It’s the brand, stupid
4 February 2014
7 February 2014
4 February 2014
4 February 2014
7 February 2014
Nigel Knowles took DLA Piper from a Northern upstart to a global player. Can Tony Angel push the firm to the next level?
On the day The Lawyer meets Tony Angel and Sir Nigel Knowles for the first time as colleagues, the sky outside DLA Piper is icy blue.
How appropriate. Angel’s tenure as Linklaters managing partner is near-legendary. He was the man associated most closely with driving the magic circle firm’s ’Clear Blue Water’ strategy, designed to catapult it into the stratosphere and out of reach of its competition. It was the first of many restructures, and one that saw Linklaters shed dozens of partners a decade ago.
Now Angel is at it again, but this time at a very different animal, after taking up his role as senior partner of DLA Piper’s international LLP and co-global chair in November 2011.
To his credit, Angel does not play the game of pretending DLA Piper is something it plainly is not. He highlights the group of global elite firms, US and UK, that have a relatively narrow and simply-defined focus on handling the premium work for the premium clients.
“At DLA Piper it’s a different market,” Angel admits. “We’re deliberately broader and in more places. Take the concept of the G20. We want to be where the multinationals are across the G20, doing the range of their work. That means a broader range of practice areas and geographies, and therefore a bigger firm.”
Without disparaging his new home, Angel candidly outlines the scope and scale of his new job. There are, he admits, “still a hell of a lot of areas where there are holes that need to be filled”.
“But few firms have as clear and consistent a view about what their positioning is,” he adds.
At which point the man who many hold responsible for creating that positioning interjects.
“The global financial crisis has been good for us in several ways,” insists joint CEO and managing partner Knowles. “There’s been a shift in the buying patterns of general counsel. There’s been an acute squeeze by chief financial officers and CEOs and therefore they’re looking again at their suppliers.”
DLA Piper’s target market, says Knowles, is the category of client that will not go to the magic circle for everything.
“In addition, some companies see the inefficiency of using several firms globally, and they’re now looking at other options,” he adds. “Look at the FTSE, there’s a scaling down of the number of firms used. So our core themes of best practice, an investment in relationships and becoming our clients’ trusted adviser all adds up to - if we get it right - clients using DLA Piper across a range of geographies with a one-partner point of access.”
Angel’s measured approach to restructures never quite manages to disguises the potential savagery of these projects. Former Linklaters partners who were axed by Angel in the middle of the last decade complain that his obsession with profit meant that the firm’s culture was sacrificed. Those that stayed presumably appreciated the notable increase in drawings.
However, Angel’s approach has always been about alignment rather than take-home pay. Is the client base coherent? Is it properly remunerative? How is it best served?
DLA Piper, which has grown fast and to the point of being sprawling, is clearly set for a reshaping. But the proof of whether the firm really
is about to move on to another level with Angel on board will be seen in the metrics.
A snapshot of the multinational clients that currently use DLA Piper across various geographies includes Aegis, ConocoPhilips, HCL Technologies, Kraft Foods, Lockheed Martin, Newell Rubbermaid, Pfizer, and Total.
According to Knowles the firm has seen a 30 per cent fee-income growth globally in the past two years down to clients such as these.
“Compare that with a London firm with no capacity to shift work to Leeds or abroad,” he says. “There’s no point of differentiation. Those firms are going to be killed over the next period. It will be difficult for them to catch us or fill that gap.”
If the current three-year plan plays out as hoped, Angel and Knowles will be supercharging DLA Piper’s trajectory. However, judging by the most obvious measure - M&A tables - there is still a long, long way to go (see graphic and commentary, below).
The thinking internally, however, is that DLA Piper’s vision and strategy are set. Over the next three years and more it’s all about implementation to achieve that vision - an ambitious plan to transform the firm fundamentally.
“This is the plan,” says Knowles. “But we have to do it right - there are still things to do.”
That is, no doubt, an understatement.
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Disaggregation is a key element of DLA Piper’s strategy. This month will see the launch of one of the more interesting planks of DLA Piper’s new dawn - LawVest, the commoditised sector-focused holding company in which DLA Piper has taken at stake.
This move has fascinated many in the market. “I don’t fully get it,” says the CEO of an international firm. “It looks as though it’s an attempt to capitalise on legal services reform but it’s unconnected with anything they do.”
LawVest is soon to launch an alternative business structure (ABS) vehicle by “deploying a market-disrupting brand, pricing and service delivery model”, as its literature puts it.
Details have yet to emerge about LawVest, but the new business should give DLA Piper the leg room to hang on to smaller and less profitable clients, albeit at arm’s length, while allowing it to do what Angel did so well at Linklaters - foster a culture of partners focusing on a smaller group of the most profitable clients. Not that Angel underestimates that particular task.
