Let's get logical
6 November 2000
Logica has had a busy time of late. With the takeover of Australian IT consultancy Mits, a licensing deal with German mobile company T-Mobile, and the acquisition of German consultancy Pdv, the company is frantically strengthening its global position.
And that is only since the beginning of October. However, Logica's legal director David Walker denies that this is normal practice. He says: "It's not an average month. What's happened over the last three years is an increase in the number of acquisitions, most of which have been outside the UK."
The story of the IT consultancy begins in 1969 and has its fair share of peaks and troughs. During the mid-1980s it experienced a slump in its profitability and in 1986 it was forced to sell off its hardware design function. By the early 1990s, none of the three original founders remained - one had passed away and the other two had walked out. By 1992, organic growth had stopped.
But in 1993 things began to change. Martin Read, who had previously been a director for GEC, was taken on as CEO and changes were made both internally and externally.
Read adjusted the internal structure of the company and, along the way, the in-house legal department was scaled down. Now, with more than 8,500 employees worldwide, the main legal function consists of only four qualified lawyers. With the current structure of the company, however, this is about right. Walker explains: "One way of doing it is to have lots of lawyers so that all salespeople refer everything through to them. A second way is that you just don't worry about it - you let the salespeople and the local managers deal with it all themselves - which is not sensible in our view. The third way, which is the one we've chosen, is to have a skilled set of people in the operations."
By having an experienced group of commercial managers placed throughout the company who are able to deal with basic legal functions such as contract drafting and deal bidding, the demands placed on the legal department are kept to a minimum. This also increases the speed and efficiency with which work is carried out.
"There's a kind of filtering process," says Walker, "which avoids the need for the legal people to get involved in the ordinary course of business. It's left to them unless there's something exceptional about it. It may be that it's legally complex, or it may be that it is of unusually high value." Having experienced managers means that on top of the four-strong corporate legal team in London, there are only about five other qualified lawyers throughout the worldwide offices. According to Walker, it is a system that works well. "That's why we manage okay with only four people in the corporate department," he says. "Otherwise you'd need a much larger number of people."
On the day-to-day side of things, the in-house department deals with issues that might be beyond the experience of the commercial managers. But when these issues become either too complex, too high in volume or too risky, then outside help is sought. This costs the company about £750,000 each year.
Walker says: "We use external lawyers for specialised areas. That includes M&A and financing, property work, group property, litigation - although we have very little need fortunately - and similar specialisms."
When there is a project or issue in another part of the world, Logica likes to take advice both at home and away, and regularly uses local firms.
However, when buying the German consultancy Pdv, things became slightly unusual. Logica generally uses Freshfields for its large M&A and financing work, and accordingly it acted as the company's German lawyers. But the seller was using Deringer, which posed unforeseen problems.
Walker says: "Deringer merged with Freshfields to form Freshfields Bruckhaus Deringer. The result was that, under German professional rules, they all had to stop acting, so we all had to go and find new lawyers." Logica decided to use Oppenhoff & R‰dler, which is part of Linklaters & Alliance. This was no coincidence, as Logica had purposefully chosen a firm with UK ties. "We wanted a top-quality German firm," he says, "but one that we could easily communicate with. Not just in language, but in the approach to business. The fact that they were part of the alliance was an advantage."
Other firms used on a regular basis include the London office of Hammond Suddards Edge for intellectual property (IP) and IT work, and niche IT firm Tarlo Lyons. But with Tarlo Lyons, it was not merely the firm they were attracted to, it was the individuals within it.
"Personal relationships are important," says Walker. "But first and foremost is the quality of the individuals. You need to know that if you're going to a firm for IT advice, for example, you've got one or two really top-quality individuals in that firm that you're going to be dealing with. It's the individuals more than the firm."
When farming out work, the in-house responsibilities do not end there. To ensure that consistency is maintained between in-house and outsourced work, the department works closely with its service provider. And while a lot is placed on the shoulders of the external firm, responsibility for the final product remains firmly in-house. This is especially so with the larger projects.
"If there's a large transaction of some sort, like an acquisition, then we would typically appoint local lawyers. But it's up to us to ensure that the acquisition is legally healthy. The more routine things we'll deal with in-house."
Logica uses different firms for different specialities. While Tarlo Lyons, Freshfields and Hammonds do most of the external work, there are other firms lurking in the wings, which come on stage as and when they are needed. Field Fisher Waterhouse is one such firm, but again this choice is due to the individual rather than the firm. "Our trademarks work is done by Field Fisher," explains Walker. "We use them because we followed John Olsen, who left SJ Berwin and went to Field Fisher. He'd been doing our trademark protection programme, so we went with him to Field Fisher."
The idea of using different firms for different needs seems to work well for Logica, and encourages the company to keep its panel under review. New relationships are created should the need arise. Walker says: "If we have a new need and we don't have an obvious outside firm, then we'd do a beauty parade. Otherwise we'd just keep the existing panel under review and use new lawyers as and when we thought sensible."
It is a successful system that seems to pay for itself. Since the company's slump in the 1980s, it has managed to claw its way back to prominence, and now runs like an efficient machine.
"We went over to this model a few years back, and we've strengthened it since then," says Walker. "We're very happy with it."
Head of legal
|FTSE 100 rating||39|
|Legal capability||Four lawyers in the UK, five abroad|
|Head of legal||David Walker|
|Reporting to||Andrew Given, group financial adviser|
|Main location for lawyers||London|
|Main law firms||Freshfields Bruckhaus Deringer, Hammond Suddards Edge, Tarlo Lyons|