The happy mediums
1 July 2013 | By Natalie Stanton
1 July 2013
1 July 2013
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As Taylor Wessing takes top honours at The Lawyer Awards, we identify five mid-market firms making a top tier splash
These are tough times for medium-sized firms. As the mid-market becomes increasingly squeezed, with firms facing new pressures from thrusting ABSs, punchy boutiques and the established global mega-firms, the imminent demise of certain mid-market players looks a dead cert.
But taking that viewpoint would mean overlooking a raft of firms blossoming in the middle of the pack – firms that somehow seem to have pinpointed the key to success in this trickiest of markets. Last Tuesday at the Grosvenor House Hotel in London’s Park Lane one of them, Taylor Wessing, took home the Law Firm of the Year gong, the evening’s top prize.
The fact that the firm kicked off a redundancy consultation for 96 secretarial positions last month shows it is far from immune to the pressures in the market, but Taylor Wessing’s award was won off the back of the fact it has gone from strength to strength over several years, while expanding significantly internationally in 2012/13. At the same time it has sharpened its sector focus and overhauled the delivery of legal services to clients.
The job cuts are a fact of life these days, and should not detract from what is one of the best-run businesses in the UK legal market.
Overseas expansion, a sharp sector focus and canny service delivery are themes that recur with all the firms The Lawyer has pinpointed as the present mid-market winners. Osborne Clarke, Bird & Bird, Olswang and RPC (runner-up Law Firm of the Year) are all following similar paths to Taylor Wessing, although naturally the geographies, sectors and initiatives differ.
So, what are the challenges facing these mid-sized outfits? For Osborne Clarke’s managing partner Simon Beswick, they roll off the tongue all too easily.
“It goes from lack of volume in the market to clients seeking more for less to the over-supply of lawyers and the changing style of delivery of legal services through the Legal Services Act and other factors,” says Beswick, whose firm was shortlisted for this year’s Law Firm of the Year prize. “The market is still globalising and there’s pressure from above and below. There are considerable pressures, but they’ve been there for the past four or five years.”
Considerable pressures there may be, but these five plucky firms were not going to give up without a fight. At some point over the past five years each has sat down, picked apart their strategy and painstakingly pieced it back together.
Taylor Wessing launched its new five-year plan in early 2010. According to the firm’s managing partner Tim Eyles, “by 2009, when the world had changed economically in a huge way, we recognised that clarity of direction was vital both internationally and domestically. We developed a strategy focused on industries and on economies where growth was already being experienced and forecast to continue”.
Osborne Clarke, Olswang and Bird & Bird had similar ideas, focusing on deepening their sector focus.
“We’ve got to figure out the international markets in which the clients in our sectors play and look at what’s important to them,” says Beswick, whose firm is in the final year of a three-year strategy.
Olswang bashed out its new strategy in 2010, aiming to increase the amount of revenue coming into the firm from clients in the TMT space.
Bird & Bird’s 10-year strategy, launched following a review in 2012, commits it to improving client service in its technology and knowledge services sectors. RPC’s five-year strategic framework, launched in 2008, also involves placing an intense focus on client service.
Hardly revolutionary, you may sneer, but between 2008/09 and 2012/13 these five firms increased their revenues by an average of 30 per cent.
Taylor Wessing had the smallest growth of the bunch at 21 per cent, while RPC rings in at 36.6 per cent. Both are exceptionally impressive considering that between 2008/09 and 2011/12 many of the UK’s biggest firms saw revenues plummet. Freshfields Bruckhaus Deringer’s turnover dropped by 11.6 per cent, for example, while Slaughter and May’s fell by 15.5 per cent.
In fact, Taylor Wessing, Osborne Clarke, Bird & Bird, RPC and Olswang have seen their revenues boosted year on year since 2009/10. Bird & Bird is the only member of the bunch to have avoided a slight dip in the recession, with the firm celebrating a phenomenal 25 years of growth in 2012/13.
Average profit per equity partner (PEP) across this group has been on a similar trajectory (see graphics), either holding steady or creeping up at each firm between 2008/09 and 2011/12. This year’s results are yet to be announced.
Perhaps the most interesting part of this financial health is where the money is being generated.
Take Osborne Clarke. The firm increased its global turnover by 14 per cent in 2012/13, from £98m to £112m. However, its three UK offices in London, Reading and Bristol posted a slight drop in revenue from £98m last year to £97m.
Clearly, the firm’s latest additions – six offices bolted on in the past financial year – have been doing the bulk of the legwork (it had been projected that the mergers would increase Osborne Clarke’s global turnover to £117m yet despite their addition it fell about £5m short).
Olswang saw its overseas bases increase their overall revenue contribution by 35 per cent in 2012/13, while Taylor Wessing’s global figures also eclipsed its UK growth – international revenue increased by 7 per cent while UK turnover inched up by 3 per cent.
