Show and tell
3 October 2005
In terms of growth, if not number of fee earners, Dublin firms Dillon Eustace and Matheson Ormsby Prentice head the Republic of Ireland Top 25 table
28 May 1996
27 May 1997
3 October 2005
20 March 2006
11 January 1999
The vow of silence adhered to by the managing partners of Dublin's top commercial law firms would put the Mafia's omertà to shame. Ironic, really, in a country full of characters famed for the gift of the gab.
But when it comes to money, Irish mouths have been firmly shut. Until now. For the first time, The Lawyer can put figures to the leading group of firms in the increasingly wealthy Irish market. As with last year's groundbreaking Euro100, the figures reveal the top revenue-generating firms in the market and will begin the process of opening Irish firms up to the same levels of scrutiny with which UK and US firms are all too familiar.
One caveat - the figures remain estimates. Not a single partner was willing to go on the record with specifics. But by quizzing enough people - current partners, former partners, managing partners, recruitment consultants - who were ready, willing and able to offer insights, we have produced informed estimates on figures along with specific observations on the equity structures and profitability of Ireland's largest firms.
The first indication that Dublin-based lawyers were at last ready to talk money publicly came in September 2004. Declan Moylan, the managing partner of mid-sized firm Mason Hayes & Curran, wrote an article responding to a piece in The Irish Times on the Dublin legal market ('Just how well paid are tight-lipped solicitors?', John McManus, 6 September 2004), in which he revealed his firm's turnover. Or at least, an approximation of it. For Dublin, this was shocking, controversial stuff.
Moylan actually said his firm's turnover for the 2003-04 financial year was "just in excess of €20m [£13.7m]". Research by The Lawyer suggests the actual figure was €20.5m (£14m). In the last year Mason Hayes has been on a hiring spree, growing its revenue by 15 per cent and putting its turnover for the last year at €23m (£15.7m). Moylan would not confirm the figure but is happy to agree that his business is in "growth mode".
Even without the specifics, Moylan's press comments in 2004 represented a significant breaking of the ranks. He referred to a "rapidly developing ethic of transparency within leading law firms regarding their financial affairs" in his piece. At the very least, it was a sign that the cartel of quiet that has reigned over one of the most vibrant and wealthy legal markets in the world was beginning to splinter.
Of course, it is worth exploring Moylan's motivation for penning such a bold article. As the managing partner of one firm put it: "The first person to give you their figures will certainly be the one I don't believe."
No one is calling Moylan a liar, and the man himself will not divulge profit figures. But as one of the more progressive thinkers in the Dublin market, and as head of a firm built on litigation which has bulked up steadily over the last few years, Moylan knows he still needs to recruit. Going public on revenue is one sure way of ensuring Mason Hayes is both in the headlines and in the thoughts of laterals looking to move, evidenced by the recent hires of Christine O'Donovan from A&L Goodbody and Justin McKenna from LK Shields. It is also a canny move by Moylan that says, very publicly, 'We're a business, not just a law firm'. As the Irish market becomes more competitive and clients begin to demand more transparency on billing and at beauty parades, Moylan's lead in removing some of the mystique surrounding the legal market looks particularly canny.
In fact, most firms in Dublin are in growth mode. The Irish economy has enjoyed a concentrated period of correction and adjustment over the last 10-15 years and, as a result, the legal market is booming. "International lawyers with specialist expertise are in high demand, particularly by the top five," says a consultant at recruitment consultancy Robert Walters. According to Michael Benson of recruitment consultants Benson & Associates, "lawyers across the piece are in great demand, but particularly in commercial property, construction, banking, finance and corporate. And there's an increasing trend for specialisation."
BCM Hanby Wallace is one of the mid-sized firms that has really capitalised on this growth. The firm, built on a platform of property and with excellent practices in employment and construction, was up to 29 partners at the end of its financial year, 12 of whom are full equity. The firm, which is building a barnstorming reputation for work on major development projects such as the Dundrum Shopping Centre, has budgeted for 28 per cent growth in the current financial year. It is currently reviewing its lockstep, partly in an effort to counter the dip in profits it has faced as it has expanded (The Lawyer, 26 September).
