Analysis on Mishcon de Reya, 2012 law firm of the year
16 July 2012 | By Matt Byrne
29 August 2014
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Mishcon de Reya’s three-year plan, spearheaded by managing partner Kevin Gold, has paid off big-time. Now it’s gearing up for its next big challenge.
Nobody in the near-20-year history of The Lawyer Awards had ever seen anything like it.
The host, comedian Jason Manford, announced Mishcon de Reya as the winner of the Law Firm of the Year Award. Immediately, a gang of lawyers and support staff from Mishcon began squeezing its way through the tiny gaps between the hundred-plus tables at the Grosvenor House Hotel.
The procession, culminating in an unprecedented stage invasion, transfixed the 1,300 industry insiders in the room.
The scrum was led by Mishcon’s victorious managing partner, Kevin Gold. And rightly so. Gold is the man most closely associated with leading a cabal of partners on a mission to revitalise a once-struggling and divided West End also-ran and transform it into a weighty player with one of the best brands in the UK legal market.
And make no mistake, Mishcon is a firm that understands the power and meaning of the word ‘brand’ better than most.
“Mishcon has an enhanced understanding of the law as a product,” says SR Search partner Nick Holt. “They’ve ditched the quaint and embraced branding.”
This year’s top gong at the awards is a reflection of how far the firm has come and how much distance it has put between itself and some of its rivals (see box).
As one Mishcon partner put it, “I was shocked to see we’re now bigger than Lawrence Graham”.
But there is more to this story than mere revenue growth. Mishcon has moved from being a West End player to an increasingly serious London firm.
“Now we’re growing up – a bit,” says executive partner James Libson. “The challenge will be to maintain our culture while dealing with the fact that we’re a big firm.”
At Mishcon, the award is now history and the pressure is on to take the rapidly growing firm to the next level.
Mishcon won its award both for the brand it has created and its phenomenal growth over the past two financial years, the result of a three-year plan launched in April 2010.
Last month the firm released its 2011-12 results that showed it was well on track to smash its three-year budget target of £80m. Mishcon unveiled a 20 per cent revenue growth that boosted turnover from £61.5m to £73.1m.
“We now have a scale we never had before,” Gold confirms.
This year’s results show average profit per equity partner (PEP) is also on the rise, growing by 20 per cent from £575,000 to £700,000.
And this year’s revenue hike came on the back of a 30 per cent increase the previous year, from £47.5m to £61.5m. The impressive figures are a vindication of the success of the plan, which was primarily about growth but also saw it embrace some significant changes.
Among major strategic moves the firm opened its first office overseas, a bespoke litigation practice in the New York office, and is converting to an alternative business structure (ABS), a move that should allow it more freedom to explore new products and extend its brand further.
“The last three-year plan was about revenue and profits,” says the head of Mishcon’s corporate department Nick Davis. “After the summer we’ll sit down and look at the next three years.”
Certainly, growth has characterised the past two years. And, according to Gold, not just in laterals, but also in the quality of growth and in Mishcon’s international coverage.
“There’s also been market share growth,” Gold insists. “That’s my gut feel judging by the size and scale of the jobs we’re doing.”
In corporate, Davis’ team has advised on more than 70 deals worth a total in excess of £2.1bn. Highlights include advising the principal shareholder of Beatthatquote.com on its $61.5m (£39.7m) disposal to Google, and Limited Brands, the owner (and licensor) of the IP used by La Senza UK during the latter’s acquisition by Middle Eastern retail group MH Alshaya from Lion Capital.
As Davis reveals, much of the team’s work is either sourced from overseas, is based overseas or is derived from high-net-worth individuals and family clients.
“There’s a constant flow,” adds Davis. “If you’re reliant on UK corporate you’re going to struggle. In the last financial year, 65 per cent of corporate revenues were either foreign money coming in or doing deals abroad.”
Of course, another core plank of the Mishcon offering is family and private client. Last month Gold told The Lawyer that it had been the decision to forge closer links between the private client and dispute resolution practices that had driven revenues upward.