Among the most obvious aspects of these five firms’ strategies is the speed and dedication with which they are expanding their international offerings. It is a canny move, given the increasingly price-sensitive UK market and the encroachment of global firms into their traditional territory.
Olswang CEO David Stewart says: “With scale comes the ability to hedge risk, so failure is not so calamitous.”
Taylor Wessing is the stand-out firm in this regard. Few, if any, other firms can boast they have opened nine offices in seven new jurisdictions in one year without seeing their revenue or profit suffer.
Taylor Wessing’s combination with the Austrian-headquartered enwc in May 2012 added a host of new offices out east: Bratislava, Brno, Budapest, Kiev, Klagenfurt, Prague, Vienna and Warsaw. Its connection with Singaporean ally RHT in March of the same year bolted on a new office in that growing litigation hub.
Osborne Clarke was hot on its heels, however, morphing since last summer from a UK firm with additional offices in Silicon Valley, Cologne and Munich into a 14-office multinational.
It initially dropped allies that opted out of a formal tie-up and adding six new offices via mergers with Osborne Clarke Spain and SLA Studio Legale Associato. The firm also opened its own office in Hamburg in October 2012, with a view to expanding its footprint in Scandinavia, Russia and the Baltics.
Brussels was the latest addition in June 2013. Beswick says the firm will formally open in Paris by the autumn, while a New York office remains on the cards.
Bird & Bird opened two offices in Denmark as a result of its merger with Danish IP/IT boutique Bender von Haller Dragsted, and formed two new co-operation agreements with Swiss and Australian firms.
Meanwhile, Olswang was busy consolidating its three 2011 office openings: Singapore, Munich and Paris. In 2006 only 1 per cent of the firm’s revenue came from outside the UK. In 2012/13 this has ballooned to 30 per cent. And by 2016 it is aiming to make this 40 per cent.
“We’re looking at expanding in Europe – exploring more offices and expanding the teams in the offices we already have,” says Stewart.
With only two international bases, RPC is the most UK-centric of these five firms, although between 2008 and 2011 a quarter of its business was international in nature – largely thanks to its membership of referral network TerraLex.
RPC dipped a tentative toe into the Asia Pacific waters by making Singapore its first non-UK office in October 2011. Since then it has established a 40-person Hong Kong outpost and popped up in slightly less exotic Bristol, launching an insurance and reinsurance base there last year with a team of lawyers from CMS Cameron McKenna.
Another prominent trend among the five is the shift towards a more defined sector focus. All but RPC have repositioned their business around a few core industry sectors. Taylor Wessing is devoted to five areas of expertise, Olswang to eight (with a particular focus on three), Osborne Clarke to four and Bird & Bird a rather less selective 14.
“They are a means of trying to help us focus on what we do,” says Beswick. “When you think that we compete against firms that are much, much larger than we are for some of the work we get, we couldn’t fight on every front. It’s really important that everyone in the business is focused on a few areas and fights battles in those areas. Our sector focus is our battleground.
“When you’re pitching against other firms, if you really do know the sectors you work in it becomes obvious quickly. You know the right people, what the issues are, and can talk about them. That comes across. It’s even better if you’re able to do that not just in the UK, but talk about what’s going on in Spain, Italy and Germany.”
The aim is to become an expert in the firm’s chosen fields and provide a one-stop-shop for clients in those industries.
Each firm has its differentiators. Bird & Bird has a commitment to aerospace and Olswang to the leisure sector. But these firms share one sector interest: TMT.
“You could say that all areas of the economy are being transformed or disrupted by the use of technology or the knowledge economy,” says Bird & Bird CEO David Kerr. “It’s taking us into unexpected areas and we can bring our expertise to bear.”
No wonder these firms are investing so heavily in the sector. “It’s the only part of the market that’s doing well,” says Douglas McWilliams, executive chairman of the Centre for Economics and Business Research. “It’s one of the driving forces of the UK economy. The number of jobs in media, information and communications has grown from 91,000 in 2004 to an estimated 170,000 this year.”
Making money out of the sector takes hard graft and persistence, however. “It’s tough to get into as it’s not hugely well-financed,” McWilliams continues. “You have to be prepared to do pro bono work, so to speak, to get in with them. But if you hang in there, hopefully there’ll be a transaction that will bring in fees. We’re no longer in a world where work with high fees provides easy pickings.”
Such work may seem like chicken feed for the biggest players, but for entrepreneurial mid-sized firms it is an area well worth the investment.
Taylor Wessing has gone the extra mile to embrace the sector, launching its own Tech City office on Old Street’s ‘Silicon Roundabout’. The idea is to foster relationships with some of the 1,300 start-ups in the area, so they grow with the firm.
The office brings together lawyers from its multiple practice areas to offer advice on anything from venture capital to immigration law.
