Ebb and flow

It has been an interesting year in the offshore legal world. New offices and associations have been launched, there have been some significant lateral hires and several firms have elected new management teams - signs that this most conservative of legal communities is finally changing.

On the move

There have been several shifts in the rankings in this year’s offshore survey, partly as a result of the changes. Maples and Calder, which was for many years the world’s largest offshore firm before being displaced by Appleby in 2010, has regained the top spot after its hire of seven partners from Walkers.

Mourant Ozannes, meanwhile, has leapfrogged Walkers into third place by both partner and lawyer headcount. Carey Olsen and Ogier have also switched places this year, although Ogier is still bigger when it comes to fee-earners.

Cayman boutique Travers Thorp Alberga (TTA) has risen one place up the rankings with three additional partners, ahead of Gibraltar’s Triay & Triay. Its appointment of Anthony Travers, one of the offshore market’s best-known names, as senior partner last year brought the firm further into the limelight.

Among the smaller offshore firms there was little major change in headcount or strategic direction. British Virgin Islands (BVI) firm Forbes Hare was the biggest mover with the addition of two partners and the launch of a London office.

But several firms are beginning to talk more about looking at office openings or associations in other jurisdictions.

In bigger firms, the practice of opening in new countries is now well-established and last year both Maples and Bedell Cristin set up Singapore offices, Mourant Ozannes opened in Hong Kong and the BVI, Carey Olsen launched in Cayman and forged an alliance in the BVI, Ogier moved into Luxembourg and Appleby set up a fiduciary office in Shanghai.

Eastwards and emerging markets, identified as a theme in last year’s report, continues to be a major topic. Firms that bulked up in Asia in 2012 included Harneys, which invested heavily in its Hong Kong litigation practice, and Collas Crill.

The Asia focus was also seen in some of the management changes in the sector. Appleby elected Hong Kong-based partner Frances Woo as its chairman when Peter Bubenzer retired, while Conyers Dill & Pearman chose Hong Kong partner ­David Lamb as one of its two co-chairs when incumbent John Collis stepped down.

Meanwhile, Ogier also turned to Hong Kong when it decided to split its chief executive function into two, selecting office head James Bergstrom as legal CEO - although Bergstrom has since moved to the Cayman office.

Broad-minded

The increased diversity in the sector has helped firms to another good year. For the second time we asked firms to give an indication of revenue growth (or otherwise). Eleven responded.

The highest revenue growth came from TTA, which said revenue was up 12 per cent, but several other firms also reported strong growth.

Isle of Man firm Dougherty Quinn reported a 9 per cent increase for the 2011/12 financial year ending on 30 September, with an even stronger start to 2012/13. Fellow Manx outfit Cains also said revenue was up, by 3.5 per cent.

In the Channel Islands things looked good. Mourant Ozannes was the largest firm to give an indication of financial performance, saying revenues had risen by 7 per cent, while Bedell Cristin said its law firm revenue had gone up by 5 per cent. Both Carey Olsen and ­Collas Crill simply said turnover was up.

Elsewhere in the world, BVI firm O’Neal Webster reported total growth of 8 per cent in the past two years. Solomon Harris in the Cayman Islands reported growth of 5.4 per cent last year.

Bermuda firms Wakefield Quin and Cox Hallett Wilkinson had a tougher 2012, with Wakefield Quin managing partner Nicholas Hoskins saying the firm’s turnover was flat and Cox Hallett reporting a decline of 11 per cent, set against increased profitability.

Eye on rivals

The changes in the sector are prompting firms to keep a keener eye on their competitors. Our survey this year asked firms to identify which other firms in the offshore market they thought were ‘ones to watch’ during 2013.

Maples and TTA, the two firms that perhaps made the most high-profile moves of the year, were each picked out by two of their competitors. But Appleby, Bedell Cristin, Conyers Dill & Pearman, Harneys, Mourant Ozannes and Walkers also picked up votes for differing reasons.

Maples managing partner Henry Smith says the firm’s growth has been somewhat opportunistic.