The establishment of Mishcon Private two years ago, which involved moving the family group headed by partner Sandra Davis into the private client department, has clearly had a positive impact on the firm’s financials and acted as a catalyst for broader success.
“What is ‘family’?” asks Gold. “I don’t mean family law. A sovereign fund for us is private. It’s family – there’s a family behind it. And it’s about how you relate to capital.”
The difference between the two, says Gold, is that institutional capital works by middle management making technical decisions.
“You can have exactly the same size and scale of wealth in the private world but it’s an individual or a family making the decisions,” he adds. “And the lawyering that’s required for those individuals and families is just slightly different in style from the corporate world. Mishcon de Reya has been particularly good at developing expertise and exploiting that.”
Gold cites one example where he was advising on the structuring of a multibillion-dollar family business.
“At the same time the principal, who had a house in St John’s Wood, wanted to buy the garage next door,” recalls Gold. “Trust me on this, he was more concerned about the garage than the deal. Now, when your firm sends that work to a junior trainee you’re missing the point. These clients don’t distinguish between the two. So it’s about what’s important to the client. One has to give equal value to everything. The bigger firms with bigger leverage that are better at moving armies of lawyers to undertake conflicts, due diligence and tax and so on aren’t geared up to have that owner relationship in the same way.”
Elsewhere in the practice litigation has always been at the heart of Mishcon but last year was a corker by any measure. The firm’s top 10 litigation instructions involved disputes with a combined value of more than £62.5bn.
Mishcon’s dispute resolution practice includes employment, family, private client and pure litigation, and together contributes more than half the firm’s turnover.
Inevitably, the firm’s role representing many of the complainants in the phone-hacking cases against News International, where partner Charlotte Harris has made a name for herself, stands out. In truth, however, this work was more about profile than turnover.
For chunky litigation income, these days in London it’s hard to beat an oligarch. Here, Mishcon has been near the front of the queue.
Head of litigation Kas Nouroozi is involved in four oligarch-related matters, including acting for Vladimir Antonov on the extradition case relating to the collapse of Baltic bank Snoras.
“It’s an enormous growth area,” confirms Nouroozi. “They come to us because we’re known for litigation.”
Litigation as a whole generated just over 50 per cent of Mishcon’s total revenue last year, with the litigation group itself generating around 75 per cent of that with around 85 fee-earners.
Narouzi, like the other leading partners, is looking at the best way to take his practice forward and is working on his business plan for next year.
“Part of my plan for litigation is to build around international arbitration and some specific bits of antitrust work,” reveals Nouroozi. “There are also interesting opportunities in terms of funding, interesting models we’re working on, here and internationally. We’ve been focused on it for more than two years. But it doesn’t mean merely providing cost-effective funding solutions. We’re also going to be doing premium work for premium clients. This will be just something we can throw into the mix.”
And once again it is likely to be something that will help Mishcon extend its brand.
The power of that brand starts at home. Speak to any Mishcon insider about the firm’s rise to prominence and it won’t be long before they’ll mention the words ‘core values’.
Before your toes curl in anticipation of yet more meaningless legal market platitudes, you would do well to speak to Gold. There are few in the market who can tell a tale quite as well, or invest a list of apparently bland corporate promises with a zeal that adds a bit of spark.
“The building block, the key to our recent success is the value system of the firm and the need to articulate and live values rather than just state them as some kind of passé thing,” says Gold. “It’s about people behaving properly to each other, being honest and open, both in criticism and praise, and try and look objectively at each situation.”
One of the most obvious examples of core values in action came in the depths of the recession in 2009 when the partners agreed to reinvest a slug of their profit back into the business as part of the drive for growth.
“There’s a view that says if you make the money you take the money,” says Gold. “But there’s a problem in the partnership structure as opposed to a corporate structure – how do you invest? How do you say ‘hey, you’ve earned this money but actually I’m not giving you that, I’m investing it in the business?’. How did we get to that point of investment? It’s because we have a corporate duty about trusteeship and a value system that says we’re going to hold the firm in trust for future generations and stakeholders.”