Another firm on the growth path is O'Donnell Sweeney. Managing partner Francis Hackett, who joined three years ago from Eircom after overseeing its IPO, will have helmed his firm to a doubling in turnover since his arrival if it hits budget in 2006. Hackett claims his firm is "transparent about circulating our numbers among the fee-earners", although he refuses to be drawn on revenue or profit figures. However, with a practice profile of 40 per cent property, 40 per cent corporate and commercial and 20 per cent litigation, it is a reasonable estimate (in the context of the Mason Hayes figures) that 16-partner O'Donnell Sweeney's revenue for the year ending 31 January was some €19m (£13m).
Another of the chasing pack firms, Dillon Eustace, is still badged as a funds boutique - unfairly so, in the eyes of managing partner Mark Thorne. "We're significantly broader than just funds," he argues. "We handle securitisations, repackaging, insurance, litigation and more. But we're still the biggest in the investment funds arena."
According to one legal market recruiter, Dillon Eustace has "exploded" in terms of size in the last 18 months and is "extremely strong" in banking and finance. The Lawyer puts the 23-partner firm's revenue at €18.5m (£12.6m). But Thorne is keeping his counsel on the figures. "We feel there is no pressure on us to reveal our figures," he argues.
Transparent or not, the word in Dublin is that Thorne's firm, which specialises in high-margin specialised financial transactions, is among the most profitable in the city. And for any mid-sized City partner reading this with an air of complacency and comfort based on their own figures, forget it. There is little comparison between the equity partner remuneration of the top Dublin firms and those of a similar size and focus in the City.
"The profits of the leading Irish firms compare notably better than mid-size London firms," says the managing partner of one large Dublin firm. "Three times the average of their UK counterparts would not be unusual, although the mid-sizers earn a lot less. In Dublin, taking home €200,000 (£136,500), or even €500,000 (£341,300), for a top partner isn't doing particularly well."
In his piece, Moylan called on The Irish Times journalist John McManus to ask the managing partners of Dublin's big five for their turnovers, a challenge McManus accepted. The result, published the following week, was a big fat "no comment" (one unnamed managing partner hilariously went so far as to offer: "Off the record: we have no comment to make.").
This year The Lawyer has taken up a similar challenge, expanding it to the top dozen firms in the city. The immediate results were similar, with still few signs that Dublin's managing partners are willing to shed much light on the revenues and profits at their firms. Few signs, but some.
Despite the growth of the more aggressive mid-size players, the Dublin market is still dominated by the big five - A&L Goodbody, Arthur Cox, Matheson Ormsby Prentice (MOP), McCann Fitzgerald and William Fry. There remains clear water in size terms between this group and the next tier of firms, which includes the likes of BCM, Eugene F Collins, Mason Hayes and O'Donnell Sweeney.
Goodbodys is Ireland's largest firm on a fee-earner basis, with 313 at the end of its last financial year. However, the firm known locally as 'the factory' employs a large number of paralegals, so on qualified solicitors only it is the third-largest with 186 (behind Arthur Cox with 195 and McCann Fitzgerald with 193). MOP and William Fry are the only other two firms with more than 100 qualified solicitors on board (177 and 133 respectively).
In estimating the revenues of these five firms, it is obviously necessary to consider the kinds of work they do and their respective client mix. Each is distinguished by an international client base, including major corporates and investment banks well used to paying top dollar for legal advice. The estimate is assisted by Moylan's breaking of the ranks. Mason Hayes' turnover of €23m (£15.7m) and partner count of 27 gives a revenue per lawyer (RPL) figure of €850,000 (£580,300). The revenue per partner (RPP) for each of the firms in this group is certain to be higher, although Mason Hayes' high level of international work means that it is unlikely to be too significant a disparity.