“We’ve always been a fairly pragmatic and opportunistic firm in terms of our growth strategy,” he acknowledges, saying that organic, internal growth is as important as lateral hiring. But he adds that the Walkers hires were opportunities too good to turn down.

“We’re always looking to grow all our practice areas and when the opportunity to speak with each of the new recruits came about we were happy to take it,” Smith says.

Like others, Smith sees the further development of the offshore world as being closely tied to the global economy. He reports a strong start for the firm’s Singapore office and predicts the coming year will be driven by clients’ focus on corporate governance.

Focus on value

The economy is also a prime driver behind the success of TTA, according to senior partner Travers.

“The market is reflecting the fact that the high-volume, low-profit model that formed the basis for the multi-office structure of the larger offshore law firm is probably broken for the foreseeable future,” Travers argues. “This places a premium on the firm that is able to add value on a realistic cost basis.”

He says the leanness of TTA’s operation, which keeps costs low by not running a bulky support function and relying on partners being able to bring in work, makes a compelling case for clients. It also appealed to Travers himself when he was planning his return to practice following the end of the restrictive covenants that applied on his retirement from Maples in 2006.

“Seeing the way the market had shifted and this niche that had opened, it was the right time to open a boutique firm with experienced partners providing their services at much lower rates,” Travers says. “Our model has been well received.”

“Work is growing and as more people try us out, the pebble rolls a bit faster,” adds fellow TTA partner Anne Todd.

The other firm attracting attention is Mourant Ozannes, which two and a half years on from the Mourant du Feu & Jeune and Ozannes merger had a strong year in terms of financial, headcount and strategic development. Its BVI and Hong Kong launches were, says managing partner Jonathan Rigby, key parts of its five-year plan.

“Essentially, our strategy is about being a leading firm in four jurisdictions,” says Rigby, pointing to Mourant Ozannes’ capabilities in the BVI, Cayman, Guernsey and Jersey.

However, the firm is also moving back into non-legal services, having recently hired Ed Fletcher from Deutsche Bank in Jersey to head a new corporate services division. The arm will provide ancillary corporate services advice to clients under the Mourant Ozannes name, and will not be as large an operation as the fiduciary businesses sold off by Mourant du Feu & Jeune in 2009.

Offshore recruitment specialist Ed Strickland of Glass Consultancy picks out Mourant Ozannes as a firm that has particularly impressed him this year.

“It has, in my view, the most charismatic, dynamic senior management,” he says, pointing to the firm’s all-equity partnership as an element that has helped create a more coherent strategy. “I think you’ll see the firm making significant advances.”

Strickland says the management changes in the offshore market could make for an interesting 2013, especially for firms such as Walkers. In many ways, 2012 could be seen as a transformative year for Walkers, with the sale of its fiduciary, the loss of its funds team to Maples and the election of Ingrid Pierce as managing partner all being significant developments.

“I think Walkers has got a really good chance this year of a new dawn with the people it has,” adds Strickland.

Split level?

While the larger firms have kept growing, many smaller, single-­jurisdiction firms have remained stable in the past year. That raises the question of whether the offshore legal world is becoming increasingly bifurcated between the big global outfits and more boutique offerings. Many are predicting further consolidation while others, such as the TTA team, are convinced leaner firms are the future.

One thing that has emerged is that offshore lawyers are much more willing to move firms than in the past. There has always been a considerable amount of associate-level hiring by offshore firms from onshore firms and the bar, and this has continued, but 2012 saw perhaps more movement at partner level between offshore firms than there has been.

Strickland suggests that the opening of new jurisdictions has made it easier for hiring firms to circumvent restrictive covenants. Someone can more easily leave a firm in Cayman to practise Cayman law for a different firm in Hong Kong than jump ship to another Cayman office.

However, the changing shape of the market and the varying economic climates may also have contributed to the flow of lateral hires. Accordingly, the coming year, with uncertainty still hanging over the global economy, could continue to be busy for Strickland and his peers in the recruitment sector.

Work-wise, offshore firms expect a focus on transparency, corporate governance and tax issues in 2013 as onshore jurisdictions keep the pressure on the offshore world. Whatever else happens, this year looks set to be an interesting one for the sector.