Gold insists that this vein of trusteeship runs through the firm and is also core to its hiring policy, a key factor as Mishcon continues to look to grow.
“Any lateral, regardless of who interviews them, will be asked about core values,” says Gold. “If they don’t buy them we won’t hire them, no matter how big their book of business. We’ve had several laterals who haven’t joined as a result of this.”
If your toes are still curling, check out the profits and revenues box with this feature. For Mishcon at least, these values are working – certainly at a financial level.
That said, the mention of finances brings up one persistent criticism of Mishcon in the wider market – that its equity is tightly held. It is something that seems to be in head-on defiance of core values and an inclusive culture.
“It’s certainly a profitable firm,” says one London recruitment consultant. “Mind you, they’ve taken a leaf out of DLA [Piper]’s book – the equity is tight.”
Currently, 29 out of 73 partners are full-equity for legal market reporting purposes. Gold, however, dismisses any talk of a high-earning elite inner circle.
“There are a number of junior partners who earn more than the full-equity partners,” insists Gold. “And there are at least three very high-earning JEPs [junior equity partners] who don’t want full equity because they don’t want the risk in their lives. For us, equity has never been purely about money. It’s about whether you contribute in the round.”
The creation of the legal director role in December 2008, which gave a number of lawyers the same status as a partner without the pressure of generating business, was intended as a nod towards democratising the firm.
Now Mishcon is analysing whether the role is still relevant in an era in which the firm has grown rapidly and there has been a swift institutionalisation of parts of the client base.
“Some clients demand a junior partner to be the day-to-day relationship partner – they don’t want an equity partner because they don’t want to pay those rates,” says Gold. “Historically, many of the legal directors are good ‘looker afterers’. That’s led to a desire by some to build a business of their own. It’s caused a tension in that structure. So we’ve gone back to forum [Mishcon’s internal communications mechanism] and asked – is the legal director role still relevant? We don’t want to undermine the role, but this is at the consultation stage and will become part of the business plan.”
Talking to Gold and several other Mishcon lawyers, the sense that the firm’s core values run right through comes across clearly.
If, however, on the day The Lawyer popped by for a chat, Gold had wanted to engender the impression of Mishcon as an inclusive, welcoming place, then the zonked-out 10-year-old snoozing on a comfy chair in the firm’s reception (apparently a client’s daughter) could have been a tailor-made plant.
“We had an elderly gentleman sleeping here on one occasion,” recalls Gold. “He was snoring the house down.”
Mishcon’s managing partner of 14 years is clearly still on a high from the previous week’s antics. Full of energy, Gold at least had recovered from an awards night that left eight members of the firm in such a state they failed to make it into work the next day.
Today, a beaming Gold is still buzzing from having received the industry’s seal of approval for the changes he has spearheaded at Mishcon.
His next three-year plan, set to kick off next May, will continue with that focus on clients. It is already the subject of much discussion internally. Once the summer – what there is of it – is out of the way, it will move to the top of the agenda.
While the tension of maintaining Mishcon’s culture as it grows into a major player will be at the heart of the next three-year plan, so will its approach to international matters.
“We’ve just appointed a director of international, Rita Jardim,” reveals Gold, referring to the former administrative director of Legalink, the international network to which Mishcon belongs. “As part of this exploratory stage before we have the new three-year plan, we’re doing some technical analysis of our relations with other firms. Rita will be helping us look at our key relations outside the UK and the best model for us to move forward with.”
Around 70 per cent of Mishcon’s business comes from outside the UK. Jeremy Hertzog, head of IP, is also closely involved with planning the next three-year plan.
“IP is an important bellwether for Mishcon,” says Hertzog. “Twelve years ago there was no IP department. Then we won Microsoft as a client. That was a launch-pad not just for the IP department but also for Mishcon as a firm with serious corporate clients. It gave the firm the confidence to go for other major corporate clients.”
