Their revenues may be lower than their UK 100 counterparts', but The Rising 50 face the same issues. And who knows? The next national powerhouse may be among them. By Matt Byrne
For the first time, The Lawyer has extended its annual coverage of the UK's top 100 firms by turnover to include the next 50 largest. These are firms with turnovers of between approximately £5m and £15m, with partner numbers of between 10 and 40. It is the most comprehensive and detailed review of this dynamic group of firms ever produced.
This is the group that contains the rising stars locally, regionally and nationally. There may also be one or two whose best days are behind them. Gateley Wareing, Lester Aldridge and Harbottle & Lewis all featured in last year's Top 100, but only Harbottles was a perennial fixture. But the firm's turnover has been all but static for three years - a problem that finally saw it disappear from the main list this year. As the firm's managing partner Samantha Phillips says: "Of course it's important but we're confident it's a temporary thing because of the investment we've made in the practice. And on all other indicators, such as profits and revenue per partner, we do much better." Indeed, the firm features in both the top 10 rankings by revenue per partner and revenue per lawyer.
Harbottles, of course, was badly hit by the crash in its core market, media. But it is not just the stormy economy that is affecting law firm performance. The legal market is on the threshold of potentially one of the biggest shake-ups in its history - Clementi. As Andy Jobson of Barclays' professional practices team points out, this could be both a threat and an opportunity. Many, if not all, of these firms may be facing the challenge that the opening up of the legal market may represent and will be reviewing their strategies. The Rising 50 may increasingly target the business which is traditionally the arena of their larger competitors in the top 100, where growing capability, refocusing existing resources on more profitable business and competitive pricing would offer a strong proposition."
The ever-changing make-up of the UK legal market is what makes this group no less interesting to examine than the top 100. There is nothing to say that the Clifford Chance of 2020 or the next merger target of a £100m-plus juggernaut or US giant will not lie in these pages.
Many of the names will be familiar to readers of The Lawyer, others less so. Geographically, the South East dominates, although the firms are spread throughout the UK - though Southampton appears to have contributed more than its fair share. The City is less well represented than in the main list, as might be expected. These are, in the main, full-service regional firms that have nevertheless identified the areas in which they excel in order to compete.
| Revenue Per Partner |
 | | Rank | Firm | RPP (£K) | turnover (£M) | No of partners | | | 1 | Moore & Blatch | 726.7 | 10.9 | 15 | | | 2 | Rosenblatt | 666.7 | 8.0 | 12 | | | 3 | Davies Lavery Solicitors | 650.0 | 10.4 | 16 | | | 4 | Forsters | 636.4 | 14.0 | 22 | | | 5 | Harbottle & Lewis | 600.0 | 13.2 | 22 | | | 6 | Eric Robinson Solicitors | 583.3 | 7.0 | 12 | | | 7 | Fishburns | 583.3 | 7.0 | 12 | | | 8 | Paris Smith & Randall | 565.3 | 9.61 | 17 | | | 9 | Watson Burton | 560.0 | 14.0 | 25 | | | 10 | Gateley Wareing | 548.1 | 14.8 | 27 |
Of course, the firms in The Rising 50 wrestle with many of the same issues faced by the top 100 firms. Financial management, underperforming partners, competition, consolidation and succession - it's all here. But the pressures on theses firms are different, partly because of their size. In a smaller firm, there is a fine line between reasonable profits and dire profits. In a smaller firm it does not take much movement either way to make a big difference.
Take Tarlo Lyons. The London firm once synonymous with the technology boom of the late 1990s has had a turbulent recent history, with messy partner departures and redundancies. When the bottom fell out of the tech market, the firm was left with a large number of fee-earners and not enough work to go around. The combination of high overheads and low turnover meant that profits took a dive. Average profit per equity partner (PEP) dropped by some 20 per cent, which had a major effect on investment, recruitment, infrastructure and all other costs, such as marketing. The firm that had once put in an appearance in The Lawyer UK 100 appeared to be in freefall.
The answer was a complete overhaul of overheads. According to managing partner Warren Foot: "We cut out any faff. We looked at the premises costs and all external outgoings, including consultants. It was right back to basics. In that period we reduced our overheads by 15 per cent."
