To most lawyers, KLegal’s Nick Holt is a kind of King Canute, whose throne will soon be engulfed by an inevitable anti-multidisciplinary partnership (MDP) tide.
Last year was a pretty stormy one for Holt, who is at the helm of KPMG’s law firm. He had to hand out P45s to loyal support staff, axe London fee-earners, and tell KLegal partners who had founded the firm that they were not part of its future.
All of this was before the world’s regulators turned on the accountants, exposing their law firms to the continuing fallout from the collapse of Enron.
Holt might be down, but he is definitely not out. Before he even sits down he has told me that the Australian states of Queensland and New South Wales have now embraced the concept of the MDP.
There is even better news close to home: the Government’s newly-formed Department for Constitutional Affairs has finally come out in favour of MDPs with last week’s report from Lord Falconer.
In the not-too-distant future, lawyers and accountants will be able to have single, profit-sharing partnerships. Equally important, the report was a vote of confidence for the merits of the MDP concept, which is after all the raison d’être for KLegal and the other accountancy-tied firms.
Holt, who appears to have the whole history of the Government report at his fingertips, says: “After two and a half years you’ve finally got to a position where the Department of Constitutional Affairs and the Government has decided to move ahead.
“What the report says is that David Clementi is going to be charged with producing a regulatory framework with a view to allowing new business models. It’s not a question of whether they’ll be allowed – they’re going to be allowed.”
Holt is clearly irritated by the Bar Council’s sideswipe at the report. The barristers claimed that MDPs would lead to the “Enronisation” of the law.
“That’s unnecessary and doesn’t take the debate any further,” is his response. “The collapse of Andersen [Legal] and the downfall of Enron isn’t, I don’t think, relevant to whether lawyers can practise with other professionals. It’s a sideshow.”
When Holt talks about the Sarbanes-Oxley Act and other regulatory challenges facing KLegal, he throws his arms into the air, gesturing that for him they lie somewhere up in the ether. He prefers to concentrate on what he views as the more concrete issue of running a fledgling law firm in a very tough economic climate.
Holt knows that the vagaries of international regulatory changes are out of his hands, and although he and KPMG’s UK head Mike Rake have a good relationship, so ultimately is how KPMG reacts to those changes. The spectre of a collapsing Andersen Legal, abandoned by its parent as the accountants saved their own skin via a merger with Deloitte & Touche, is hard to shake.
Running a law firm in a tough economic climate has been no cakewalk. Last July, Holt axed 20 fee-earners and 42 support staff, the vast majority from the legacy KLegal firm rather than its Scottish merger partner McGrigor Donald.
Not a nice thing to have to do, but the way Holt did it was exemplary and was a major factor in The Lawyer‘s decision to make him runner-up in the Partner of the Year category at this year’s The Lawyer Awards. KLegal was one of the first to grasp the nettle, but a host of other firms followed suit in the autumn, with fee-earner redundancies and copycat versions of KLegal’s compensated trainee deferments.
Holt says that, in the wake of the cuts, he was inundated with calls from other managing partners asking him how to do it. His advice was prosaic – perhaps showing the Manchester Grammar boy’s Northern roots. It was simply: “You’ve got to be honest with people, and it’s a hard thing to do.”
That sounds straightforward, but there were plenty of firms that have not exactly been honest with their staff about cuts, particularly those which have used a ‘managing out’ process rather than the formal redundancy route. Holt names Denton Wilde Sapte and Jones Day Gouldens as two firms that have done it right, complying fully with their obligations to consult staff.
One fly in the ointment for Holt is what happened when the firm deferred a second lot of trainees. They were offered only £2,500 – a paltry sum in comparison with the £10,000 paid out the first time around.
The consensus is that Holt took his eye off the ball and left it to the HR department, but partners at the firm were upset and embarrassed by the ensuing fracas with trainees, who quickly and understandably became rather militant.
Holt looks uncomfortable discussing this point, and admits: “In hindsight, we pitched our initial offer at the wrong level.” Still, he comes out fighting. “If you make a mistake – and you do make mistakes in running law firms – the key thing is to get on with it and try to put it right,” he states.
In addition, Holt pushed out six underperforming partners last summer. Again there was a North-South divide – they were all legacy KLegal partners and two of them were founders of the firm; a third founding partner, James Hodgson, left of his own accord last month. Lawyers at the firm say there was not a single McGrigors lawyer at Hodgson’s farewell get-together.
Despite Anglo-Scottish tensions, Holt says the McGrigors tie-up is one of his key achievements in his three years at KLegal. A heavyweight merger certainly gave him critical mass, an independent client base and therefore a lot more leeway with the accountants.
But what Holt is most proud of, and what helps him retain confidence in the MDP concept, is the strength of individual relationships between KLegal lawyers and professionals at KPMG.
“That’s leading to opportunities in terms of quality of work and quality of clients, which quite frankly we wouldn’t have had if we were just a medium-sized law firm,” he says.
He genuinely thinks the firm is turning the corner, adding: “If you can hold your nerve while the economy’s as tough as it is, and while we’ve done all the things we’ve done, that puts you in good shape.”
Holt has been through many incarnations, working at Clifford Chance, stockbrokers Smith Newcourt, Merrill Lynch and Jardine Matheson in Hong Kong. He moved to KLegal from Weil Gotshal & Manges, where he was one of the four partners who walked out in January 2000 with the firm’s joint managing partner Maurice Allen, to whom Holt remains very close.
Describing Weil Gotshal in 1999-2000 as a seething political cauldron is like comparing Macbeth’s court with a school playground. When I ask Holt what he misses most, he says it is the firm’s football team, on which he played with Allen. I do not need to ask if Weil Gotshal’s other joint managing partner Mike Francies played on the team – Francies and Allen are not close.
Having experienced Weil Gotshal’s political minefield, you can see why Holt has managed to balance the interests of the accountants and the Scots where others would have failed. However, he strikes me as a straightforward bloke rather than a Machiavellian political player – and you do have to wonder whether he still enjoys life at KLegal.
“If you cut away the Enron/Sarbanes-Oxley noise,” he says cheerfully, “what you see in the UK is a law firm that didn’t exist four years ago in its current form, a firm which has gone through a lot of change [but which] has started to bed down and deliver.”
Holt thinks the firm can be bigger and better than Andersen Legal was before it collapsed, and he is such an amiable chap that you just have to wish him luck while at the same time acknowledging that the odds seem stacked against him.
He is a very keen Manchester United fan. There was a joke going around last year that Holt only did the McGrigors merger in order to get tickets for the 2002 Champions League Final, which was staged at Hampden Park in Glasgow. If he did, it was a gross misjudgement, as his team never made the finals.
When I ask him about his plans for the future, he jokes: “Well, I’d be happy if I get to one or two European games in cities where KLegal has an office.”
It seems like he will stick it out at KLegal then – at least for the next season.
Nick Holt
Managing partner
KLegal
