Focus: Simmons & Simmons: City slippers
10 January 2011
10 January 2011
10 December 2010
16 February 2009
28 March 2011
21 June 2010
Dawkins’ revolution from the top has made little difference to Simmons. Is merger the only option left?
Where is Simmons & Simmons going? Shortly after Mark Dawkins took over as managing partner the firm was ahead of Norton Rose in terms of both turnover and average profit per equity partner (PEP). Five years on and Norton Rose has pursued a coherent growth strategy, including mergers in Australia, Canada and South Africa, overtaken Simmons on PEP and broken through the £300m revenue barrier, with Simmons lagging £50m behind.
The last term of Dawkins’ tenure has seen the development of a seemingly piecemeal international vision: the firm closed its offices in Funchal, Lisbon, Padua and Rotterdam; it also shut up shop in Moscow just two years after launching there. But at the same time the firm wants to open in Dublin and Beijing.
The Dublin launch, coming in the aftermath of the meltdown of the Irish economy, is not as mad as it first appears. Simmons wants a niche offshore funds practice rather than a full-service offering. But just as in Beijing, where it plans investment four years after its licence application was revoked, progress is slow. For all Dawkins’ energy and ideas, Simmons has just not taken off.
Lows and highs
When it comes to global growth plans, who can forget the botched attempt to secure a US merger through the on-off talks with Mayer Brown?
Elsewhere, both financial services (where clients include Bank of America, Deutsche Bank and Standard Chartered and which accounts for almost half of firmwide revenue) and corporate have predictably taken a battering in the current market.
Simmons, though, still has some of the best lawyers in the City, one of the best funds practices, its litigation department continues to go from strength to strength with wins on the Buncefield and bank charges disputes, and the past year or so has seen panel wins for the Treasury, the UK arm of Standard Chartered and the Europe, Middle East and Africa (Emea) branch of Citigroup. All is not lost.
“There’s nothing wrong with Simmons,” argues a well-placed source. “But you need to have a reason to go to a firm - either [because of] the brand, because it’s innovative or because it’s good value. In certain areas Simmons fulfils that - in life sciences and structured finance, for example.
“It’s a good firm, it has good lawyers, but when you put it all together, what’s the point of Simmons?”
This year marks the potential for change. From May it will have a new managing partner in the form of international financial markets practice and financial institutions sector head Jeremy Hoyland, while it is widely expected that the incumbent David Dickinson, who has been at the helm of the firm for 12 years, first as managing partner and then in his current role as senior partner, will step down when his term comes to an end in June.
But will Hoyland and the as yet unnamed senior partner take action to address the firm’s problems, build on its achievements and reinstate Simmons to its place among the top brass of the upper mid-market?
All quiet on the Simmons front
Simmons is one of the least open firms when it comes to discussing its procedure for appointing new management.
It declined to comment on the process surrounding nominations or the managing partner vote itself; there was silence on the timetable; and it refused to confirm the identities of either of the candidates until after the result was announced.
On paper the election, which took place shortly before Christmas, was a two-horse race. Hoyland was up against the formidable Germany head Hans-Hermann Aldenhoff, who reportedly received many of the votes of the international partners. But it has been suggested that Aldenhoff’s candidacy was designed merely to provide an alternative to Hoyland, the chosen favourite.
This claim was rejected by both Dawkins and Hoyland. But after the result was announced Dawkins did make the following, potentially nuanced, comment. “Any managing partner’s responsibility is to try to have a succession plan. That’s always difficult when talking about elected succession,” he stated. “The best I thought I could do was to try to ensure we had the right pool of people so the partnership had a real choice. I can create an environment in which they have a choice.”
As head of the firm’s largest-billing sector, and an area from which Dawkins hails, Hoyland was seen as having been groomed for the managing partner role.
He is not speaking about his plans at this stage, but the expectations are that the partner does not represent in practice a radical change in direction from that of Dawkins, with whom he is close.
