Profit on the margins
16 October 2013
2 December 2013
13 January 2014
25 April 2013
24 October 2013
You don’t have to be a big firm to innovate and thrive in a downturn, as our look at the lower half of the UK 200 shows. We pick 10 inspiring stories
When the news broke on 30 January that Manchester firm Cobbetts was on the brink of going into administration, no doubt firms up and down the land were looking on aghast, all the time asking themselves “Could this happen to us?”
The truth is yes, sadly, it probably could. As many will agree, Cobbetts is by no means the only firm struggling to keep its head above water in the present climate.
Although DWF which, as we all remember, was in merger talks with Cobbetts until 31 January last year, has flung the firm a lifeline it seems unlikely many other firms would have the option to phone a friend as quickly in a similar time of need.
However, despite the gloom surrounding the lower end of the market, there are plenty of examples of good practice. For over a decade now The Lawyer has been commending smaller firms across the UK in our Niche Firm of The Year prize at The Lawyer Awards. Last year the winners were Hawkswell Kilvington in the regional category and Brecher & Co for London. In a similar vein, we have pored over the statistics taken from the mammoth project that is The Lawyer UK 200. What follows are just some of the finer examples of smaller firms in the market that are making real strides in their respective practice areas and - perhaps most importantly - are succeeding in keeping a tight rein on their finances and finding novel ways to keep costs down.
This is not to say that these firms have not had their low points or difficult decisions to make in recent years; indeed, many have faced tough times. But as we will show, it’s how you play the game that counts.
UK 200 position: 184
Number of lawyers: 57
Key clients: Heineken; LexisNexis; Loomis; Tchibo Coffee
Derby-based Flint Bishop has never been one to follow the crowd. The firm identified that consumer needs were changing way back in 2004, when it developed a 24/7 online service for conveyancing (Flint Direct) and will-writing (FB Wills); the latter was instructed to manage an estate worth £1.6m last month. The former was in its heyday before the recession smacked down in 2008, with online conveyancing getting an average of 500 instructions per month. But the credit crunch hit Flint Bishop hard. After 2008 these instructions dropped to just 42. Between 2008 and 2010 revenue at the firm dropped by 30 per cent, resulting in 35 staff redundancies.
Instead of just muddling through the financial gloom the firm decided to launch more online legal services to attract new clients, and in July 2011 FB Support was born. The fixed-fee employment law and HR advice service gives clients access to more than 80 templates and ‘How To’ video guides as well as access to their very own solicitor (clients buy time with a solicitor in packets of 12, 24 or 36 hours). More notably, the service brought the firm 169 new clients last year including Loomis (£109m turnover), National Windscreens (£41m turnover) and Tchibo Coffee (£22m turnover).
Not bad, but that was not quite enough for a firm in ideas overdrive. In 2012, Flint Bishop opened a niche market through FB Support focused on employment law advice in the education sector. Digging out the evidence, this new service attracted 54 schools in 2012 and the firm is confident it will reach its target of signing up 200 schools as clients by the end of 2013.
“After researching the education sector we found a gap for legal services - a gap created by two political drivers,” explains the firm’s managing partner Ken Dixon. “The first was austerity-based budget cuts in local authorities - traditionally the organisations that support HR functions in schools. The second change driver was the Government’s plan to convert schools into academies, meaning schools had to act like businesses and so choose their own service providers.”
But despite spotting gaps in the market years before its contemporaries the firm, like any business, still faces challenges. Although it carries no significant third-party debt and has an impressive, or more importantly growing list of clients (including Heineken and LexisNexis), one fundamental hurdle remains - perception.
“The challenge for us as a business is that we’re a medium-sized firm based in Derby so the conundrum we face [in attracting new clients] is perception,” says Dixon. “Being based in Derby has it business benefits, including low overhead costs, but we have to work hard to convince prospects that a firm in Derby has the skill and innovation to handle major work.”
