Pinsent Masons validates power of merger with soaring PEP” />Mergers can do wonders for your profitability if you play them right. Of all the law firms that boasted a growth in profit per equity partner (PEP) this year, not one came close to touching the 70 per cent leap posted by Pinsent Masons.
The equity partners of the merged Pinsent Curtis Biddle and Masons are now pulling in £400,000 in profit, compared with £234,000 last year. Turnover is also on the rise, up £22m, or 15 per cent, to £172m.
From these figures it would appear that Pinsents plus Masons automatically equals rocketing profit – but success is rarely so simple. It has taken both firms some time to get the most out of the tie-up. Six months after the December 2004 merger, Pinsent Masons’ figures were disappointing. At £234,000, PEP was lower than at both Pinsents or Masons and turnover had not budged an inch, standing at £150m.
The merger costs, estimated at £3m by sources at the firm, took a bite out of Pinsent Masons’ profitability in its first year. The firm has also lost partners. Pinsents and Masons had a combined 131 equity partners in 2003; the merged firm now has 115.
While that is not a great change in partner numbers, the departure of senior partners and their replacement with junior partners could add as much as £25,000 per partner. Pinsent Masons has lost senior partners such as insurance dispute practice head James Crabtree to Taylor Wessing and Bristol commercial property group head Rosemary Pike to Clarke Wilmott.
Managing partner David Ryan is adamant that this is not the reason for the healthier PEP figure, saying: “Every firm has a turnover of partners – I wouldn’t describe it as something out of the ordinary.”
To pick up its drab financials, Pinsent Masons needed internal teamwork to raise revenue and drop costs. Ryan and his management board led initiatives to build special client teams with a mix of partners from the two legacy firms. The teams pooled their contacts and cross-sold, and Pinsent Masons started to win seats on some juicy panels as a result. Ryan also kicked off an efficiency drive to ensure any added revenue went straight to the bottom line.
“There have been lots new activities which neither firm would have had before the merger,” he says, pointing to wins on the Vodafone, Nestlé and BT panels over the past 12 months.
“In some instances the clients have said that the choice was because of the combination of the two firms,” adds Ryan.
The firm’s burgeoning outsourcing, technology and commercial group is a good example of a practice area benefiting from this approach. Clive Seddon, head of the IT outsourcing practice, says: “This business is about relationships, both internally and externally. We’ve improved ours and we’ve been winning work.”
Seddon’s group has shot past its target for the year by 15 per cent, hauling in £20m for the firm, but his team was not the only one to do so. Ryan says every department had a hand in the firm’s strong performance.
Ryan’s challenge now is to get the same return on the merger year after year. Although another 70 per cent jump in profit is a tall order, Ryan is quite confident that Pinsent Masons will continue to grow.
“In one way we’ve only just started to get the best out of the combined strengths of the firm,” he says.