Foot says it took Tarlo Lyons three years to turn things around. The firm has even begun to recruit in technology again, with IT partner Jimmy Desai joining in March from Lawrence Graham and a new technology assistant due to come on board in December. But where previously Tarlo Lyons had recruited in anticipation of work, now, as Foot puts it, "we're very cautious".
Costs and overheads have to be managed more carefully in smaller outfits. Firms that do not have a real grip on overheads may face more pressure to merge or consolidate. As The Lawyer reported on 4 October, a number of South East firms addressed this issue by cutting costs via a campaign of office rationalisation. DMH, for example, cut its offices from six to three in five years. At the same time, turnover has grown from £6m in 1996 to more than £15m last year.
"Any firm of our size that hasn't thought of merging is burying their head in the sand," says Andrew Chalkley, managing partner of Boyes Turner. "The difficulty is identifying what it is you're going to achieve. We'd be very wary of any firm with five or six offices. They would have major overhead issues, cultural issues and so on. We prefer to have a centre of excellence."
Chalkley's firm exemplifies one of the benefits of a smaller practice: focus. The Thames Valley firm that counts Panasonic, EDS, Ericsson and Thames Water among its clients is close to London, and with high numbers of former City lawyers on board it can compete with the City on price. "We've just won Dun & Bradstreet's employment work in a major tender which included City firms a couple of months ago," says Chalkley. "We've also just won a local tender for a major bank and we're on the banking panel for Bank of Scotland and Barclays. These clients are attracted by the quality of the people and City expertise."
| Revenue Per Lawyer |
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| Rank | Firm | RPl (£K) | turnover (£M) | No of lawyers |
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| 1 | Rosenblatt | 320.0 | 8.0 | 25 |
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| 2 | Dawsons | 236.8 | 9.0 | 38 |
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| 3 | Tarlo Lyons | 236.1 | 8.5 | 36 |
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| 4 | Harbottle & Lewis | 227.6 | 13.2 | 58 |
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| 5 | Forsters | 215.4 | 14.0 | 65 |
| | 6 | BPE Solicitors | 195.5 | 8.6 | 44 |
| | 7 | Brachers Solicitors | 194.9 | 11.5 | 59 |
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| 8 | Campbell Hooper | 193.9 | 9.5 | 49 | | | 9 | Shadbolt & Co | 191.5 | 9.0 | 47 | | | 10 | Fishburns | 189.2 | 7.0 | 37 |
In other words, the partners identified the need for a firm such as theirs and then went about creating it. For smaller firms, making your firm look attractive, both to clients and to quality lawyers, can be hard, but with so much competition differentiation is vital. The work-life balance issue is obviously important, but it is not everything. The nature of many of the firms in the Rising 50 is that they will be building up to critical mass. That means growth, which can create problems, such as finding good people. "What's required is a clear strategy as to what they're doing to sell themselves," adds Chalkley.
Once that strategy is in place, smaller firms have a number of major advantages over their larger rivals. For one, they are more nimble. "There's a real opportunity for our type of firm," says Ian Gilthorpe, senior partner at Robert Muckle. "Ensuring that the quality of people is the same and the service is totally integrated is much easier with 125 people than 1,000. Clients know what they want and it's all about focus." The shorter lines of communication in a smaller firm "make an enormous difference", adds Gilthorpe. "It means that, if we want to change something, we'll just go off and change."
Similarly in Scotland, the domicile of six of the firms in the Rising 50, the partners at Henderson Boyd Jackson (HBJ) have a clear idea about who they are. "In Scotland there's really only the big four and then the rest," admits executive chairman Malcolm McPherson. "So we concentrate on the areas we know we're good in."
That focus recently brought HBJ all of BT's legal work in Scotland, which itself came on the back of winning all the work for Fife Regional Council via another tender in July. "In a smaller firm you have to produce people of the same quality who enjoy the environment you create," says McPherson. "There's also a need to keep people fresh. Last year we took partners out of the firm, people who've been here a long time. It was a reconstitution of the partnership. Small firms can be more flexible, more reactive, although the downside is there's less support. But if you stick to what you're good at you can be as good as anybody in your own field."
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