UK 200 position: 163
Number of lawyers: 118
Key clients: Cancer Research Technology; Central Bedfordshire Council; G’Nosh; Hodder & Stoughton; Snog Yoghurt; Stagecoach; Simon & Schuster; The Orion Publishing Group
In 2002 when the likes of broadband were still a lofty ideal, James Knight pioneered the idea of a dispersed law firm, something that would have been completely unthinkable in the pre-internet era.
“Everything was dotcom then - it was all about technology and instead of building a firm with bricks and mortar we came up with the dotcom idea,” says Knight.
Such has been the success of Keystone’s model that it posted a turnover of £11.2m in 2011/12, a 5 per cent increase on the previous year’s revenue. Not bad going for a law firm that has spent just a decade in the market.
However, even Knight could not have anticipated how much technology has developed and helped keep the firm at the top of its game.
“Tools such as PLC and LexisNexis that have replaced law firm libraries have really played court to a firm like Keystone and helped us rise,” he stresses.
While Keystone’s core practice areas are non-contentious corporate and commercial advice in the TMT sector, the firm has also worked hard to make the most of technology and used tools such as document assembly to improve its profitability and cut costs. Other moves, such as the decision to outsource reception facilities to Moneypenny have also made dispersed working “much more realistic”, according to Knight.
Although the firm’s dispersed model allows its 118 consultant solicitors to work flexibly from home, like most conventional law firms Keystone does have a central office and this inevitably incurs some costs. The firm has its headquarters in London, where the firm’s two partners, Knight and corporate partner and COO William Robins, are based, and two satellite offices in Bristol and Manchester which offer some minor facilities for lawyers based locally. The London office, on the other hand, houses 15 permanent members of staff and related facilities, including a handful of meeting rooms that can accommodate up to 18 people each. Altogether, this brings the total running cost of the London office to more than £2.5m.
In spite of sceptics’ concerns that technology and social networking may be replacing personal interaction, Knight stresses that Keystone’s model has relationships at its core.
“The reality is that we’re not just a bunch of sole practitioners: we’ve used collaborative working technology to work far more efficiently and in a more joined-up way, which in turn works much better for our clients,” adds Knight. “One of the best things is that there are no politics. It’s just a flat structure where everyone has the same title, the same position and gets the same deal - everyone is on the same performance-related remuneration structure.”
A slew of hires in January confirmed Keystone’s pulling power to attract experienced lawyers from the top 50 firms to join its ranks. The 10 hires included criminal lawyer Lucinda Russell-Jones from DLA Piper, commercial contracts partner Nicholas Tall from Speechly Bircham, pensions and employment lawyer Simon Owens from Ashurst, head of private client at Hanne & Co Solicitors Nia Jones and former Motorola Mobility senior commercial counsel Clare Lucas.
For Knight, the reason lawyers are flocking to Keystone is clear.
“Keystone provides senior solicitors with the dichotomy they’re looking for,” he says. “In our world we’re not competing with the likes of Linklaters or Lovells but we are competing with medium-sized conventional law firms doing high-end work.”
And he seems unfazed by the prospect of other firms riding in on Keystone’s coat-tails.
“For the first five years nobody copied our model but now you hear about new law firms promising to revolutionise the legal profession - I think it would be a bit strange if, after 10 years, Keystone was the only one,” he says “We belong to a new genre of legal firms and being first does lend us a certain credibility. Heaps of firms are now trying to get into the same space and there’s nothing better than being seen as the forerunner.”
UK 200 position: 111
Number of lawyers: 140
Key clients: BP; Department for Work & Pensions; Forestry Commission; Glasgow 2014; Scottish Government; Scottish Premier League; Scottish & Southern Energy; William Hill
When asked how Harper Macleod has got to where it is today CEO Martin Darroch says it is easy to identify the firm’s make-or-break moment. In March 2008 the firm took the unexpected and difficult decision to retrain and redeploy around 20 per cent of its corporate, real estate and private client lawyers into insurance, debt recovery and insolvency.
“As we were analysing the trends of the work we were getting from clients in 2008/09 we were able to predict significant downturns in particular practice areas,” says Darroch. “By taking the affected people, retraining them and putting them into other practice areas we thought we would steal a march, but it was clear it was going to come at a significant cost.”
