Alliances, failed and successful, are the story of the year outside London
The impact of mergers on the turnover of regional firms is best highlighted by the growth of DWF and Weightmans in 2011-12.
There has been the odd exception of more than modest organic growth, such as Browne Jacobson’s 17 per cent turnover increase, juxtaposed against firms such as Cobbetts and Bond Pearce that missed the merger boat last year.
Those that have recently announced deals more northerly such as TLT, Ashfords and Shakespeares will be looking towards the end of the regional rankings this time next year.
As it stands, the Midlands’ biggest outfit Wragge & Co still tops the turnover table for UK regional firms, recording a 5 per cent rise in turnover, from £113.1m to £118.2m, as it continues the recovery towards its 2007-08 level of £127m. Managing partner Ian Metcalfe says the firm’s investment in new partners – including ending its internal promotions freeze – dented net profit by just over £1m.
Metcalfe is unlikely to be too troubled by noisy neighbours Shakespeares, as Wragges is still twice the size of its nearest competitor, with a healthier profit margin.
Yet Shakespeares’ chief executive Paul Wilson has declared his aim to grow his firm into a £50m mid-tier heavyweight by 2014 – evidenced by its recent merger with Harvey Ingram – and is already planning what will be a sixth merger in under three years for early 2013.
However, Shakespeares’ bulking up is put in the shade by Manchester-based DWF.
Under the leadership of managing partner Andrew Leaitherland, DWF has broken the £100m turnover barrier for the first time due, in part, to a string of acquisitions. The firm took over Crutes in Newcastle in January and added Coventry firm Buller Jeffries in April.
Although turnover has surged for the second successive year – by 23 per cent, to £102m from £83m – Leaitherland says only £3m came from mergers. But with a deal with Scottish firm Biggart Baillie, announced in July, to factor in – plus a full financial year from the Buller Jeffries bolt-on – DWF could even push Wragges off the top spot, with an estimated £120m income for 2012-13.
Leaitherland’s bullish outlook on the market means he has not ruled out further consolidation in Scotland and adding a presence in Bristol. Even without further buyouts, that would be enough to put DWF into the top 25 of The Lawyer’s UK 200 – plotting a route that firms such as Liverpool’s Weightmans may well look to mimic.
Weightmans also enjoyed significant growth in the last financial year, now its acquisitions of Mace & Jones and Vizards Wyeth’s insurance team are bearing fruit. The firm has seen turnover grow by almost £20m (32.5 per cent), from £58.2m in 2010-11 to £77.1m, leapfrogging Burges Salmon in the process.
Weightmans’ managing partner Patrick Gaul says that although profitability takes a hit during the merger process, firms must take a longer term view of three to five years.
“Having said that,” he adds, “we’d be looking to turn that around by the end of this financial year and we need to see turnover and profit going up. This is a three- to five-year project to create a bigger, better, more valuable firm. In year two I want to see a considerable improvement.”
Gaul says there are a number of firms in Weightmans’ catchment area doing insurance work with a strong commercial offering, such as Hill Dickinson, Keoghs, Clydes, DAC Beachcroft and Browne Jacobson. He says that in the past there would have been a three- to four-year period for a merger to bed in, but that “the market moves on” and strategies have to be reviewed in such a competitive arena.
He highlights DWF as a “different kettle of fish” as it is a younger firm and “very acquisitive”.
“You’ve got to be improving, not just getting bigger,” Gaul says. “But size, geographical and even international reach are becoming more and more important in the market. You can’t sit still; we’re looking all the time to keep up with the competition.”
Gaul says the work done in this “landmark year” will stand the firm in good stead for the future and that “working together does indeed make us stronger”.
Hill Dickinson and Burges Salmon are the only two firms in the regional top 10 that showed healthy turnover growth without the benefit of a merger. Hill Dickinson enjoyed 10 per cent growth, from £100.1m in 2010-11 to £110.1m, although the fact that this is its first full year’s trading since it snapped up Halliwells’ Liverpool and Sheffield offices was a contributing factor.
Burges Salmon has been overtaken by Weightmans, yet posted a 7.4 per cent turnover increase, from £66.1m to £71m.
Elsewhere in the top 10 regional outfits, North West firm Pannone suffered another year of revenue falls, down 2.8 per cent from £47.5m to £46.17m, following a restructure led by managing partner Emma Holt. However, she says net costs have been cut by £1.5m, putting average profit per equity partner (PEP) up by 8 per cent.
Newcastle-based Dickinson Dees made little progress back towards its £60m 2007-08 turnover total, making just a 1.3 per cent advance from £45.5m in 2010-11 to £46.1m. It is a similar story for Blake Lapthorn, which recorded a 3.1 per cent rise in turnover, from £44.3m to £45.7m, after a slump a couple of years back.
For Bond Pearce it is a story of what might have been. Its proposed merger with Scottish firm Maclay Murray & Spens would have created a £95m firm, nudging the upper echelons of UK regionals. But with talks called off “for commercial reasons” in March, Bond Pearce was left down 1 per cent in turnover, from £47m to £46.5m.
Bristol-based TLT, on the other hand, executed its own Scottish tie-up with Anderson Fyfe, following the trend of many English firms opening north of the border, by sealing a merger that should kick in this financial year after a 3 per cent organic turnover increase for 2011-12
On the fringe of the top 10 regional firms is North West-based Cobbetts, which posted a 2 per cent increase in turnover despite the fallout of its failed merger talks with DWF.
The combined force would have been bringing in £132m, but discussions were aborted in January because of “uncertain market conditions”. Since then the management structure has been streamlined, with three new business practice groups and an executive team led by managing partner Nick Carr, in a bid to make the firm an attractive proposition.
Elsewhere in the regions Exeter firm Ashfords reacted to a troubling year in 2010-11 by buying up Rochman Landau to consolidate a £30m business and expand into London.
Public sector firm Bevan Brittan stumbled somewhat with a 2.3 per cent fall in total turnover, from £34.7m to £33.9m, as it shuffled its management structure, whereas Newcastle’s Ward Hadaway built on 2010-11’s static turnover and average PEP by making a 5.6 per cent leap in gross fees from £28.4m to £30m for 2011-12.
The Midlands marketplace has been a tough nut to crack in recent years, yet there are, at face value, success stories.
Nottingham firm Freeth Cartwright is another that has taken the acquisition route to growth, snapping up Milton Keynes’ Kimbell in November 2011 en route to posting a 15 per cent turnover increase from £32m to £36.7m.
But just to prove the exception to the merger rule, Midlands-based Browne Jacobson showed organic growth can still push a firm to the brink of the top 10 biggest regional outfits. Managing partner Iain Blatherwick says the firm’s 17.3 per cent increase in turnover, from £35.2m to £41.3m, represents a “landmark year” and the highest year-on-year increase in more than a decade – without merger or acquisition.
The firm has opened in Manchester this year and put on double-digit growth in Nottingham (16 per cent), Birmingham (16 per cent) and London (26 per cent).
“It’s a phenomenal achievement,” says Blatherwick. “It’s particularly pleasing considering this growth is purely organic, although we don’t rule out acquisition being part of our strategy going forward.”