27 November 2006
Next week the third issue of The Lawyer Rising 50 will be published. This year, for the first time, we will also publish the next 50 firms that follow those in The Rising 50 table.
When considered along with The Lawyer UK 100 Annual Report, this is the first time that detailed financial data on the UK's top 200 firms has ever been published.
Add the £413m total revenue that these 'Chasing 50' firms generate to The Rising 50 firms' £677m, and together the 100 firms' combined turnover pips Clifford Chance's 2005-06 turnover of £1.03bn by £60m.
While these firms are not large, the speed of growth among the most dynamic is little short of astonishing. Ten firms recorded revenue rises of more than 20 per cent last year.
And do not dismiss the very smallest. Some of the biggest risers this year have come from this second group of 50.
Take East Midlands firm Flint Bishop & Barnett: it grew turnover by 47 per cent last year from £8.8m, putting it squarely into The Rising 50 for the first time with annual turnover of £12.95m for 2005-06. And this growth was all organic.
Indeed, managing partner Ken Dixon says the firm has "shunned" several merger offers. Instead it plumped for a new office in Nottingham in March 2005 to cater for an increase in fee-earner numbers. It has also restructured the equity; so a firm that five years ago had 15 equity partners now has just six out of a total of 22 partners.
"It's helped enormously being smaller," says Dixon. "One of the problems for a lot of the larger firms is that they haven't had a clearout of the partners. Doing that, and having a team of senior people working full time on management, has allowed us to be really focused on developing the business."
East Anglia's Birketts is another impressive outfit that is enjoying a good run of form. Its revenue was up by 37.5 per cent in 2005-06, from £8.8m to £12.1m. The increase was achieved partly by a series of hires, including a private client and agricultural team from Eversheds, which added around £1.3m to the top line. Birketts' corporate team also scored a succession of significant deals that saw it beat budget by 10 per cent, contributing £2.1m out of the £12.1m total.
However, the biggest riser has not even made it into The Rising 50 table, but it will do so next year if it continues the same rate of growth as in 2005-06. Conveyancing firm Barnetts grew its revenue by 75 per cent in the last financial year, adding £4m to its 2004-05 turnover of £6m. Its new and improved £10m turnover would have made The Rising 50 rankings last year.
The firm attributes the growth to an expanding list of high street bank and large financial institution clients, including NatWest and HBOS. Barnetts also encourages young lawyers to actively go out and get business. The four partners are well supplied with more than 300 fee-earners, who form an army of revenue growers.
"We understand about gearing," says chief executive Joe Whelan. Whelan expects the firm to grow at a similar rate in the coming years, making Barnetts one to look out for near the top of the table in 2007.
Making the gradeThere are 11 new entrants to The Rising 50. A few of these are dropouts from The Lawyer UK 100 Annual Report, but five of these are crashing into The Rising 50 for the first time. The five - Barlow Robbins, Birketts, Flint Bishop & Barnett, Matthew Arnold & Baldwin and Withy King - all embody the ethos that underpins The Rising 50 itself.
These firms may be small, but many of the 50 firms would slot straight into The Lawyer UK 100 on other key indicators such as revenue per partner (RPP) or revenue per lawyer (RPL).
Take Rosenblatt Solicitors: the London corporate finance boutique may only have a turnover of £12m, but its RPP last year was £923,000, well ahead of far larger firms such as Watson Farley & Williams (£907,000), DLA Piper (£798,000) and Lawrence Graham (£733,000). Ditto Scotland's private client leader Turcan Connell, which posted an RPP of £911,000 last year.
In fact, a total of eight firms in The Rising 50 would feature in the top half of The Lawyer UK 100 if based purely on RPP, including the commodity players Silverbeck Rymer and Golds, which posted market-busting RPP figures of £4.1m and £1.3m respectively. Only nine firms in The Rising 50 would fail to make the main list. The figures are purely a reflection of the quality of work that the firms in this turnover bracket are handling year-on-year.
Interestingly, the firm at the foot of the RPL table this year is Putsmans, which is currently moving towards a merger with the £8m revenue earner Shakespeares.