Assuming average RPP across the five is €950,000 (£648,500), that puts Arthur Cox at the head of the revenue table with €66.5m (£45.4m), followed by McCann Fitzgerald's €60.8m (£41.5m), Goodbodys' €58.9m (£40.2m), MOP's €50.3m (£34.3m) and William Fry's €47.5m (£32.4m).
Of this group, the two firms widely considered the most profitable are Arthur Cox and William Fry (although the other three will not be far behind). The distinction of Ireland's most profitable firm falls to M&A star Arthur Cox, the firm that carries with it "the gloss of success", as one recruiter puts it. According to managing partner Pádraig O'Ríordáin, "last year was a record". A reasonable estimate for the top of equity is at least €1m (£680,000). Sources suggest it could well be as high as €1.5m (£1m) at the firm known for its meritocratic approach to remuneration (O'Ríordáin introduced a bonus system on his watch, setting it apart from the all-equity, pure lockstep McCanns, which has none). However, the firm's relatively large number of equity partners means that, even with a profit margin of some 35 per cent, average profit per equity partner (PEP) is around €500,000 (£341,300).
Frys, known primarily for its strength in banking and financial services, is the smallest of the big five, but has a higher average PEP than Arthur Cox thanks to the tightly-held equity. Just 28 of the firm's 50 partners are full equity, giving them an average PEP in the region of €590,000 (£402,800) on a similar profit margin of 35 per cent.
The figures may not quite compare with the City's elite, but for a handful of senior equity partners they are very, very healthy indeed. But with the rapid rise in remuneration that Irish lawyers have enjoyed over the last decade must come an acceptance that business these days demands transparency. As Gavin O'Reilly, director of Dublin-based Solv Legal Recruitment, puts it: "The environment here is changing and the firms are having to react and treat themselves more like businesses in the eyes of their customers. The negative effect of keeping the financial information a secret is one of perception. Yes, by law, firms don't have to disclose their figures, but when clients see Mason Hayes do it they will wonder why the others aren't."
As Irish firms wake up to the fact that they can take nothing for granted anymore, and the big five in particular realise that the pack is snapping at their heels, anything a firm can do to distinguish itself from its rivals is fair game. Just ask Moylan.
THE MOP LITIGATION
Money is more than simply the stuff you take home at the end of the month. Remuneration and equity partner status were at the core of a dispute that may have escaped the headlines, but nevertheless set tongues wagging in the Dublin market to the extent that, two years on, they are still wagging.
It centred on Matheson Ormsby Prentice (MOP) and the firm's associated tax advisory practice. MOP, which has by far the largest tax group in Ireland, is the closest thing to a multidisciplinary partnership in the Dublin market. But Irish regulations still prohibit full profit-sharing between lawyers and non-lawyers.
However, in a memo dated 21 July 1999, MOP appeared to suggest that it was open to the entry of non-lawyers to the equity. The memo said MOP was "committed to the development of its existing taxation advisory service and is committed in principle to the creation of a structure to facilitate the career progression of new senior recruits other than solicitors towards full equity partnership, status and benefits."
On 14 July 2003, one of the firm's tax advisers, South African John Gulliver, claimed in the High Court that MOP had agreed to admit him as a full equity partner. This, Gulliver alleged, had been agreed to take effect on 1 January 2003. MOP refuted the claim, arguing that the case should go to arbitration. On 19 December 2003 in the Supreme Court, Mr Justice Geoghegan confirmed that the dispute should go to arbitration, following which the case settled. Consequently, Gulliver departed from MOP.
|Level||Range €K (£K)||Typical €K (£K)|
|1 PQE||40-54 (27-37)||48 (33)|
|2 PQE||50-62 (34-42)||56 (38)|
|3 PQE||56-63 (38-43)||60 (41)|
|4 PQE||60-72 (41-49)||66 (45)|
|5 PQE||66-90 (45-61)||73 (50)|
|6 PQE||80-120 (55-82)||100 (68)|
|7 PQE||110-140 (75-96)||125 (85)|
|Source: Hays Legal |
Table: Dublin law firms at a glance
but are they starting to show signs of transparency? Matt Byrne reveals all