Holding on to DAC

Sitting in the Manchester office of Davies Arnold Cooper is an unnamed assistant, the sole reminder of February's bloodletting.

The rest of the 90 staff who were made redundant (the corporate department in Manchester was axed and five partners and nine assistants went from the London office) have dispersed, leaving not just an office but a whole firm trying to reinvent itself.

DAC's dramatic move – presented at the time as a move to enable it to concentrate on its chosen arenas of insurance and property/banking – sent shock waves through the legal community. Such drastic restructuring was the behaviour of a multinational business and not a law firm, some thought.

Managing director Nick Sinfield believes that, five months on, the dust has settled and the move has been welcomed both internally and by clients.

“Clients have always said that it's about time that law firms acted like a business,” he says. “At the time, we were told by clients that if we were a publicly quoted company our share price would have rocketed following the restructuring.”

While the cull may have been welcomed by clients, within the firm it has scared many and may have contributed to the departure of some big names in recent weeks.

Head of intellectual property Catrin Turner is taking her team to niche firm Henry Hepworth, while highly rated employers liability and public liability partner Tania Sless has also handed in her resignation and is believed to be heading for Beachcroft Wansbroughs.

But Sinfield is putting a brave face on these departures, saying it must have been hard for a firm that was not “doing badly” to have had decisions forced upon it by people who “aren't shareholders in the business” – meaning finance director Andrew Lyburn.

Lyburn's role has, according to sources, caused particular resentment. He only joined the firm last November from Coopers & Lybrand's business assurance team and many believe that the bloodletting, which occurred so soon after, was his brainchild.

“We have had quite normal losses of staff, but in a way that's quite a useful process,” Sinfield says. “To use a sporting analogy, if you have a rugby team, you will get 20 people who want to be in the team, but after months of training, you emerge with the true thoroughbred core team who are really prepared to be in it.

“The changing process is always going to have to go through a bottoming out. It can't be helped, it's a physical process and we have now got to the bottom.”

However, one of the partners who was axed in February says that the executive committee structure has failed to keep the firm together.

“There are now two or three people at the top who are trying to keep control, but the whole thing is getting out of control,” he says.

Partners are making their own decisions about the future of the firm, he believes, and saying that they do not think it is going to work.

It is also thought that some of the partners lack confidence in the new structure. Senior partner David McIntosh, who has been sidelined in the power switch, is said by sources to have been deeply upset by the ructions in DAC, which he regarded as “his baby”.

Some have, of course, chosen to leave. One such partner is Sless, who is widely considered to be a star player in her field. Outsiders say that she will leave a large hole in the DAC team.

When discussing her departure, Sinfield's cheerful demeanour temporarily slips.

He explains tersely that she has not given her reasons. “We have not sought to retain Tania, we need people who believe in the brand of DAC. It is disappointing but you have got to put it in context. You have got to look at law as a business and, particularly in this area, clients are not looking for people who do master classes, they are looking for people who can do the job quickly and keep the costs down.

“Tania made a personal decision to go to another practice,” he explains. “In terms of our clients it doesn't make any difference to them and it gives us a chance to restructure the group, which we have done, and lets us do what we need to do. Her area is one with a very small profit margin and the only way you can do it is by reducing production costs.”

One former DAC partner, however, says that the departure is more important than Sinfield is letting on.

“The fact that she is pulling out seems to indicate that there is something quite fundamentally wrong.

“Although it has got to be a good move for the firm to concentrate on one area, Tania is working on that core area. Over the next few weeks I predict that there will be more departures.”

Another source claims that there are two more departments looking to offer themselves as a team to other firms, one of which he describes as a “core team”.

“There is not a general confidence that the firm has been restructured correctly,” he says. “DAC are concentrating on insurance litigation but many people at the firm are not sure that the profit margins will be there for the foreseeable future to make it viable.”

This feeling is shared by managing partner of Dibb Lupton Alsop, Nigel Knowles.

“I think they will have a really hard time surviving just as an insurance practice. Insurance clients are looking for value and DAC has substantial London overheads which don't allow it to cut its rates. It seems to be a firm that is trying to find itself.”

Perhaps in an attempt to address this problem, the firm is in negotiations to open an office in the South West.

“We have been talking to a large insurer who feels that they are not served well in that area even though our competitors operate there,” Sinfield says. “They believe that we are one of the few law firms that are speaking the right language.

“We are not considering this move to increase anyone's profile and any office would be predominantly served by local people.”

Sinfield says that he has learned a lesson from the Manchester office, where he admits too many London people were brought in.

The firm is looking to service a Spanish insurance client by opening in Barcelona. This office would complement the existing practice in Madrid, but there are a couple of regulatory hurdles to cross before it can become a reality, including the rule that any office in Barcelona has to be led by a Catalan.

DAC is also in negotiations to link up with a Paris firm to act, in Sinfield's words, almost as a translator for one of the firm's big insurance clients, easing the process for any UK-based work the insurance company undertakes. Sinfield believes that this is an area which could provide rich pickings as French companies prefer to control their subsidiaries from France but may need help in the English legal market.

DAC's international ambitions do not match up to many of its rivals, but then Sinfield explains that litigation work, which is the firm's bread and butter, does not lend itself to international growth.

Also, before the firm can start to look abroad again, it needs to make sure that its future at home is secure.

A senior partner at a national firm, who did not want to be named, believes it will take at least a year before DAC lawyers feel settled again.

“Management has not been sending out the right signals recently. Last year, they told the firm to concentrate on five industry sectors of pharmaceuticals, insurance, property, financial services and technology. This year, they then did a partial U-turn and started to narrow down the areas of work to concentrate on property and banking work and dispute resolution.

“Then, by axing as many partners as they did earlier this year, they send out signals to the most gifted lawyers that partnership is not the holy grail of security they would have hoped. If it were my firm I would be deeply worried about retaining the talent that brings in profit,” he says.

However, Sinfield is putting his hopes on the next generation of partners to create a new style of law firm. To try to retain DAC's current bright young things, the firm is concentrating on making working conditions better, including a move to a paperless office and becoming a “family-friendly” employer.

“We are encouraging our staff to have breakfast with their children. Also, we want our lawyers to increasingly work from our clients premises as that gives them more of a feel of what they want,” Sinfield says.

Sinfield admits that communication has also been a problem in the past. One former partner told The Lawyer that partners often heard of planned changes through the legal grapevine rather than from management.

But DAC is reinventing itself after the upheavals of the past year. Sinfield is trying to create a tightly knit, committed team. One of his tactics is to make becoming a DAC partner a prestigious and difficult accomplishment. This year's eight partner promotions were preceded by a tough round of interviews and tests, including ones for emotional intelligence.

“In the eighties, people became partners too easily. Now our process is incredibly difficult to get through and our eight new partners are very enthusiastic and committed, with energy and drive. If I was going for partner now I doubt that I would have got through the tests.”

Sinfield hopes that these new partners can live up to his hopes for them, because his and DAC's future rests firmly in their collective hands.

DAC departures

Ambereen Salamat: joined DJ Freeman in May

Stephen Lane: joined Masons in June

Catrin Turner: joined Beachcroft Wansbroughs in June

Tania Sless: joined Henry Hepworth in June