Trowers & Hamlins: the swan emerges
11 June 2007
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Trowers & Hamlins: the swan emerges" />There is such a thing as being in the right place at the right time; just ask Trowers & Hamlins. During the past couple of years one of the most attractive international destinations among discerning law firms has been Dubai. Ashurst, Herbert Smith and Lovells are just three of the ranks of firms that have opened offices or signalled their intention to join the party in Dubai recently. And Trowers? It's been there since 1991.
You need to go a lot further back to find the firm's first contact with the Middle East: try 1960, when it began seconding lawyers to the government in Bahrain (see box). Nearly half a century later, Trowers is the firm on the ground in the key cities across the Middle East.
Last week (4 June) The Lawyer reported that Trowers was relaunching an office in Saudi Arabia. And last month the firm revealed record financial results that show an average profit per equity partner of £545,000 - a 15 per cent rise from 2006 - and a total revenue of £68.1m, up by an astounding 21 per cent. Trowers has the feel of a firm whose time has come.
Yet that is not all there is to Trowers. The other part of its practice is also doing well; and it is about as far removed from its international projects practice as it is possible to be.
From Exeter to Dubai
There is no avoiding it; Trowers is one strange firm. At least the firm's affable senior partner Jonathan Adlington doesn't attempt to pretend otherwise.
"It does seem a strange fit for a major City law firm to have such a substantial housing association client base," Adlington admits. "But several of these organisations are now major businesses."
Indeed, one of these clients, the Peabody Trust, has properties worth in excess of £1bn in central London and employs more than 1,000 people.
Trowers' housing association group, which also includes clients such as Genesis and the Metropolitan Housing Trust (MHT), generates a steady stream of mainstream commercial work such as governance, employment and IT contracts. And if Trowers does feel the need to discount a little, around 15 per cent in fact, these clients nevertheless produce substantial business.
Graham Gill senior consultant Hilary Spicer says: "There's money to be made and it's a steady income stream."
"Two of the firm's top five billing clients last year were housing associations," reveals Adlington. "The group's turnover increased by 32 per cent last year and historically, it's been more profitable than the international practice."
As Adlington points out, Trowers' international practice has considerably higher overheads than its housing association group. The air fares alone for lawyers regularly travelling from the UK, added to rising salaries and charge-out rates in the Middle East that are lower than in the UK for comparable work, means that much of Trowers' international work is less profitable than it appears.
"But it will be more profitable as the gearing gets better," says Adlington. "The housing association practice is profitable because it's geared properly."
Social housing organisations certainly appear to have shed their 1970s 'beards and sandals' image. The legal spend that clients such as Peabody, Genesis and MHT wield is comparable to any decent plc, as is the professional manner in which they are run. Plus, the possibility of large-scale mergers between these organisations would seem to gift Trowers a front seat at any M&A beauty parade (the firm has already advised on a handful of deals in this sector).
But it is not only the existence of Trowers' housing association practice that jars with its growing Middle East presence. It is also its geography. Sitting neatly with the oddness of Trowers' housing association client base are its offices in Manchester and, even more bizarrely, Exeter.
How exactly does this fit with a firm doing such great business on cutting-edge projects in the Middle East?According to Adlington, the Manchester office started life as an outpost solely handling social housing. It now includes construction, litigation and employment.
For its part, Exeter remains a small part of the business, contributing just 3 per cent of turnover last year.
"But Exeter has always been profitable," says Adlington. "You can make money out of any legal business as long as you run it properly. And you can lose money as well."
Dubai: the jewel in the crown
Exeter and Manchester may be profitable, but it is the Middle East network that is the most eye-catching part of Trowers' practice. At the firm's partnership conference on 19 May the key theme was how to improve communications, and therefore work flows, between the firm's various offices.
"It's already happening more than it did a few years ago," says Adlington. But clearly there was room for improvement. The partner spearheading this drive is Martin Amison, the head of the firm's Middle East practice, who founded its international group in 1995.
"At the beginning the international group was just me and a secretary," recalls Amison. "Now there are 22 partners and around 140 people, so we've an international conference each November to help us keep in touch. You've got to keep encouraging people to try harder."
Last year Amison's group contributed £12.5m to Trowers' turnover - around 19 per cent of fees. Next year it is projecting a revenue of £15m. In contrast, the housing projects group chipped in 13 per cent.
