Irwin Mitchell: we’ll float and take on the mid-tier
Irwin Mitchell first to declare ABS intentions; aims for £50m war chest for recruitment
John Pickering
Irwin Mitchell plans to use the £50m war chest it expects to amass on converting to an alternative business structure (ABS) to go head-to-head with mid-tier corporate firms.
Managing partner John Pickering said the firm would target growth through mergers and acquisitions once the Legal Services Act (LSA) is implemented in October.
“We’re trying to get a more balanced portfolio that’s deliberately diverse,” he explained. “What we do, we do well.
“We’re not trying to take on the magic circle, but in terms of business we can challenge the mid-tier corporate firms and those in small and medium-sized enterprise circles.
“We’re doing work for some of the biggest companies around. This will give us the opportunity to grow our service portfolio for the companies we’re working for.”
Systems the firm has developed through its commoditised arm will be adapted and tailored to meet the needs of the corporate practice.
Pickering explained: “It’s about deconstruction of the law, like [consultants] Stephen Mayson or Richard Susskind have explained in the past, trying to reduce it to an operational process.”
Irwin Mitchell’s conversion to an ABS has been anticipated by the profession ever since the LSA was first mooted.
The firm’s senior partner Michael Napier was heavily involved in shaping the LSA legislation and spent a good deal of time on the legal circuit advocating its speedy progress through Parliament.
What was not known, however, was how Irwin Mitchell intended to grow following the implementation of the act.
The firm sent shockwaves through the profession last September when it made an audacious move for a four-partner real estate team from SJ Berwin.
Traditionally Irwin Mitchell has been perceived as a personal injury powerhouse, but when the firm raided SJ Berwin for a hefty proportion of its London property team it set its stall out to become a serious contender in the City.
“It was the blend of skill that we wanted,” reflected Pickering. “It takes us to a new level in that sector.”
Pickering said acquisitions will be looked at on a case-by-case basis, adding that Irwin Mitchell would consider any firms, teams or companies that offer a complementary service.
Through M&A activity on a scale never before seen in the profession, Irwin Mitchell could effectively reshape the mid-tier legal sector.
Irwin Mitchell, which was ranked 22nd in The Lawyer UK 200 Annual Report 2010 with a turnover of £157m, said all options were up for discussion, with the firm assessing whether it might be best to do an IPO to raise cash or to take outside investment from a non-legal entity.
Pickering said Irwin Mitchell had no set strategic aim of being the first law firm to launch an ABS. Rather, he stresses that the firm is looking at what options would best suit the long-term objective of growth.
Pickering said: “We’re at the beginning of the first part of the process, not at the end of it. We haven’t committed to an IPO or private funding - both are options.”
The firm announced last week that it had appointed a trio of professional advisers to guide it through the conversion (TheLawyer. com, 20 April).
Norton Rose has been drafted in to provide legal advice, with five partners and an of counsel working on the project.
This team includes corporate partners Martin Scott and Julian Stanier, assisted by of counsel Anne Ledingham, tax partner Dominic Stuttaford and employment partners Monique Fry and Paul Griffin.
Espirito Santo Investment Ban has been appointed as the firm’s financial adviser and Deloitte as its accountant.
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Readers' comments (16)
Anonymous | 28-Apr-2011 4:47 pm
How anyone can say it's a good idea because Investment Banks floated is beyond me...
Investment banks need capital to fund their activities, outside of enticing in new talent (which is all law firms will be able to do with any funds raised). I agree it may work for very low end commoditised work, but anything that relies on the talent of the lawyers dealing with these issues, will not benefit. The value of any law firm is in its lawyers, outside of human capital I doubt there is any value in its balance sheet.
Floating a law firm would be like floating a football club (both rely entirely on the talents of their employees to earn all their capital) and both or terrible investment opportunities if looking for a reasonable return. The majority of football club shares would be owned by fans, or nowadays billionaires who want a trophy asset to play with. I doubt law firms will be considered a 'trophy asset' by anyone!!
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Anonymous | 29-Apr-2011 2:06 am
I think the move to external investors will be transformative as this will give the insititution many more levers to incentivise performance apart from cash. Barry is thinking old style. The use of options and such like can allow firms to incentivise "partners" and staff over a longer period of time linking their success with the success of the firm at the same time allowing for longer term investment rather than cashing out the profits each year in the form of partner draw. By unlinking the ownership from the management, firms will be able to hire leaders who are focussed on delivering shareholder value and good managment and the "patner" can concentrate on delivering the revenues. Furthermore, if a "partner" does not perform then the scrutiny from external investors and the board will probably be more robust than current partnership structures. Good luck to IM - I hope the succees.
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Tim Brown | 1-May-2011 8:54 am
Surely the best way of achieving a high ROI is for the investor to also "add value" to the practice, not just cash.
My company is preapring to enter into several agreements post ABS - we provide the software, funding and clients and the practice provide the legals.
Cash alone has not worked for us in the past because of several of the aforementioned reasons given by other commentators.
This methodology does work for both ourselves and our legal partners.
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Anonymous | 4-May-2011 4:13 pm
There seems to me to be a major "disconnect" at play here. To Jerome's point - IM is a firm which is better suited than any UK firm to provide volume, commoditised, consumer facing private client services. As such, this half of the quation balances and makes sense.
The disconnect comes on the Corporate side of the equation. In any given town or city, there are firms which have always balanced the Private and Corporate work, but increasingly these firms look like a dog's dinner in terms of their branding. Nationally (and with the funding IM are looking at, it very much has to be national brand) I can't think of one firm which succesfully balances Private Client/PI and Corporate work.
The reasons for this are various but include cultural differences, different operational models, charge out rates and profitability and, not least, conflicts of interest. As such, if IM were looking to do this purely as a PI/Private Client Business it makes sense, but I suspect Barry is nearer to the mark given the apparent push on the Corporate side.
As a detatched observer, it will make for fascinating viewing.
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Ashley Balls | 5-May-2011 2:32 am
A publicly quoted legal service delivery business may finally remove the mystique of the traditonal modus operandi. The new business model should, at last, deliver a greater focus on the customer. Most clients are unable to discern the qualitiative nuances in the legal products they buy - most are only interested in the outcome. Property buyers are not intersted in lawyer interviews - they want nothing more than clear title to a property. The incumberances encountered along the way are of no interst to the customer. This is hopefully what the new model will deliver as it has in Australia. As a side issue there is money to be made too!
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Ashley Balls | 19-Jul-2011 9:59 pm
Playing the long game! Probably not. In future profits at 30% - 50% are likely to be the exception as publicly owned law firms build a model with fewer directors and look for an ROI in keeping with market norms. This is just the start and the industry will have to get used to the notion that the price of external capital is conformity. It rather begs the question why would any public company even imagine it might need hundreds of directors. After all what would their management functions encompass?
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