“It’s always hard to get partners to give up clients,” he says. “It’s all about personal relationships and it’s bloody difficult.”
“LawVest allows us to say to clients, ’we don’t do this work anymore, we’re not geared up for it, but rather than turn you away we can say we’ve taken a strategic stake in a business that does handle this work and introduce you to LawVest’,” says Knowles.
In other words, it should allow the firm to stay in touch with the likes of small Northern businesses with £5,000 legal needs or larger corporates (think Tesco) with remortgaging needs. DLA Piper does not do remortgaging, but LawVest can, goes the thinking. That way the firm minimises the risk of offending Tesco. And who would want to do that?
“We have to shed commodity work, but in a sensible way,” adds Knowles. “This is a toe in the water.”
On this basis, the LawVest move may have more resonance with managing partners than would seem to be the case at first glance.
“Never has it been more important to work out high and low operating models and make sure you can triage between them,” says one law firm CEO. “I suppose this ABS can give you the opportunity to run things in a different way.”
But back to the firm proper. Once the shock of Angel’s arrival at DLA Piper subsided the market chat turned to how long it would be before he began cutting partner headcount.
“My understanding is that Angel has been brought in to cut partner headcount by 30 per cent,” says one former partner.
Another says this sounds “too high”, but agrees the arrival of Angel is likely to herald a period of bloodletting at his new firm.
“Tony is going around the partners and asking them - ’what did you do for DLA Piper last year and what are you going to do this year?’” says a source close to the firm. “It’s aggressive, but frankly it’s not wrong.”
The fear of cuts is, understandably, said to be widespread throughout the firm right now, with DLA Piper’s layers of non fee-earning management such as sector or group heads thought to be the prime target in Angel’s sights.
It’s an issue that Angel is willing to address. “I do strongly believe in alignment but that doesn’t mean a slash and burn strategy,” says Angel.
The firm’s move to an all-equity partnership in its international LLP increases the importance of having “everyone aligned”, says Angel.
“All the offices have to work in the same market,” he elaborates. “They can offer a real competitive advantage when general counsel are looking for lower costs, although the partners and lawyers in those offices are bound by exactly the same strategy as everywhere else.”
Which leads to a fundamental question - does the firm have the right number of managers? Or, more specifically, the right number of lawyers spending most or all of their time managing rather than fee-earning?
“We’ve always evaluated management every three years and that will continue,” says Knowles. “When you’re doing less building [outwards] the emphasis changes. They could be back at the coalface building client relationships.”
That would certainly chime well with DLA Piper’s plans to integrate the international side of the business with the US, where the idea of non-fee-earning lawyers in management is anathema.
A notable comparison is Hogan Lovells, where only co-CEO David Harris in the international side of the firm is focused exclusively on management. All other group, practice area or sector heads are expected to generate value for the firm in the form of hard cash.
Even a cursory glance at DLA Piper’s organisational chart (see table, page 28) shows that the firm is operating a management matrix that cries out for a spot of Angelic streamlining.
“I feel strongly [about this issue],” adds Angel. “At Linklaters, if I couldn’t, as managing partner of the firm, generate 10 times what my billings would have been, I ought to be fired. If you’re adding less value to the firm as a manager than your billings you should be fired.”
In DLA Piper’s new world, no one is immune from realignment.
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Tony Angel: the market’s questions answered
What’s the best bit you’ve found about DLA?Senior partner, national firm
What impresses me - and this came through even before I joined the firm - is the sense of purpose and clarity of vision. All firms face challenges, especially in the present environment, but it is the willingness to face up to them and do what is required that is important.
Is DLA capable of competing with the magic circle? Managing partner, national firm
We’re not trying to be a magic circle firm. We have a clear and distinct strategy.
What metrics are you going to use to measure other people in the business? CEO, City/international firm
Under any performance management and remuneration process - and ours is no exception - partners, from the most junior to the most senior, are entitled to clarity on what is expected of them. Performance is about how well partners do against those objectives and needs to be assessed differently for different partners, depending on their roles and responsibilities. DLA has a reputation for being meritocratic, with reward tied to performance, and that will continue. In the current economic environment that is more important than ever.
How confident are you of the model of DLA, and how does it relate to Linklaters? Managing partner, silver circle firm
Every day we see examples of the way our ability to use our sector expertise to meet the needs of
global and other clients across a range of jurisdictions and practices is increasingly compelling. Elite firms such as Linklaters have a similar approach, of course, but in relation to a different market segment.
