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9 September 2013
As the hierarchy of the legal profession undergoes radical change, Abigail Townsend asks whether Leeds can remain home to regional firms with truly national ambitions.
The legal market is in a state of flux and nowhere is feeling it more than the regions. Globalisation, partner moves and accountants have all shaken up the profession. But many believe there is much more to come and, in line with the rest of business, consolidation is the name of the game.
One industry insider believes that within a relatively short period the hierarchy of the profession will be altered dramatically and permanently.
He sees the magic circle remaining the same, but believes accountants will lurk beneath the top five in the league tables, which means the second tier will shoulder the burden of change.
In simple terms, he expects the second tier to split into three strands - smaller City practices, national firms and regional firms.
For Leeds - the largest and most important legal market outside London - it is the relationship between national and regional firms that is most relevant.
While Walker Morris is the epitome of a regional practice, how to define the others is more difficult.
Dibbs and Eversheds are probably the only true national firms, with offices in seven and 13 UK locations respectively.
Pinsents and Hammonds could also claim to be national firms. But the common perception is that true national coverage out of only three offices - Pinsents out of Leeds, Birmingham and London and Hammonds out of Leeds (and Bradford), Manchester and London - is implausible.
Addleshaws had, until recently, billed itself as a northern practice but, as its 1998 decision to establish a City practice shows, the lure of national coverage has proved impossible to resist.
There are certainly benefits to being a national firm. Dibbs' Leeds managing partner Neil McLean argues that the firm has a depth of intelligence that marks it out from regional stalwarts such as Walker Morris.
"Dibbs has got something they have not - national skills and resources. If we go head-to-head we are on the same terms, or near as damn it, in Leeds. But it is our ability to bring international resources and skills into play that marks us out," says McLean.
"As more and more clients reduce their panels, they are asking fewer firms to do a bigger spread of their work. We can do that."
He cites a particular deal that Dibbs could only do because it has national coverage. "We did a couple of transactions for a property client in Leeds which needed to be handled out of London on the corporate and banking sides. But the data we needed was in Liverpool, so I got our Liverpool office to report back to me via the London corporate team."
However, Walker Morris senior partner Chris Caisley argues that technology offers those benefits without the need to leave a regional office.
Caisley says: "We see ourselves as a regional star but with the compatibility to do national and international work. We do not just operate in the regions - look to our client base."
He has a point. Clients include the resolutely non-Yorkshire companies ICI and Caterpillar.
"Despite being based in a single office location in Leeds, we have the capability to attract business on a national scale. We work for some insurance companies in Bristol and Surrey and we manage to do a lot of that online. Our IT systems allow us to do work within the region and outside of it."
Caisley argues that technology has saved the firm from being forced to go national. "There was a time a couple of years ago when there was pressure from the perspective of recruitment. It was portrayed that to be national was good and those that are not will be left behind.
"But that has most definitely gone now. There has been a realisation, certainly among staff, that our strategy is a good one, especially with the way IT is developing."
Caisley believes that effective management is one of the biggest issues facing national firms. While Walker Morris concentrates its overheads, partnership and top brass out of Leeds, national firms have to do this across offices of differing sizes, abilities and importance.
Eversheds boasts the widest cross-country coverage with over 300 partners in 13 locations.
One criticism traditionally levelled against the firm is that it does not profit share fully between offices. But partners are poised to vote in favour of 100 per cent national profit sharing (The Lawyer, 14 February).
However, Leeds managing partner David Ansbro accepts that this is only a step in the right direction. He admits that regional offices operating under a national umbrella "distinguishes us from the competition".
Ansbro realises the difficulties involved in managing such an operation. "The bigger you get the harder it is to keep up levels of communication. The London office has got to be strong and if that creates tension then you have got a problem.
"You have got to channel your resources but managing change is the most difficult thing you have to do."
While Eversheds has had 11 years to hone its management skills, younger firms like Pinsents have not had such an easy run of it.
Created five years ago out of Leeds and Birmingham stalwarts Pinsent & Co and Simpson Curtis, the firm's decision last year to redefine itself as a national as opposed to regional firm was met by a flood of partner defections.
But Leeds managing partner and national head of litigation Nigel Kissack is optimistic that the shakedown is over. As a regional and national head, he is ideally placed to understand the problems of management.
"One of the difficulties you can face is the common matrix of management in making sure your lawyers are answering to both the national heads as well as talking to each other in Leeds," says Kissack.
One of the biggest criticisms levelled against Pinsents is that while its Leeds office is recognised as being the strongest in the firm, its management board is based in Birmingham and its London office is still fighting to make its mark.
Kissack says: "I have got both hats on. We are a proper national firm which needs to have its eye on partner matters. But I do not see it matters where the management board is."
But no national firm trying to distinguish itself from its regional rivals can afford to neglect London. If a firm is going to claim national coverage then it has to crack the City. And that is no easy task.
One senior Leeds lawyer believes Addleshaws' decision to head for London is a high risk one. "Addleshaws is trying to build an office from nothing when recruitment is so very hard," he says.
But Scottish Power's head of legal James Stanley says that even if a national firm has a decent London operation, the clout of an established City player is needed for major transactions.
"I could use Shepherd & Wedderburn in Edinburgh for a major acquisition," says Stanley. "But would I use them? Absolutely not.
"If you are in the City you need a City firm sucking up to all the relevant people. We use Freshfields because the board feels more comfortable, more cosy, with a big name. We use a big firm because it packs a punch."
But the majority of Leeds firms remain upbeat about their role in London, despite some much-publicised problems.
Kissack says of his competitors: "We are obviously competing in the Leeds market with Hammonds and Dibbs. But from a more City-based position we are competing particularly with the magic circle and are getting work off them. London is a competitive market for us."
And ultimately, as industry consolidation continues unabated, it no longer matters what a firm's standing in Leeds is - it is its route to the City, be it through an office or technology, that counts.
As one senior in-house lawyer, who uses both national and regional firms, says: "We use one regional firm because it has the expertise we need. We are not that hung up about the City, but some experience is an issue."
What the future holds then for the big six firms in Leeds is anyone's guess. Firms like Walker Morris may have to consider their City position again. Or firms like Hammonds may have to pull back their national coverage in favour of returning to a more concentrated offering. But one thing is for sure - time will tell and money will, in the end, win out.
As Hammonds' Leeds managing partner Mike Henley says: "It comes down to reasons for being in business. The businesses that will survive are the ones that have offices that are profitable."