complex transactions.”
Ambitious words from a firm that just sneaks into the top 50 of the UK 200, but not an altogether barmy one. For example, as a member of HMV’s legal panel, RPC was instructed on the acquisition of nine Zavvi stores. Anderson led on the deal alongside corporate partner Karen Hendy. However, the client opted to utilise longstanding banking adviser Linklaters to lead on the chain’s subsequent administration.
Winning a sizeable chunk of market share comes down to getting the right clients at the right price, so pitches involve treading on dangerous ground. Firms are likely to emerge from a competitive tender either licking their wounded pride or cutting their fees to compete.
As Lloyd puts it, “Discounts are now more or less the norm, not the exception.”
This is particularly true for mid-sized firms, whose client work tends to be less institutionalised and more relationship-driven. Rather than focusing on pitches, many smaller firms are finding value in solidifying new and existing relationships.
Anderson says: “If you build relationships with big corporations they’re not as price-sensitive.”
To this end, and given ever-increasing market segmentation, a robust sector focus will also stand these firms in good stead.
Blankfield explains: “We’re expanding our equity markets horizon up from our traditional AIM patch and at the same time looking to significantly build our M&A practice. We’ll do that on a sectoral basis which makes sense for a firm where we are in the market. Realistically, mid-sized firms have different routes to market – different geographic and industry sectors.”
For RPC, these are insurance, media and technology and real estate.
“We’re building relationships by offering a first-class service,” notes Anderson. “It’s not about the price but about the quality of what we’re offering.”
Lateral hires will also be key to these firms’ success in the corporate field.
Blankfield says: “The ideal hire is someone who brings contacts but can also work with existing team clients whether in corporate or other parts of the firm.”
Take Shatz, for example. He declined to comment on whether he will be bringing any clients from his SJ Berwin practice to RPC, but bolting on the likes of AXA, British Land, Delancey and Westfield Shoppingtowns would be an enormous heist for the ambitious team.
If all goes to plan and these mid-sized firms succeed in nabbing valuable corporate market share, how will this impact the rest of the market? Should more established corporate firms such as Travers Smith, Macfarlanes or SJ Berwin be trembling in their boots?
“It depends who they recruit,” says Spencer Summerfield, head of corporate finance at Travers. “If they recruited a good guy, maybe they’d be considered more of a threat.”
As ambitious corporate upstarts like RPC and Irwin Mitchell continue to arm themselves with the tools necessary to crack the corporate arena, the established mid-market would be advised to take note.
For those mid-market firms with a more substantial international presence, such market shifts could signal a change in focus.
As one global corporate head notes, “If mid-market firms are competing more heavily on the national level you’ll see more firms like us looking to our overseas networks.”
Either way, one thing is clear – there is a new power struggle in the mid-level corporate market. Firms will have to consider their pricing, hiring and sector-focus models, and find innovative ways to court new clients if they are to come out on top.