Over the past decade there has been a significant growth in Mishcon’s contentious and non-contentious IP, in particular with instructions overseas. The team has recovered more than $100m with significant repeat business for clients such as Pfizer, HP, Dell and BMW.
“Fifteen or so of the world’s biggest corporations are clients of ours in IP,” adds Hertzog. “The clients in IP are a good calling card for the rest of the firm. And by nature IP is international. Our competition is the likes of Baker & McKenzie and DLA Piper – the global firms. We need an answer – I think it’s a network of independent lawyers who are the best in the key jurisdictions in the world. So I’m in the process of setting up a global IP network of best-is-best IP lawyers. We’ve identified the jurisdictions and we’ve largely identified the partners in those jurisdictions. It’ll be a non-exclusive network, but yes, we want something back in return. And at the end of the day, you can’t be best friends with everyone.”
“February, whichever way the wind blows, is the cut-off point to deliver the next three-year plan,” says Gold. “It doesn’t have to have a goal, but it will have a process.”
At this stage nothing is decided, but not everything is on the table.
“I don’t think it’ll see us opening any offices and I’m pretty certain we’ll remain an independent London-centric firm with a New York litigation office,” he insists, adding that it is also unlikely to see the firm open its doors to a US merger.
“We’re often pursued by them,” Gold admits. “I always say ‘a merger is not on the agenda’ and they always say ‘that’s fine, but can we just come and see you?’ And then the first question is always, ‘so, can we talk about a merger?’ We’re not playing hard to get. We just think – why recreate something that’s already out there in the market?”
A merger or a new international strategy aren’t the only hurdles Mishcon may have to jump.
The firm is working towards an ABS conversion but as Gold puts it, “at a time of a complex economy and rapid growth of the brand and the business it’s frankly a bit of a pain, so it’s been put on the back-burner. But we’ve promised our partners an end-game”.
Key to that end-game will be Mishcon’s property. The firm has a break clause in its primary property in 2017 (Mishcon is in two buildings, with five floors both in Eagle House on Procter St and in its main headquarters at Summit House in Red Lion Sqaure).
“A property move can make or break law firms,” concedes Gold, “so it’ll be a massive decision about where we go. We’re losing business by being on two sites. A decision will be made in the next six to 12 months.”
Gold says the firm has been looking for three years and that currently there is a “shortish shortlist” but he prefers not to divulge details of the firm’s options, although he can’t resist confirming, “it’s unlikely we’ll be going to the City – we’re not a City firm”.
Part of good branding is knowing what you’re not as well as what you are. Few do that better than Mishcon.
Ask Mishcon’s managing partner what the firm’s core values are all about and he offers numerous examples. One highlights the ease with which in some firms, individual fee-earners can feel left out in the cold and how at his firm this issue is addressed.
As Kevin Gold puts it, in a typical firm the internal market “buys or sells” internal talent. If lawyers aren’t ‘buying’ an individual’s talent, i.e. using them on their deals or cases, it is easy for that person to become slowly ostracised until they are miserable.
“A firm’s best performers are the best performers because the internal market uses them – buys them,” says Gold. “Generally, law firms are bad at communications. They don’t say anything to those ‘non-buyee’ lawyers, but over time people feel ostracised.”
At Mishcon the onus is on communication. For example, that individual at the bottom of the pyramid has their own independent monitoring partner, not necessarily someone in the team.
“If you let someone down a couple of times and nothing is said, but over time you don’t get used and the internal market doesn’t buy you and you slowly become more miserable, ultimately it leads to a difficult decision,” says Gold.
With the adoption of the values across the firm, that individual has the right to be heard.
“But, more importantly, there is an obligation for someone to come and have a conversation and find out what you need,” adds Gold.
As the firm puts it, in its pitch for this year’s awards, Mishcon’s core values system, “is not just a generic partnership charter – it remains at the heart of everything we do”.