So what has Dawkins’ legacy been?
A major element has consisted of developing a sector focus and slimming down the list of global clients into a core list of 100. The sectors include energy and infrastructure, life sciences, TMT and financial services, but is overwhelmingly dominated by the latter. Clients are divided into the Global 25, the largest-billing clients with global reach, and the remaining 75, for which the firm bills between £500,000 and £1m in one or two jurisdictions. Dawkins argues that revenue from the list has increased by around 16 per cent during the first six months of this financial year, but has not analysed revenue change outside the core list.
This finance-heavy focus saw revenue and PEP shoot up in the first term of Dawkins’ management, only to plummet in the second (see PEP and turnover graphs, page 15). Figures are now recovering due to financial services-related litigation and cost-cutting.
A former partner puts this emphasis down to the “Linklaters syndrome” - the belief that the firm should, like the magic circle giant, be first and foremost a finance and corporate firm, with the “other” sectors tacked on as support functions.
If Simmons’ core client strategy looks familiar, Linklaters has been doing something similar for several years. Indeed, it sought to perfect the model through its ’New World’ programme.
But the former partner is scathing of the approach. “You can’t compete in terms of financial means or brand with Linklaters, you can only do so on pricing. Simmons [is trying] to copy Linklaters without the financial capacity. It’s not an internationally minded culture. Simmons is London-centric, it’s a very British, conservative law firm.”
But the firm’s advanced merger talks with Mayer Brown, which were well-received by Simmons’ partners, could hardly be considered ’conservative’.
“As far as merger goes,” comments one partner, “the Mayer Brown thing would have been a good one. If something else comes along that’s similar to that, we’d be pretty open. It would give us credibility as a bigger player.”
The deal was thought to have failed because of the reluctance of Mayer Brown’s US partners to bed down yet another merger in a short period of time. But although Dawkins states that the firm is not “actively pursuing any US mergers”, he is convinced that general counsel of major clients are increasingly prioritising advisers with global capabilities.
Kent Zimmerman at US law firm consultancy Zeughauser Group, which advised Lovells on its tie-up with Hogan & Hartson, explains the ongoing attraction of a transatlantic deal for UK firms such as Simmons.
“With the US generating three-quarters of the global revenue of the [largest 10 global firms], and US litigation comprising a greater share of the global revenue than the entire gross revenue of the non-US litigation market, it’s implausible for any firm to be among the pre-eminent global law firms without having a robust US litigation practice and breadth and depth in at least two or three strategic US geographic markets,” says Zimmerman.
He thinks that if firms such as Simmons are unable to get the kind of deal with a good-quality upper mid-market US firm they would like, they may opt to tie up with firms possessing niche capabilities as an interim measure.
But those watching Simmons argue that it needs to take more stringent action to reverse declining profits if it wants to be attractive to potential merger partners.
Location, location, location
In management circles a common maxim is, ’If all else fails, merge’. But while this may be seen as having greater currency with the likes of the SNR Denton and Squire Sanders Hammonds deals, the same cannot be said of Simmons-Mayer Brown.
A combination with Mayer Brown would have made strategic sense for Simmons by immediately gifting it a platform in the fast-growing East Asia economies, which is an (as yet unrealised) strategic objective.
The firm has suffered setbacks in the region since regional managing partner Huen Wong left with a team of seven partners for Fried Frank in 2006 and at the time withdrew its licence application for a Beijing office.
The international partners conference this summer reiterated the firm’s commitment to the region and to the Middle East above other emerging markets. Simmons has made small steps in this area by luring back Michael Hickman from Fried Frank and hiring Davis Wang from Chinese firm King & Wood to spearhead a new Beijing office. But it has yet to create real ripples.
While in the Middle East the search for a possible Saudi sponsor, an issue that plagues all international firms looking to break the Gulf’s biggest economy, has yet to prove fruitful.