In terms of brand positioning, how do you see yourselves? Senior partner, large City firm
Our aim is clear: to be the leading global business law firm. We’ve made great progress - for example, last year we were the world’s leading M&A firm by volume, we have market-leading practices in litigation, IPT, real estate, and so on, but we accept that the challenge is tocontinue to build on the foundations we have laid.
DLA Piper: M&A data
DLA Piper’s UK M&A record is pretty clear: it advises on an astonishing number of deals but is way off the leading pack for transaction value.
For example, it won roles on 105 deals with UK involvement in 2010 and hit the exact same figure in 2011, according to data provided by Thomson Reuters. This put it far ahead of any rivals by deal count in 2011, with Freshfields Bruckhaus Deringer in second place on 77 mandates. In 2010,Freshfields pipped it to the post with 115 deals, but that was in a market where overall deal volume was slightly higher.
But deal value gives a wholly different picture. It lagged in 16th place in 2011 behind the likes of US firm Morgan Lewis & Bockius and Australian firm Blake Dawson, clocking up a total of $20.3bn (£12.8bn), sandwiched between Cleary Gottlieb Steen & Hamilton and Weil Gotshal & Manges. Freshfields and Linklaters, by contrast, each advised on UK deals valuing over $60bn. DLA’s figure was 21 per cent down on its 2010 total of $16bn, but it only dropped one place in the rankings.
However, there’s clear water between DLA and its obvious peers, such as Baker & McKenzie and Jones Day, a distinction underlined by DLA’s stronger record on the very biggest deals. It has advised on eleven deals exceeding $1bn in value going back to 2007 where the target was a UKcompany, with three of these coming in 2011. Bakers, meanwhile, acted on only four $1bn-plus transactions, of which one was in 2011. Linklaters, by contrast, scored 77 in this respect, including ix in 2011.
DLA’s deal portfolio ranges from the $10.3bn takeover of software company Autonomy by US giant Hewlett-Packard in 2011, where it had a minor role for the buyer, to the reverse merger of Rotherham meat retailer Crawshaw Group and retail kiosk maker Felix Group in 2008, which Thomson Reuters values at $301,000.
Overall, DLA has advised on 163 UK deals valuing less than $100m since 2007, compared with Linklaters’ 24. Indeed, DLA has advised on nine deals worth less than $1m since 2007, and two in 2011.It’s almost the definition of a volume business.
Knowles and Angel: the personal relationship
It’s quite something to see Knowles and Angel together selling the same story for the first time. Also quite something to hear Angel say “we” and mean DLA Piper. It takes some getting used to.
“Back in May it wasn’t on the agenda,” says Angel. “I’d left Linklaters, joined Standard & Poor’s and had two very interesting years at the centre of the financial world credit storm, meeting central bankers and so on, and effectively getting it through to being regulated.
“By September 2010 my job effectively disappeared. So then a range of things opened up. Vantage Diagnostics [where Angel was chief executive] was one and also I was asked by [senior partner] Jonathan Blake to be a non-exec at SJ Berwin.”
Angel has known Blake since they were at school together aged 11 and, as he puts it, “he’s to blame”.
“He reminded me that I thoroughly enjoy being in a law firm and had an interesting perspective from having run a non-legal firm,” adds Angel. “I’d also found out that I was a lousy non-exec because I wanted to be involved in everything.
“So joining DLA Piper had never occurred to me. If I hadn’t gone to SJ Berwin I wouldn’t have known what I was missing.”
No one would doubt that there are few, if any, more experienced law firm leaders in the global market. As for the dynamic between the pair, they share the talking duties more or less evenly, with the naturally more garrulous Knowles only once being stopped from interrupting Angel with a raised hand and a gentle but firm, “if I can just finish this point”.
The former Linklaters man’s arrival has generally been seen by the market, and even former DLA Piper partners, as a positive step for the firm.
“When I heard that Tony Angel was coming in I thought it was a very good story for DLA Piper,” says one former partner. “He’s a big name.”
Knowles and Angel have known each other for more than 10 years. Last May, at a breakfast meeting at The Wolseley that lasted two hours, Knowles - who insists that there had been nothing “premeditated” - asked Angel to join the firm.
“I hadn’t thought it was on the agenda but I said I’d give it some thought,” admits Angel. “I met [co-global chair] Frank Burch and [joint CEO] Lee Miller, went to the US and kicked the tyres.”
“There was unanimous support everywhere,” adds Knowles. “We want to be the leading business law firm in the world and there’s so much still to do [around the world] in improving delivery, best practice and integration.
“We need the best possible squad at the top to advance that [agenda], and we really need to hit the accelerator.”