Although Darroch estimates that the whole exercise cost the firm around 15 per cent of its profits that year, he believes the ‘cruel to be kind’ approach has worked better than he could ever have imagined.
“We could have sacked people but if you do a negative thing like that it becomes a story that’s sticks with your business for ever, and both existing clients and prospective ones would know about it,” he says. “Now, we’re the only major commercial law firm in Scotland that can say we never did that to our people”
The firm certainly seems to have reaped the rewards. Since 1 April 2012 it has brought in 13 fee-earners and five lateral partner hires, bringing total headcount to 52 partners, 140 lawyers and 43 paralegals, and it continues to attract big-name clients, such as its appointment last year as legal adviser to Glasgow 2014. Following the 2008 staff redeployment the firm has grown its insurance, banking, public sector, retail, franchising, energy, debt recovery and insolvency practice groups. Lateral hires, such as those of PPP and PFI partners Euan Mitchell and Euan Pirie from McClure Naismith in October 2012, have also gifted it new areas of expertise.
As a chartered accountant Darroch has always had a practical approach to how the firm operates and this even extends to how it manages its real estate. As The Lawyer UK 200 Annual Report 2012 revealed, Harper Macleod controls 30,000sq ft of space that costs it just £421,000 a year, working out at just £1,581 per person.
“We were described as being at the bottom of that table and it’s the first time in my life I’ve said I’m proud to be bottom,” chuckles Darroch. “I’ve used that type of statistic to great effect in pitches to respective clients because if they’re doing a price comparison and ask why we are able to charge less I can say - this is why, look at this figure.”
“We’re a business, it just happens to be law, so if we identify a better way of doing something we do it.”
UK 200 position: 127
Number of lawyers: 96
Key clients: Fiserv; Netcracker; Earthport; Red Gate Software; Proact; ARM; Endomatics; Discuva; AlertMe; Pulmagen
It was 25 years ago this January that Newmarket-based Taylors of Newmarket and Cambridge firm Vinters merged, and Taylor Vinters was born. Located just a stone’s throw from the Cambridge Science Park, the firm’s technology focus was clear from the outset.
However, Taylor Vinters’ reach extends far beyond the confines of Cambridge. In 2010 the firm scored a real coup by opening offices in two global technology hubs: first in London in May and then kickstarting its Singapore office in July via a contractual joint venture with Singaporean technology law firm Keystone Law Corporation (not to be confused with Keystone Law).
Today the Singapore office is home to two partners, a senior associate and a junior associate, and there are ambitious plans to boost headcount there to nine lawyers over the next 18 months. The firm applied for a Qualifying Foreign Law Practice (QFLP) licence in September 2012, but in the meantime the team continues to work with a number of local law firms.
Although the Singapore office might be viewed as a bit of a gamble, it has paid off, notes managing partner Ed Turner.
“Outside of Cambridge we’ve now got a strong established business in London and a proper business in Singapore that is growing and generating work for us in the UK,” he says.
The firm’s combined technology, commercial, charities and employment practices contributed 34 per cent to 2011/12 turnover, which rose by 2.5 per cent, to £16.2m.
CEO Matt Meyer leads Taylor Vinters’ London office, which has 13 fee-earners and two support staff, plus around five other lawyers who split their time between London and Cambridge. Contrary to what you may think, having an office in the heart of the City has not been a huge financial headache, according to Meyer.
“When we chose to invest in London the property market was at rock bottom and, although I can’t give an exact figure, let’s just say we got a really good deal,” he chuckles.
The London hub has been instrumental in boosting Taylor Vinters’ international capability in the technology sphere, he adds.
“By attacking the local market in London from the regions we’ve gained access to the international market in a way we wouldn’t necessarily have been able to do from our base in Cambridge,” says Meyer.
Aside from technology, the office also handles a large amount of private client work and some restructuring and insolvency matters.
Aside from office launches, one of the most important things for the firm has been to stay focused in the current environment, stresses Turner.