“It’s in order to become even more immersed in the sector and its latest developments,” says Eyles. “It’s important that we’re part of the TMT ecosystem. We’ve seen a lot of new relationships because of it. Our Tech City presence helps us to really understand what the trends are from the bottom up.”
According to Thomson Reuters, the TMT sector accounted for 45 per cent of total deal value at Taylor Wessing in 2012. At Olswang, TMT clients were responsible for 50 per cent of total revenue in 2012/13, a figure the firm intends to increase by 10 per cent over the next three years.
RPC is the only firm to snub the sector focus concept. As the firm’s managing partner Jonathan Watmough says, “we tend to profile our clients and prospects by size and life stage”, taking age and structure into account before industry segment.
That approach tends to result in the firm’s client list having a slight bias towards “dynamic sectors like technology, service business and some areas of retail”, so it is also fighting for a slice of the TMT pie.
Buy all means
If there is one sure-fire way to grow, and in the right places, it is through lateral hiring, something these five firms have not been shy of in recent years. In terms of sheer numbers, every single one has ballooned in size. RPC took on 13 new lateral partners in the 2012/13 financial year, Taylor Wessing added 15 and Osborne Clarke brought in 20 partners globally, while Oswang added 14 and Bird & Bird 25.
The crucial point, however, is that each of these hires is targeted to give substance to the firms’ sector focus.
“It’s been important to enable us to add scale to our business in London and do it in a way that’s relevant to the sectors in which we play,” Beswick says. “It either brings expertise, adds bench strength to what we’ve got or gives us access to clients in key sectors.”
The hire of Rafael Garcia del Poyo to head Madrid’s digital media team is a prime example. A former partner at Garrigues and secretary of the board of directors to various tech companies, he should significantly bolster the growing office’s TMT offering.
Taylor Wessing hired Mark Owen, head of IP at Harbottle & Lewis in April 2013. His 25 years of experience in media and entertainment, and strong connections in the US, give Taylor Wessing a new springboard to expand its TMT work across the pond. Retrospectively, RPC pinched Jeremy Drew from Ashurst in early 2006 and has since seen its IP practice grow eightfold.
The calibre of hires at each of these firms is impressive. RPC opened its doors to partners from Shearman & Sterling, DLA Piper and SJ Berwin in 2013 alone, along with a three-man corporate team from Wragge & Co.
Osborne Clarke picked up Eversheds’ UK head of corporate Mark Spinner alongside hires from Freshfields and Wragges. Bird & Bird scooped partners from Baker Botts, while Olswang nabbed CMS Cameron McKenna’s former head of China Andrew Halper.
RPC head of corporate Tim Anderson says: “We want to be seen as peers to the magic circle, not necessarily on the largest deals, but definitely on the upper mid-market and significant or complex deals.”
This ambition is paying off. In February the firm won a mandate to act for Sports Direct on its purchase of Republic, despite previously advising only on the company’s IP matters. Since 2008 each of the five firms has completed at least one multimillion-dollar deal in which they have either worked alongside or across the table from a magic circle firm.
New brand bag
Being a well-oiled machine with top-quality working parts is all well and good, but few things attract interest better than plush packaging with a shiny bow on top. Consequently, since 2008, four of these five firms have also undergone extensive rebranding exercises to communicate their new outlook to prospective and existing clients, as well as to the wider legal profession.
Taylor Wessing’s rebrand took place in 2010 against a backdrop of redundancies and salary cuts. But the controversial move has paid off.
Eyles says: “In a very crowded market it’s important to differentiate and be clear what our offering is.”
Since then (and likely partially thanks to the facelift) mentions of the firm in the press have increased by 45 per cent.
Olswang refreshed its brand two years ago, a move that included updating its strapline to ‘changing business’.
“The focus was to make our brand a little bit more grown-up than it had been,” says Stewart.
RPC and Bird & Bird’s recent rebrands also reflect the firms they want to be perceived as.
“As to how our corporate visual identity is seen, we tend to hear words such as ‘quality’, ‘original’, ‘independent’ and ‘going places’,” says Kerr.
In picking up The Lawyer’s coveted Law Firm of the Year award, hotly pursued by RPC, Taylor Wessing has shown there is life in the mid-market yet. The unprecedented hurdles these firms are facing mean they are scrutinising themselves more than ever and coming up with creative responses. It is a challenge they are certainly meeting.
“One element of our rebrand was to get feedback from clients internationally,” says Eyles. “We asked clients who use a number of firms what distinguishes us in the market. One message we received across the board was about us being commercial and innovative. We’ve tried to amplify that in this more challenging environment, which has led to things like Tech City.”
A relatively small step for Taylor Wessing that undoubtedly speaks to a bigger leap for firms in the mid-market. Firms across the UK 200 would do well to take note.