It has been a mixed year in Leeds’ legal battleground. Addleshaw Goddard, DLA Piper and Walker Morris have had bumper years, but profit predictions at Hammonds, Pinsent Masons and Eversheds are far less rosy.
The current mantra from smaller competitors is that national firms have lost interest in the Leeds market. “The more remote they become, the more vulnerable they are,” says one. “But we gain as they lose clients to us.”
However, DLA Piper’s Leeds managing partner Neil Maclean sharply counters this view. “It’s just crap that our rivals say we’re only interested in global mega deals – if we only fished for huge matters we’d expose ourselves to a huge contingency risk. Matters that involve large numbers of people do, to an extent, create a distortion in the practice because if you allocate most of your resources to a particular matter, you leave gaps in other areas. But that just means you have to ensure the soundness of the core business. Clients haven’t commented on this, as far as we know.”
The centre of gravity for management may have shifted to London, but Maclean argues that DLA Piper’s regional offices support this move as they know it is the gateway for work being referred to the regions at a lower cost.
DLA Piper unveiled record results for the 2004-05 financial year last Wednesday (18 May). Average profit per equity partner (PEP) leapt by 12.6 per cent to £535,000, although tellingly only a third of DLA legacy partners are in the equity. Turnover was up 18 per cent to £324m, of which £34.5m was chipped in by Leeds.
Workwise, the Leeds office has been at least as active as its competitors in the public sector. Several major PFI infrastructure projects, including Kirklees Metropolitan Council’s £22m special schools deal and the ongoing work on the mammoth NHS IT programme, have been keeping the lawyers busy.
Addleshaws has also had an extremely profitable year. For the first time, PEP has reached the £400,000 mark at £404,000, which is a 25 per cent rise on last year’s £321,000. The performance of the Leeds office should be enough to dismiss accusations of losing focus. In the corporate private equity division, the Leeds team acted for Maplin Electronics on its £244m secondary management buyout (MBO), while Sean Lippell, who stood down as corporate division managing partner on 1 May 2005, advised Fenner this May on its £44.6m recommended offer for Wellington Holdings.
Addleshaws’ finance and projects division has seen a 23 per cent rise in fee income in the past year, and is on most of the panels of all the UK’s major clearing banks, while the commercial property market team received its first instruction from Simons Developments, developer of the iconic Criterion Place.
Eversheds has failed to match its rivals on growth. Turnover is up just 2 per cent, while PEP stands at £350,000. Managing partner Stephen Hopkins argues that the firm is “more focused than ever on client service and people, having invested in flexible working practices and reward schemes”.
Its competitors say that the firm is losing its Leeds focus on account of its regional perspective. “Eversheds is recruiting a lot, but also losing a lot of people. It hasn’t had the profile it used to have for years and there’s a feeling that the North is seen as one region and people don’t feel valued,” claims one.
Hopkins counters this, saying the firm has had to consolidate to become a national and international firm. “There’s a London-centric element, but there’s always been firm management on the ground in Leeds because people need local strength,” he says.
He adds that the Leeds office has been picking up more corporate banking, finance and real estate work than in recent years. Significant deals include the MBO of the Ring Group, where Eversheds acted for the funder, Lloyds Development Corporation, and the £4.2bn Greater Manchester Waste Project.
Walker Morris is steaming ahead with some impressive figures. Its preliminary estimated turnover is £44m, an increase of 11.4 per cent, and its average PEP is £575,000, an increase of 10.5 per cent.
It has seen a flurry of activity in Leeds on the deals front. Recent corporate deals include acting for UK furniture and furnishings retailer the Homestyle Group on a £105m placing and open offer to refinance the business and acting on behalf of the shareholders of Airedale International Air Conditioning in its £21m sale to US company Modine Manufacturing.
But Walker Morris’s problem may be its size. Lean and mean it may be, but where do its ambitious lawyers go when there’s no room in the partnership? As one rival puts it: “There’s little room for ambitious lawyers to progress unless it decides to grow or move.”
However, managing partner Peter Smart says the firm is aiming to grow organically and there is room for progression.
Then there is Hammonds. With the profit drop for this financial year predicted at 25 per cent, Hammonds’ UK equity spread could be as low as £90,000-£225,000, with average PEP around £200,000, following the “exceptional charge”. Redundancies involving 60 fee-earners and staff were made. Then in April a lock-in agreement, preventing partners from leaving until July 2006, was signed in an attempt to prevent further partners leaving.
Although the firm’s debt is one third of its turnover, the Leeds office put in a strong financial performance last year, coming in over budget with total deals valued at £1.1bn. These include acting for the management on the £230m buyout of UCB Films and for Rensburg on the £185m reverse takeover of Carr Sheppards Crosthwaite.
Managing partner Ian Greenfield says the fact that five construction partners are leaving to join Addleshaws is “of course a disappointment”, but that the firm will “continue to retain a strong construction team” in Leeds. “We’re taking the necessary steps to further develop the team. I can also confirm that I have no reason to believe that there will be any other significant departures from the Leeds office,” he adds.
Pinsent Masons’ competitors claim post-merger cost-cutting and fee-earner redundancies have created dissatisfaction. One wit quipped: “In order to lose the plot you have to have had it in the first place. I don’t know that Pinsent Masons ever had it.”
However, Pinsent Masons managing partner Nigel Mclean points to the significant property deals, local authority work and the strength of its PFI practice, as evidence of plot ownership. The firm has also made it on to the panel of National Grid Transco thanks to the Masons legacy. The 2004-05 turnover is £150m, but PEP figures are sure to be down on last year because of the merger.
The firm advised 22 out of the 25 top construction companies by turnover. Major deals include advising Viridor Waste Management on an integrated waste disposal contract supported by PFI credits.
The property team in Leeds has played a part in most of the major regeneration projects in the region and in a large number of headline private sector deals. The city centre schemes include the regeneration of Leeds and the Bridgewater, Mayfair and Portland Way developments.