“Focus is the watchword,” he says. “Bearing in mind our size, we can’t be as good at everything as we would like, but I think our identity and our size allow us to offer clients an alternative.”
It is also about making the most of the technology at your disposal, he notes.
“Culturally, we have to do everything as smartly as we can, whether that be our back-office process, the way we structure our business such as using the cloud for the IT infrastructure or IT, or process reviews to deliver change in our back-office systems.”
UK 200 position: 189
Number of lawyers: 34
Clients: Accenture; eBay; Expedia; Financial Times; Google; Microsoft
With three years of consistent revenue growth and an A-list of technology clients that includes eBay, Google and Microsoft, technology boutique Kemp Little proves big things can come in small packages.
“Growth is all about incremental improvements, not one big thing,” the firm’s senior partner Richard Kemp argues, adding that the firm has not tried to “reinvent the wheel” to get to where it is. “Asking for feedback from pitches, for example, is important. It’s difficult when you’re on the inside to see what you look like on the outside. You need someone like a business development director or a client to hold up a mirror to you.”
It is this attitude that has propelled the London TMT boutique into a firm many regard as one of the best managed in the UK, both operationally and in terms of its legal practice. After former managing partner Lucy Vernall left to become Wonga’s first general counsel in March 2011, the firm hired its first COO, Siddhartha Mankad, to assist on the management of the firm, with new flexible working arrangements just one of the projects on Mankad’s to-do list.
It comes as no surprise then, that partners at larger, international firms are starting to take note. One of the firm’s most recent hires, K&L Gates IP partner Rebecca Halford-Harris, is a good example. US firm K&L Gates recorded a London turnover of £35.6m (with firmwide turnover at $1.06bn - £680m) in 2012, compared to Kemp Little’s £8.9m. Clearly, it is not all about being at an international brand.
Indeed, Kemp Little’s clients need no introduction - the firm has been advising Google on commercial work since 2009 and computer giant Microsoft on cloud regulatory and advisory work for a number of years, while it continues to work with Vernall at money-lending site Wonga, where the firm’s corporate, commercial technology and IP/litigation groups advise.
But the firm is not all about the big guns. It provides free face-to-face legal advice and consultation to start-up technology companies - businesses that will no doubt become clients to shout about in future.
UK 200 position: 173
Number of lawyers: 40
Clients: Titan International; Chime Communications; Game Retail; Lucian Freud Archive, BSkyB
Goodman Derrick has made growth a strategic priority in the past few years, underlined last year by the arrival of former Bird & Bird partner Simon McLeod, former Charles Russell partner Edward Hoare, former Davenport Lyons partner Stephen Hornsby and former Taylor Wessing partner Paul Webb.
“The pressures on the legal market caused by the downturn have created an upside for us,” the firm’s head of TMT Paul Herbert tells The Lawyer, when asked how the 50-year-old firm revived itself during the recession. “The ‘buy IBM’ policy no longer prevails; the magic circle is well and truly global and many mid-tier firms appear to be trapped between two stools - organic growth is not an effective response option for them and merger is far from straightforward. This has created many opportunities for us both in terms of attracting talent and clients placing greater emphasis on value.”
The hires won Goodman a number of multimillion-pound mandates during the year, notably advising Titan International (led by Simon McLeod) on its acquisition of Kidderminster’s Titan Europe, the largest takeover since September by acquirer’s legal fees. Goodman Derrick took the lead UK role, where the firm is understood to have taken in the region of 80 per cent of the buyer’s fees (estimated to be from £550,000 to £650,000). The work, which saw Goodman Derrick draft all the documentation, was a referral from an intermediary in the US.
But it is not all about catching the headline deals, and Herbert points out that partners in the City are coming to Goodman because their job is getting further and further from fee-earning.
“I’ve been here man and boy, and we’ve always been a firm to punch above our weight and attract big-name players,” says Herbert . “Partners at the bigger firms often beat a path to our door because [at a large firm] the job is getting further away from fee-earning. Here, things can get done quicker, you can have closer relationships with partners and clients, and you’re working somewhere that is growing.”