This year the gap between the firm in the number one position, ASB Law, and 50th place, Lupton Fawcett, shrank by £250,000. The tightening of this group is the most tangible demonstration of how competitive this market is.
Growth through mergerSince last year there have been four major mergers announced involving firms in last year's Rising 50. The highest-profile one was arguably Scottish heavyweight McGrigors' audacious raid on oil and gas leader Ledingham Chalmers (The Lawyer, 23 January), which left the Aberdeen firm split in two. Last year Ledingham was secure in the top half of The Rising 50 with a £12.8m turnover. This year it has dropped out of the list, but is by no means out of the running.
The firm relaunched itself as a new 22-partner, 70 fee-earner limitedliability partnership (LLP), still named Ledingham Chalmers. It still serves the oil services industry in Aberdeen, but has a sharper focus on a core of insurance litigation, the small and medium-sized enterprise market and the private client sector. As its managing partner David Laing puts it: "We may not be large by national standards, but we'll grow again."
Staying in Scotland, last year's 40th-placed firm Henderson Boyd Jackson completed its merger with Gateley Wareing in January 2006 after it was announced in October 2005.
The new firm, HBJ Gateley Wareing, proceeded to secure the 69th spot in The Lawyer UK 100 Annual Report, with a revenue of £31.5m and an average profit per equity partner of £280,000.
On 24 July The Lawyer revealed that South East firm Blake Lapthorn Linnell was negotiating a merger with 20-partner London outfit Tarlo Lyons. Meanwhile, October brought the news that Birmingham firms Putsmans and Shakespeares were to merge, creating a new £20m player in the Birmingham mid-market.
Although these deals suggest that The Rising 50 is a rich source of merger material for larger firms hunting for additional muscle, this is not necessarily the case. ASB senior partner Russell Bell argues that it is not always necessary to go as far as a full-blown merger.
"If there are areas where expanding the firm gives you access to more skills and more clients, then we'd be interested in that," he says. "The issue is how you manage that integration and get around the cultural differences."
Then there are the firms for which the idea of a merger is anathema. Rosenblatt is one such outfit. The corporate-focused firm reported a 20 per cent increase in revenue for 2005-06, and senior partner Ian Rosenblatt tells The Lawyer that he "would rather die" than see a merger involving his firm. "The thought of it makes me feels sick," he adds.
Equally, the looming implementation of Sir David Clementi's proposals contained in the Legal Services Bill does nothing for Rosenblatt. "We don't need outside investment. We're doing very well already," he insists.
Indeed it is: the firm's £923,100 RPP was generated by a client base that includes Northern & Shell and the Sanctuary Group, which it advised on its recent reorganisation. Rosenblatt also acted for Collins Stewart on the broker's high-profile battle with James Middleweek and on its full listing.
An eye on the futureNot all of the firms share Rosenblatt's attitude to merger. Many are actively seeking growth through merger or a series of bolt-ons or lateral hires. For Southampton-based Moore & Blatch, the post-Clementi possibility for outside investment "goes hand-in-hand with looking outside the firm for opportunities", according to managing partner David Thompson.
The firm did consider bulking up by taking on a smaller Southampton outfit during the year, but Thompson says "cultural differences" prevented the merger taking place. Generally, however, Moore & Blatch is "alive to the possibility" of a merger with a suitor that would complement rather than duplicate its business.
Coffin Mew & Clover managing partner Pauline Johnson says her firm has not ruled out the use of alternative business structures, a key part of the Legal Services Bill's proposals, as a means of future expansion, but the firm is currently bolstering its ranks through both organic growth and lateral hires, both from the surrounding area and further afield.
Just last week in The Lawyer (20 November), UK 100 stalwart DWF announced its desire for growth by merger. The rumour mill has linked it with Ricksons, but the latter firm has shown little appetite for such a link - and little wonder with turnover rising by a creditable 22.6 per cent on its own in 2005-06.
In The Rising 50, Kent's Brachers and Bath-based Thring Townsend also revealed merger-based growth strategies. Those firms slipping down the lower reaches of the The Lawyer UK 100 - and there are a few - should be looking anxiously over their shoulders.