The recession has long been hailed as an opportunity for upwardly mobile firms to grow through bringing in senior lateral hires from rivals. But while many managing partners talk of “always looking at opportunities”, they seem less willing to sign on the dotted line.
No such idle chatter at Berwin Leighton Paisner (BLP). The firm, which was prepared to pay over and above its equity to secure senior laterals during the boom years, was hardly going to halt the recruitment process when the ball is more than ever in its court.
BLP has a positive record on organic growth (seven were made up to the partnership this year and 13 the year before), but it is the prominence of external hires that has grabbed the headlines. While other firms have imposed hiring freezes, BLP has made five lateral hires this year alone: Andrew Bamber and Sidney Myers from Allen & Overy (A&O), Nic Fletcher from Clifford Chance, Raymond McKeeve from Kirkland & Ellis (via Robert Tchenguiz’s buyout vehicle R20) and Graham Shear from Teacher Stern. Another ex-Clifford Chance partner, tax specialist Murray North, is set to join shortly.
With such a mix of practice areas – private equity, arbitration, financial services regulation, commercial litigation and tax – it is hard to discern the strategic thinking behind these individual hires. Did it smack more of opportunism?
“Everything’s opportunistic,” argues BLP managing partner Neville Eisenberg. “If people aren’t on the market you don’t have the opportunity to hire them. Even though it’s hard to see the commonality in this group, it does fit in with the long-term strategy.”
He points out that BLP planned to bulk up in each of the areas into which the partners are joining.
“We’re trying to see the recession as an opportunity for BLP to accelerate its strategy. This is evidence of us being successful at that – it positions us well for the future,” says Eisenberg. “In terms of the background of this group, it’s slanted towards the magic circle firms. We’ve moved our sights up in terms of lateral recruitment. We might have been able to get them in the ordinary course of things, but the recession may have played a part in [these partners’] decisions to make a move.”
But what attracted these lawyers to BLP in particular? It probably was not the firm’s profit per equity partner (PEP). Like so many other firms, BLP’s PEP dropped significantly over the past financial year. It fell slightly in 2008 and then by a third to £414,000 in 2009. It now sits at just over half that of the lowest magic circle PEP (Clifford Chance), from where Fletcher and North join, and 39 per cent of A&O’s, the former home of Bamber and Myers.
Compared with the rest of the silver circle, average equity partners at BLP made half that of Macfarlanes’, but broadly the same as those at SJ Berwin and Travers Smith. But then a focus on the firm’s PEP is perhaps a bit of a ruse in terms of analysing any financial magnetism. The modified lockstep’s 20 per cent weighting towards merit, together with the large equity spread, means that high performers have the potential to earn fantastic sums of money. In fact, at £1m BLP has one of the highest equity ceilings in the top 20 firms by revenue.
“BLP takes the approach that it decides who it wants and pays what it needs to get them,” says one of the group of newbies. “They know they’re not able to get a top-of-equity magic circle partner for the average PEP in a silver circle firm – they’re pragmatic.”
Whether that partner was wooed with either top-of-equity or guaranteed equity, or is just speaking in generic terms, is unclear. However, at least one of this group was asked to leave their former firm, and for many money was not a determining factor.
“I didn’t move for the money. BLP doesn’t have a PEP approaching the magic circle,” says one. Another fellow joiner adds: “I’m not going to see a huge difference. I’ve not been showered with silver.”
Unlike senior lateral hires, which tend to join the equity, most BLP associates are promoted into the salaried partner role, where 54 per cent of all partners sit. Eisenberg has argued that homegrown partners are supportive of the firm’s approach to bringing in high-profile laterals because it is thought they will generate new work. Speculation in the market is rife that the expensive hires have generated internal tension because of the size of their remuneration packages. But if there is even a tinge of jealousy among the BLP lifers about the status of lateral hires, they may derive some comfort from the fact that salaried partners earned on average £230,000 last year, while the bottom of equity stood at £185,000.
