Ten years ago Eversheds, not long after it had come together as a unified partnership with a single profit centre, was the UK’s seventh largest law firm by turnover. In 2011-12 it is the eleventh.
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This is not to suggest that Eversheds has let itself slide. The firm has worked hard to stay relevant in a shifting legal profession. But over the past decade it has been leapfrogged by or left in the turnover wake of firms – DLA Piper, Hogan Lovells and Norton Rose spring to mind – that have transformed themselves through aggressive expansion.
Between 2004-05 and 2011-12, Eversheds LLP’s turnover rose 21.1 per cent, from £302.2m to £366m (if revenues from associated firms are taken into account that swells to £472m). Like many firms outside the magic circle without recent bolt-ons or mergers, 2007-08 was Eversheds’ revenue peak – bringing in £390.1m. But three years of decline followed, ending in 2011-12 when turnover rose 3 per cent.
Net profit was at £80m in 2007-08. But the firm has improved profitability since then and its margin has risen from 20.5 per cent to 21.7 per cent in 2011-12, giving the firm a £80.6m net profit.
Part of this is down to cost cutting. Eversheds cut 735 jobs during the recession, booking most of the costs for the cuts in 2008-09.
The year after, average profit per equity partner (PEP) rose by nearly a third, from £404,000 to £517,000. In 2011-12 PEP reached £632,000.
Since 2008-09, Eversheds has cut costs further by outsourcing document production work and offshoring HR, administration and finance roles.
The firm has also increased profitability by putting more emphasis on corporate and finance work. In 2005-06, the bulk of Eversheds income came from property work – around 26 per cent – while corporate and finance made up 22 per cent. In 2011-12, corporate and finance accounted for 34 per cent, with the vast majority of that figure being corporate. Finance accounts for 2 per cent of turnover.
Since 2004-05, profit per lawyer at the firm has doubled from £33,000 to £66,000 in 2011-12. Over the same period the number of lawyers at the firm dropped from 1,743 to 1,206. Partner numbers shrunk from 337 to 317.
London remains a sticking point for Eversheds. It is keen to increase its presence in the City, particularly on high-end corporate work, but the portion of revenue attributable to work done in the capital has only increased from 20 per cent to around 24 per cent since 2001.
Management says it spoke to three potential London merger partners in 2011 (it declined to say who) but those talks fell through.
It may be some time before Eversheds completes another transformative merger, but no one can say it hasn’t been prudent in the meantime.
Eversheds: the cash question
In 2009-10 Eversheds’ closing cash balance rose from £10.6m to £20.9m. In 2011-12 the firm had only slightly less cash at the bank and in hand, at £20.4m.
According to the firm, the jump in 2009-10 was principally the result of improved profitability, better working capital management – the firm’s debtor days fell by 8 to 60 – and a respite from previous years’ spending on office development.
“As a firm we have focused extensively on managing our cash position with the aim of reducing our reliance on bank facilities,” said a spokesperson for the firm. “You will appreciate that the cash balance reported at year end is the closing position (which will benefit from the focus most firms see at year end), however, throughout the year there will be a number of peaks and troughs largely dictated by cyclical tax payments.”
The conventional wisdom is that when firms cut partners women suffer disproportionately and Eversheds is no exception. Equity partner numbers between 2004-05 and 2011-12 fell from 164 to 127, a drop of 22.6 per cent. Meanwhile, the number of female equity partners fell 32.1 per cent, from 28 to 19, over the same period. As a result, women now make up 15 per cent of equity partners, compared with 17.1 per cent in 2004-05. That said, Eversheds has made more effort than most when it comes to accommodating people who want to work flexibly through job sharing, remote working and other initiatives. Without them, the drops could have been much more significant.