"International is now the biggest department in the firm," he says. "In the past three years we've more than doubled the income, from £6m in 2003-04 to where we are now."
Perhaps the most significant change is the level of instructions that Trowers' international offices are now providing for its London headquarters. Last year you could add on roughly £5m in revenue derived from overseas clients feeding work to London corporate, litigation, property and construction lawyers, with highlights including acting for the Kuwaiti-based Adeem on its investment into the Grosvenor House hotel on Park Lane.
"As the firm gets bigger, the risk is people stop talking or don't know who to talk to," says Amison.
Strength in experience
There are other risks, of which Amison is equally aware. The spate of firms rushing into Dubai is the biggest threat to Trowers' longstanding dominance in the region.
There has always been competition, of course. Norton Rose and Linklaters in Bahrain, Allen & Overy and Clifford Chance in Dubai: Trowers has never had these markets to itself. But equally it has never before faced an influx as concentrated as the rush of firms into Dubai in recent years.
So, is Amison feeling the pressure? "The main threat is that these firms will be trying to pinch our lawyers to buy experience," says Amison. "That will then overheat the salaries. There's no doubt that recruitment is tougher than it was."
Amison adds that he is already seeing lowballing as the new entrants look to buy market share. "You can't rely on client loyalty," he warns.
But Amison remains confident that there is more to making a buck in the Middle East than knocking in a nameplate. "I think some of the firms that are flocking to Dubai are in for a big, bloody nose," he says. "You can't just throw money at it. Those firms that are spending $75,000 [£38,000] on sponsoring conferences are never going to recover their set-up costs."
Trowers, meanwhile, believes its trump card is its longevity in the region. As Taylor Root consultant Jamie Newbold put it: "There are other firms there now, but Trowers has the long-term relationships."
Amison says: "We feel we've done the right things in the Middle East. We've always known we were up against the magic circle, so the only way to differentiate ourselves was by demonstrating our local and regional market knowledge. We spend a huge amount of time on building market intelligence and relationships. We've always known that we have to have an edge, and we would be utterly foolish to squander that."
Trowers' results this year, in the UK and abroad, suggest that it has done nothing of the sort. From unpromising and unfashionable beginnings, the firm has come good. Even if in some quarters, the firm's practice mix still looks a little odd.
As Adlington puts it, "It's an interesting model but it works.
•Middle East growth
The invasion of Kuwait that led to the first Gulf War had many knock-on effects in the Middle East and around the world. But one of the more unexpected ones was that it lead to the founding of Trowers & Hamlins' Dubai office.
In 1991 Trowers partners Martin Amison and Nick Hills spotted what they thought was an opportunity in Kuwait; to go and open an office to support UK-based oil and construction clients moving into the country.
"Unfortunately, everyone was carrying guns," remembers Amison. "It was a bit too dangerous." An alternative destination, and one suggested by clients, was Dubai. Trowers opened there in 1991 and has been there ever since.
While the Kuwait market then turned out to be what Amison calls fondly "a waste of time", Dubai was already a busy trading centre. Although there was virtually no major projects or finance work, there was a whole host of commercial contracts. Back then, Trowers' office was a foothold in a market that showed promise.
The following year Trowers opened in Abu Dhabi. Within a year Amison and his team decided it was "the projects place". The firm won work on the $1bn (£501.37m) Borouge petrochemicals project in Abu Dhabi, advising the shareholders of Borealis.
"It was a classic example of seeing the fruits of the goodwill we'd generated by having acted for Borealis in Oman," says Amison. "That deal made our Abu Dhabi office." Trowers has kept the client ever since.
Spurred on by the firm's success in Abu Dhabi, Dubai and Oman (the firm's original Middle East office, opened in 1980 by Nick Hills), Amison returned to London in 1994 to lobby for the launch of an international department.
The argument was that it would assist with the group's administration and its integration into the firm.
"There was a tension in those days as to whether or not we needed an international department," recalls Amison. "But we wanted to give our overseas offices a sense of identity." Amison won the argument and four years later Trowers had added a Cairo and Bahrain office to its network.
Although Cairo got off to a rocky start - "We thought it'd be the place to be, but our arrival coincided with the currency crisis and the collapse of the projects market," says Amison - the lawyers headed by Sarah Hinton pulled through on a diet of bread and butter commercial contracts.
As The Lawyer reported last week (4 June), the latest piece of Trowers' growing international jigsaw was put in place this month, with its new office in Saudi Arabia.