So, money aside, what other factors brought these partners to BLP? “Partners in this market move for parity,” believes one partner recruiter at a City consultancy. “They never move for a big pay rise. You’re paid on the basis of what you bring in. It’s either a pull – a better platform or culture – or a push – the place you are is a shit place to work.”
Hot on property
The unique selling point of the BLP platform is clearly its market-leading reputation in real estate. “When I was looking at coming back into private practice [from R20], it wasn’t so much about what the firm could do for me, but what it could do for my clients,” says McKeeve, loosely paraphrasing John F Kennedy. “BLP’s rooted in real estate and other hard assets, which is interesting for private equity.”
For Shear, who hails from Teacher Stern, where he was arguably something of a large fish in a small pond, BLP offers a full-service capability.
“My clients were looking for more corporate, more tax, more international capability,” he says. “BLP ticked all those boxes. Although I’m a sports and media litigator, my clients are from all businesses and jurisdictions.”
But some think BLP is still held back by its corporate and finance departments. Three of the new joiners have capabilities in litigation and dispute resolution – Fletcher in international arbitration, Myers in financial services regulation and Shear as a commercial litigator.
“You can’t build a serious contentious practice in the absence of a core offering in corporate and banking that’s taken seriously,” says the head of a major City litigation practice. “It seems to me BLP’s underlying practice is lacking. You can’t expect to pitch to win with a dispute resolution offering not supported by a reputation in those areas.”
The City recruiter, who has worked with several departing BLP partners, agrees. “The big problem for BLP is that it doesn’t have sufficient corporate and finance capability. They have some good guys there, but if real estate is ruling the firm you’re not really playing with the big boys.”
So will the pressure be on the corporate and finance partners to improve their game? Myers claims that the politicisation of financial services regulation is leading to a very busy time for his 11-strong team advising clients on their positions.
For McKeeve the summer was, predictably, slower. “The transaction volume was slow. Frankly that suited me well – [I was] getting round to see the clients.”
The pressure will not be ratcheted up too much, though, suggests Eisenberg. “It can take a good two or three years for partners moving into a new firm to get fully up to speed,” he says.
And how sympathetic will the homegrown partners be to the new joiners ‘getting up to speed’? “We’ve been doing it for a while – people tend not to have unreasonable expectations,” Eisenberg stresses.
So, to complete an examination of how BLP stands up on the pull factor, what about that frustratingly euphemistic catch-all term ‘culture’? How is BLP defined vis-à-vis the partners’ respective former outfits?
“BLP is very entrepreneurial,” says Fletcher. “It has significant ambitions to develop the practice and create a full-service practice, servicing a wide range of high-quality international clients across its five pillars strategy.”
For a moment it seems as if no sooner have the partners passed through the door of Adelaide House than they have undergone some kind of brainwashing in BLP newspeak. But then McKeeve provides a more terse response.
“I get a bit tired of the word ’entrepreneurial’,” he says. “Clients are looking for commercial, pragmatic, legally sound advice. If you spend too much time trying to be ‘entrepreneurial’ you forget about what being a lawyer is all about.”
To be fair, when it is pointed out that he sounds a little on-message, Fletcher adds: “The thing that’s struck me is that it’s like being at Clifford Chance in the late 1980s, early 1990s. There’s real excitement about being part of something.”
A pertinent analogy for a number of reasons. The partners all indicate excitement and efforts at cohesion, commenting on anything from the enthusiasm of colleagues in other practice areas to whom they can cross-sell, to the fact that they are all assigned ‘buddies’ upon joining . But it is also a relevant statement given the heavy onus among this group – and many recent laterals – on magic circle experience and BLP’s ambition to move up the food chain.
But the question remains as to whether this emulation of the magic circle will be cosmetic or root and branch. And if it is the latter, how will BLP manage its growth to avoid a turn of fate similar to that of Clifford Chance – from its confident, post-merger standpoint in the late 1980s to that of 2009, licking its wounds following a dramatic fall from grace?