Freres:an offer it could not refuse
5 December 1998
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3 October 2014
Robert Lindsay takes a look at the causes of Frere Cholmeley Bischoff's demise and assesses the prospects of its successor firms.
The demise of the 200-year-old name of Frere Cholmeley Bischoff on 1 August will be a sad day for many. But sadder than the loss of the name is the fact that many of the partners effectively voted the firm into oblivion so they could escape.
Twenty-five partners agreed to be absorbed into Eversheds London, leaving 11 partners and 44 assistants to form their own strange mix of private client, property and corporate media firm.
But no fewer than nine partners, including several highly regarded names and heads of department, have gone to rival firms to pursue their own careers (see table below).
How could such a respected and venerable firm have come to such an end? David Willis, senior partner of the new firm, Forsters, says: "We were suffering from being a middle-sized firm."
But this is not the whole answer. The real problem was overexpansion in the 1980s and early 1990s into diverse fields which created a massive overdraft and bound partners together by debt.
Until the beginning of this year, when landlord JP Morgan offered the firm a lump sum to move out of its premises, merger had not been considered as a way out of its problems.
The overdraft was coming down steadily. And last summer Freres had called in consultancy firm Hodgart Temporal. It had advised the firm to focus on four key areas: financial services and banking; property; media and entertainment; and Central and Eastern Europe - as well as the support areas of commercial litigation, private client, tax and employment.
All the partners accepted this strategy and agreed to implement his report.
But managing partner Alan Jenkins had a chance meeting with Peter Scott, his opposite number at Eversheds London close to the end of October.
It was at a Deloitte & Touche dinner at the Victoria & Albert Museum. The two happened to be sitting next to each other and got into a conversation about the legal market. Scott was anxious to double the size of the London office. "Critical mass" was what he desired.
A few weeks later Freres' landlord JP Morgan told Jenkins it was interested in taking over the premises for its own use. It would buy Freres out of its lease. At a stroke the debt would be wiped out. Scott, who is keen to stress "we don't take on other people's debt", suddenly found Freres rather attractive. He and Jenkins began talking.
At Freres there was a series of meetings over January and February as Jenkins informed partners of Eversheds' interest and the progress of negotiations. But it quickly became clear that many partners, particularly those in private client and property, and the corporate media partners Stephen Sugar (who had been managing partner and had steered the 1993 merger with Bischoff & Co) and Craig Eadie, did not want to join the party.
Jenkins says: "The position with Eversheds was that private client and property would have been happily included had they chosen to be part of it." The same also went for the corporate media people, he says.
One insider says: "There were some very heated discussions. At first people couldn't understand why people had different opinions to them. But it became clear that people wanted different things out of their careers."
The private client department and many of the property people, several of whom are highly regarded names in their fields, realised that at Eversheds they would have been small cogs in a larger machine that was primarily interested in commercial and corporate finance work.
The private client partners particularly, who work largely for landed estates, thought their kind of work was better practised in smaller, specialist firms, where clients feel better able to get the personal touch they want.
For the corporate media people Eversheds had no name in their field.
Then there were the other partners who simply wanted out altogether. Since 1994, when corporate head David Zeffman left for Olswang with six assistants, the firm had imposed draconian restrictive covenants and a clause that said partners had to pay off their own share of the debt before they could leave.
This did not stop a steady exodus of big names whose intended firms were prepared to stump up, but there were others who wanted to go who simply could not afford to. The new year windfall from JP Morgan at last gave them their chance.
Eventually it all came down to a vote on the merger in March. The partners all voted for the merger, even though half of them knew that they would not be taking part in it.
Eversheds was left with intellectual property litigation - with clients like Warner Music and McDonalds - led by the respected Freres senior partner Frank Presland, whose clients include Elton John; the financial services people, particularly leading unit trust names Richard Millar and Pamela Thompson; some tax lawyers, who were apparently persuaded to join by the imminent arrival at Eversheds of a Deloitte & Touche tax lawyer Reg Nock; and assorted others including the Paris office (minus three partners) and Moscow.
But Eversheds' true aim, to build strength and depth in corporate finance in London, remains unaccomplished. Its merger with Waltons & Morse three years ago took partner numbers up from 44 to 55, but that figure has since slipped down to about 45. With the new team it will be back up to 70.
Abroad, Eversheds now has the Paris office it wants, but corporate work in Paris will need some serious building. The Moscow office will be useful, says Scott. But Monaco and Italy, where there are associated offices only, look incidental to the deal.
The Forsters experiment, while at first sight presenting an odd, mismatched mixture of corporate media, commercial property and private client lawyers who did not want to join Eversheds, could actually work.
The firm will have many of Freres' good names - senior partner David Willis, trusts expert David Robinson, divorce expert Hilary Rodgers, and Craig Eadie, who helps media businesses do deals.
Willis says: "We chose the name Forster after John Forster, one of the founding partners of what became Frere Cholmeley. We thought it was a nice way of remembering the founding partners and connecting us to the past... in the private client field where we have acted for families for several generations."
For most of its 200 years at Lincoln's Inn, the firm did only private client work, and only broke into commercial work after the Second World War.
Property and private client work together accounted for only a quarter of Freres' revenue last year, but the smaller, less diffuse firm will be able to convert far more of this revenue into profits.
As for that odd fit of corporate media, commercial property and private client, Willis admits there is little overlap between private client and commercial property but says there is a good deal with private client and corporate media work. "I do a lot of work with Stephen Singer and Craig Eadie for many private media clients," he says.
Forsters is negotiating to lease an office in Mayfair, an area chosen deliberately for its proximity to property developers, rich individuals and media stars.
But while both Forsters and Eversheds are both claiming to have inherited Freres' corporate expertise, in reality many of the corporate players are going their separate ways.
In particular, highly regarded corporate media partner Simon Morgan is negotiating to join another City firm with corporate media partner Stephen Hermer.
In the end, getting rid of the overdraft made a mockery of all the agonising over strategy.
Given the chance to begin anew in different firms, after the years spent shackled to each other by debt, the Freres partners went for it.
The story behind freres' debt
The causes of the debt - at one point believed to have reached as much as £20m, approaching the turnover of the firm - are now widely acknowledged: overambitious expansion in the early 1990s.
As The Lawyer revealed last month, much of it stems from the reign of Tim Razzall as chief executive between 1990 and 1994.
He opened offices in Berlin, Brussels, Dubai, Barcelona, Moscow and Milan. All of which, apart from Moscow and Milan, were subsequently closed.
In September 1992 he moved the firm from three ramshackle offices at Lincoln's Inn, where it had been since 1750, to a plush, expensive city office at John Carpenter Street.
Then, in February 1993, he and the then head of company commercial Stephen Sugar led the firm into the merger with Bischoff & Co.
There are now only a handful of the original Bischoff partners left in the firm.
But Razzall must not take all the blame. He was supported in all he did by his partners. Razzall himself points out that he has not been involved in the management of the firm for five years. He adds: "The debt was higher when I began as chief executive than when I resigned."
Closing down some of the foreign offices after he left is likely to have increased the overdraft.