And growing it is. Revenues for the firm’s property and corporate/finance groups jumped 30 per cent last year, from £2.8m to £3.7m, with the turnover hike explained by a string of transactional mandates from key listed client Chime Communications (last year Chime acquired 12 businesses, several of which related to the Olympics). The firm also moved to a bigger, brighter office in 2012, making no secret of its plans to keep expanding.
“It’s definitely a case of watch this space,” concludes Herbert.
UK 200 position: 102
Number of lawyers: 200
Key clients: Haberdashers’ Monmouth Schools; University College London; Diocese of Gloucester; Government Procurement Service (property and estates); Eton College (employment)
Simon Heald was elected managing partner at Veale Wasbrough Vizards in November 2008, just a matter of months after Lehman Brothers had gone bust and the credit crunch had begun to rear its ugly head. Not a great time, you may think, to take charge of a law firm, but Heald has taken an optimistic approach.
“Given the economic climate since I became managing partner, the firm has exceeded my expectations,” he says.
Veale Wasbrough broke out of the Bristol market in 2009 via a merger with London firm Vizards Tweedie. For much of last year the firm was in another set of highly publicised merger talks with Cambridge-headquartered Hewitsons, which were eventually called off last month. Although Heald says the firm is not working on any other major merger talks, another tie-up is not out of the question.
“Not everything works, but we’ll continue to look at lateral hires, bolt-ons and, if we can make it work, a good merger,” he says.
Although turnover dipped at the firm in 2011/12, from £21.4m to £21.3m, it maintained its position at the top of the bottom 100 of the UK 200 leader board in position 102. Veale Wasbrough has made a name for itself in key areas such as the public sector, where it has acted for more than 100 local authorities, and education, where it has advised over 1,000 educational institutions and acted on some 200 academy conversions.
With all this work flooding in, the firm has charged ahead with an aggressive lateral hiring strategy, with recent appointments including former Rickerbys education employment specialist Alice Reeve, Bristol City Council legal head Stephen McNamara and the return of former partner Sue Malthouse after 18 months as group director of legal and company secretary at Clarks Shoes.
All these hires are a clear sign that the firm is wasting no time in trying to boost its offering both in London and Bristol. For Heald, the important thing is to be proactive.
“You can’t just sit and wait for the downturn to end, you have to work hard in the present climate and do what you have to do,” he says. “We’re interested in standing out, growing our top line and continuously planning how to do this.”
UK 200 position: 133
Number of lawyers: 69
Clients: Barclays; Close Brothers; Centric Commercial Finance; ABN Amro; Leumi ABL; IGF Invoice Finance; Lloyds TSB
Daily discount website Groupon, the company that is the fastest business ever to reach $1bn in sales, was worth a whopping $13bn before its IPO in 2011. So who did the daily deals leader choose to use as its sole legal adviser in the UK? Not Clifford Chance or Allen & Overy, or for that matter anyone else in the top 50. Instead, the megasite opted for South East firm Matthew Arnold & Baldwin (MAB) - a £15.8m turnover outfit that comes in at 133 in The Lawyer’s UK 200 ranking.
“We’ve got the right balance between size and reputation,” comments the firm’s corporate head and management board member Richard Phillips, who credits the firm’s low staff turnover rate to an ethos of investing in people and promoting from within.
“We’re of a size where we can be flexible and shape things in slightly different ways, but we also have the reputation and expertise to attract top clients,” says Phillips.
It’s a strategy that seems to be working - turnover at the firm jumped by 20 per cent during 2011/12, ending two years of flat revenue figures. The firm’s flexible pricing model, which ranges from offering large corporations discounts on bulk work to putting clients in touch with third-party funders, no doubt boosted that number. As did a number of notable lateral hires - the firm poached asset-based lending partners Charny Sanghera and Andrew Bowden-Brown from Squire Sanders (where Bowden-Brown was a senior associate) in 2011, bringing in clients Close Brothers, Centric Commercial Finance, ABN Amro, Leumi ABL, IGF Invoice Finance and Lloyds TSB.
