Reed Smith at the ready as Pinsents’ construction team prepares to defect

Are Pinsents’ consolidation plans going to score it an own goal?

When a group of senior partners leave a market-leading practice for a firm with little standing in their area of expertise, eyebrows are inevitably raised.

It is understood that four ­Pinsent Masons construction partners – Gordon Bell, Peter ­Cassidy, Keith Hartley and ­Vincent Rowan – could be about to do just that. Bell runs Pinsents’ international arbitration practice, while Cassidy is perhaps the most senior of the group, having been a ­partner for around 20 years. They are tipped to be joining Reed Smith imminently.

Most of the group specialise in contentious construction with a particular focus on international projects. At Reed Smith they will enhance significantly a practice that has just two London-based construction partners – Richard Ceeney, who was made up last year and who did his articles at DJ Freeman before a spell at ­Linklaters, and Lynne Freeman, formerly of Stephenson Harwood and ­Hammonds, who has been a ­partner since 2003.

A source tells The Lawyer that what clinched the Reed Smith deal for the Pinsents four was not just the money, but “the network of offices, the [higher] profitability and the fact that it is a truly merged firm”.

In terms of the firms’ respective office networks, Pinsents and Reed Smith overlap in the Asia-Pacific and Middle East regions, where all of these partners have ­traditionally been most active. Reed Smith also has the US and Continental Europe, although that may not be as relevant for the ­practices of these individuals.

And there is probably some truth to the assertion concerning greater profitability. Sullivan & Cromwell it ain’t, but with an ­average global profit per equity partner (PEP) for 2009 standing at $998,000 (£648,000), Reed Smith is ­undisputedly more ­profitable than Pinsents, where equity partners took home an ­average of £310,000 last year.
Equity partners at ­Pinsents have recently been ­overtaken by those at other national firms of varying sizes and profiles, from Addleshaw Goddard to Osborne Clarke. It is expected that these four will have been offered a ­financial sweetener that may include guaranteed ­packages in the first year of the deal.

Having been admitted to the roll between 1982 and 1990, like much of the construction practice they are legacy Masons partners. As a group they are all rated highly by colleagues at rival firms.

A former partner at construction boutique Shadbolt & Co, which was taken over by Clyde & Co at the beginning of this year, comments: “They’re very strong, they’re market ­leaders.”

One source estimates that as a group they bring in £6m per year, which if true means on an ­individual basis they each ­generate twice Pinsents’ average revenue per ­partner, which stands at £760,000.

Reed Smith’s gain would be ­Pinsents’ loss, according to ­another source. “They control four of the most successful practices. The management of the firm ­doesn’t understand how pre-­eminent that practice has been,” says the source.

As with many other national firms, Pinsents is the sum of ­several tie-ups, the 2004 merger between Pinsent Curtis Biddle and Masons being the most germane, as it ­gifted Pinsents a top-notch construction team. The binding delivered good financial results during the boom years, ­undergirded by strong domestic reputations in real estate and ­projects. At the end of the 2005-06 financial year the firm’s PEP leapt by 70 per cent, up from £234,000 to £400,000. Turnover was also up, rising 15 per cent to £172m.

But much of the ­international ­profile in Asia and the Middle East has been linked to the Masons construction ­department. The firm gained a foothold in Dubai, before many competitors arrived, for example, precisely through Masons’ ­construction reputation. It is an historic ability to punch above its weight that has endeared the ­construction practice to much larger outfits. One observer says that its reputation is such that even lawyers at the traditionally ­discerning Herbert Smith are among its admirers.

However, in common with other firms operating in similar ­markets, the recession has hit Pinsents hard and provoked some soul-­searching. Just as Addleshaws and Eversheds have already done, ­Pinsents is poised to relocate into new City headquarters, which is partly about establishing its flag in the ground in London.

Pinsents wants to be bigger, but last year shelved a possible ­merger with Salans for cost reasons (The Lawyer, 27 July 2009), opting instead for a tie-up that sees the two firms operate on joint pitches.

However, there is a feeling that the firm still eyes a merger as the ultimate end goal, with emphasis on growing its standing in ­corporate and finance, and this may be to the detriment of ­traditional core practices.

A source confirms: “I don’t think the firm recognises the seminal strength [of the ­construction ­practice]. The firm’s dominated by non-Masons lawyers who think construction is a dirty word. ­Management wants to merge the firm at all costs.”

No one from Pinsents ­responded to repeated requests from The Lawyer to comment for this article. If their departure terms are ­negotiated smoothly (and there is some suggestion that Pinsents could make it difficult for the ­partners to leave promptly) their exits will follow soon after two ­insurance partners left for Sidley Austin, including ­insurance head Martin Membery (TheLawyer.com, 12 March). However, it would be unfair to say that Pinsents’ ­partners have all been going in one direction – the firm recently took ­Halliwells ex-head of real estate Mike Edge to run its ­Manchester real estate department.

It is thought that the construction experts were ­speaking to a number of outfits, from international to regional players. For Reed Smith, picking up this group will constitute a major coup. Their loss to Pinsents, though, may be a response to a major change of direction – and not necessarily one for the better.

luke.mcleod-roberts@thelawyer.com