Allen & Overy (A&O) rarely puts a foot wrong.
Strategically it wrongfooted its closest rival Clifford Chance with its mass Australian acquisition in February, while – as we report today – its practice brand has been given a further fillip by replacing Slaughters as the Treasury adviser on the Irish bailout. However, it may look back ruefully on the history of its derivatives spin-offs. First, Derivative Services (DS) was launched on 11 September 2001. Then, as if that was not bad enough, docGenix, son of DS, was launched in September 2008, just days before Lehman Brothers collapsed. To say this venture has not been a money-spinner is an understatement.
There’s a playful but persistent conspiracy theory that the derivatives outfit was set up purely to avoid the difficulties of breaking lockstep in the US caused by bringing in trophy hire Dan Cunningham from Cravath. A&O earnestly protests that it’s still a start-up, it’s had its seed money and it’s looking to find a buyer. However, with a write-down of £1.3m by DS last year, any acquisition would best be described as a strategic play.
A&O’s decision to pull the plug on docGenix should a buyer not be found is yet more ammunition for those who argue that lawyers make terrible businesspeople.
It is, of course, an unfair charge, given the performance of the magic circle. A&O, Clifford Chance, Freshfields and Linklaters have made the running in the global legal sector in a way that few other comparable UK businesses have, and they’ve always been run by lawyers.
However, where law firms are less sure-footed is in extending their traditional business to related areas. Take Berwin Leighton Paisner (BLP), one of the market’s most entrepreneurial firms. Its success has been in nimbly tweaking the existing law firm model; its Lawyers on Demand, which subcontracts lawyers out to clients and essentially sells on hours, is a case in point. Yet even this looks likely to be decoupled from BLP once ABSs take hold. This parallels the experience of Eversheds and Beachcroft, both of which are abandoning their branded volume businesses and reintegrating them into a more general offering.
Lawyers doing law? Now, that’s radical.