But the firm’s most high-profile client is arguably Barclays, which MAB has been advising for over 20 years. No surprise, then, that the firm found itself in a number of headlines in the legal press last year (alongside the likes of Simmons & Simmons and Clifford Chance) in connection with mis-selling claims brought against the bank.
It is not all about the big-name clients, though. The firm established the Pharmaceutical Industry Networking Group last year with the aim of consolidating Watford and the surrounding area as a centre of excellence for the pharmaceutical industry in the UK, holding bi-monthly seminar networking groups and two large industry events a year.
UK 200 position: 139
Number of lawyers: 98
Key clients: Chelmsford Star Co-operative Society; Cleveland Fire Authority; Baptist Union; GreenSquare Group; John Taylor High School; Midland Heart; Staffordshire County Council
Aside from a small dip in turnover in 2009/10, Birmingham-headquartered Anthony Collins has delivered impressive year-on-year growth over the past five years, with the firm posting a 9 per cent increase in turnover, from £13.2m to £14.4m, in 2011/12. What’s more, last year the firm’s net profit soared from £2.4m to £3.7m.
And making the most of these profits, the firm has invested in hiring no less than 17 staff in the past nine months, bringing its headcount to 138 fee-earners. It has also made two important additions to its internal management team in the form of Paul Harker as the firm’s new head of IT last July and Rob Adams, the firm’s first head of risk and compliance, in January.
While things have not always been rosy at the firm - 16 members of staff had to be let go in 2010 - senior partner Romaine Thompson maintains that a confident approach has been vital in the ups and downs of recent years.
“We’ve stuck at what we think is the right thing to do and the key has been not to lose our nerve and follow the market, but to keep looking to find solutions to needs rather than sell something that is not needed,” she stresses.
The firm’s niche expertise in areas such as social housing, health and social care, local government, education and faith communities has also helped it to stand out and it was this rather unusual mix of skill sets that secured the firm’s recent mandate acting for Staffordshire County Council as it embarked on a £230m landmark NHS project - the largest integration of council and NHS services in England to date.
While Thompson insists there is no “magic formula” that has driven the firm’s success in the past 14 years, incremental changes such as the firm’s new IT strategy that will come into force later this year have helped make it a desirable working environment and consolidate its reputation.
A number of the recent hires have been lawyers returning to the firm, something Thompson finds deeply encouraging.
“People move for all kinds of reasons and it’s been such a positive thing to see people choosing to return to the firm - it must mean we’re doing something right,” she says.
UK 200 position: 155
Number of lawyers: 42
Key clients: BBC Worldwide;
BT; Channel 4; Condé Nast; Discovery; Disney; Endemol; Random House; Sony Columbia; Times Newspapers; 20th Century Fox; Universal; Virgin Media; Warner Bros
Wiggin is one of the few firms to put its money where its mouth is when it says it sees the credit crunch as an opportunity.
The media boutique made a conscious decision to move away from being a pure media law firm once the recession hit, instead reinventing itself as more of a media all-rounder.
Fluffy this may sound, but how’s this for something meaty - the firm is in the middle of plans to launch its own technology incubator in East London, due to open later this year. This will enable Wiggin to develop its own clients through entrepreneurial arm Ariel Ventures.
It also has its own executive producer group, where Wiggin partners have so far taken producer roles on documentary series Walking with Dinosaurs, and films The History Boys and The Eagle. If that wasn’t enough to keep them busy, the firm launched its own content protection business, Incorpro, last year. Do Wiggin’s lawyers ever have time to focus on the day job?
Surprisingly, they do. Highlights of last year saw the firm, which remains the only UK law firm to advise all of the six major US film studios, act for almost half of the UK producers awarded YouTube channels for the first time; advise on all production-related matters for the American fantasy television series Game of Thrones; and, in October 2012, open an office in Brussels.
The firm also recorded an 8.7 per cent increase in revenue for the 2011/12 financial year, from £11.4m to £12.4m, after taking full advantage of the Legal Services Act in 2010/11 by converting to a legal disciplinary partnership (LDP).