Elsewhere Germany remains a priority and the firm has been scouring firms in Ireland in the hope of poaching a small team for a focused offshore hedge funds practice in Dublin that would seek to advise clients in the post-Directive on Alternative Investment Fund Managers regulatory context. However, it has yet to sign anybody up.
But as Dawkins prepares to hand over to his successor, he defends the international strategy, points out that PEP is 20 per cent up on when he assumed control and identifies the sector focus as an “important distinguishing feature” from competitors. Whether that focus is really so different from Norton Rose’s ’headlights’, for example, is questionable. What has defined Simmons as different has been its excellent funds and disputes practices and its boldness in recognising the strategic value of corporate social responsibility and diversity. It is time for the next management duo to emphasise these strengths further – both to its own people and to potential merger partners.
Simmons’ senior partner race: runners and riders
David Dickinson steps down from his role as senior partner at the end of June. Candidates for the role are yet to be announced, but it is thought that current managing partner Mark Dawkins is very likely to put his name forward and that if he were to do so he would win hands down.
“Mark has a strong advantage because he’s well-respected, well-liked and everyone knows him. If he’s one of the candidates there’s no question he’ll win,” comments one source close to the firm.
But another insider fears the possibility of a potential duplication of roles and a lack of progress.
“It’s often not the best thing for a managing partner to become senior partner because you don’t have any change,” he says.
One alternative would be that Dawkins, who is the client partner for UBS, could revert to being head of the financial markets practice.
But managing partner-in-waiting Jeremy Hoyland says he would be “surprised” if that were the case, arguing that “I think he’s too ambitious [for that]”.
Other possibilities are believed to include two fellow litigators, department head Colin Passmore and partner Philip Vaughan, and Charles Mayo, who has had experience running life sciences.
owever, Passmore and Vaughan are thought to have clear advantages. As head of the litigation department Passmore has overseen litigation revenue growth as a proportion of firmwide revenue, from 27 per cent in 2008-09 to 33.6 per cent in 2009-10.
The firm is acting for Kier Group on its appeal against an OFT fine as well as on the worldwide freezing order relating to the alleged colossal fraud perpetrated by Maan Al-Sanea, the Saudi Arabian billionaire owner of the Saad Group. Not afraid to get his hands dirty, Passmore personally undertook a secondment to key client Barclays. Vaughan, meanwhile, made his name acting for Shell on the Buncefield litigation in a case that gave the client the green light to sue Total.
Mayo is a corporate and M&A partner who in the middle of the last decade had a five-year stint in the Hong Kong office. He has also won praise for his efficient management of life sciences. However, this has a lower profile when compared with litigation or financial services.
The name of Richard Slater has also been raised. The former Italy head ran unsuccessfully against Dickinson in 2006, and sources claim that he had Dawkins’ support at the time; but with expectations that Slater might retire imminently, he may not feature on the shortlist.
Simmons’ Global spread
Total: 15 (plus two associated offices in Portugal)
Amsterdam, Brussels, Düsseldorf, Frankfurt, London, Madrid, Milan, Paris, Rome
Abu Dhabi, Doha, Dubai
Hong Kong, Shanghai, Tokyo
Funchal, Lisbon, Moscow, Padua, Rotterdam
On the shopping list
Beijing, Dublin, Saudi, US
Simmons & Simmons has made something of a name for itself in the corporate responsibility and diversity spheres. While critics dismiss this as a distraction from commercial objectives, there is a case to be made that it helps the firm reach these goals through providing networking opportunities with clients, many of which also impose diversity-related conditions to tender processes.
The firm has also shared best practice with competitors by putting together training packs on LGBT-related issues.
But as reported by The Lawyer (25 October 2010), Simmons’ record on female career progression has been less impressive, with the firm haemorrhaging female partners over the past few years.
It has since put in place departmental plans to address the issue and wants 30 per cent of all partner promotions to be female in the next three years. Dawkins says he expects the firm’s new management “to remain fully committed to these issues”.