The Lawyer UK 200 preview: City: Silver circle weathers the storm

BLP and SJ Berwin shine; Stephenson Harwood in new leap forward.

Rob Day
Rob Day

Berwin Leighton Paisner (BLP) and SJ Berwin were the standout performers among the City firms in 2010-11, with both posting ­drastic increases in profitability.

At BLP, net profit rose 50 per cent from £42m to £63m, while average profit per equity partner (PEP) was up 57 per cent from £455,000 to £712,000. At the same time, turnover rose 20 per cent from £191m to £229m, allowing the firm to overtake Bird & Bird as the largest City firm in turnover terms.

At SJ Berwin, meanwhile, net profit rose 49 per cent from £35m to £52m, while PEP was up 40 per cent from £447,000 to £626,000. Turnover was up 5 per cent from £171m to £179m.

For both firms the figures represent the consolidation of a recovery that began during the previous financial year.

For SJ Berwin, 2008-09 was a particularly low point, with PEP virtually halving from £801,000 to £410,000 while turnover fell 14 per cent from £215m to £184m. The firm’s heavy emphasis on real estate and private equity meant it was hit hard during the downturn, wiping out the gains it had made since its previous low point in 2002-03. With its large exposure to corporate leaving it vulnerable during that downturn, the firm’s 2002-03 PEP stood at £409,000, its lowest level since 1997-98.

In 2009-10, the firm began to steady the ship and, although turnover fell by 7 per cent, PEP rose 9 per cent to £447,000.

Although the firm was hit with high-profile departures in 2010-11, most notably the Jon Vivian-led real estate team that defected to Irwin Mitchell, managing partner Rob Day says the fact the firm has fewer people now than it did in 2008 helped boost its financials.

“Our total profit pool increased by about £10m [in 2010-11] – £8m of that came from slight income growth,” he says. “The rest came from sale of space and cost reductions. In part that’s about looking at headcount and revenue per lawyer and making sure you’ve got the right balance. The firm is a smaller firm than it was three years ago at partner, associate and ­support staff levels. We have fewer people than we had back in 2008 and we’ve sublet some space.”

At BLP, the picture has been ­similar. Back in 2001-02, the first full year following the merger of Berwin Leighton and Paisner & Co, the firm’s turnover and ­profitability both suffered. The following year was rosier, with turnover rising by 6 per cent to £91m and PEP up 17 per cent to £303,000. BLP’s upward trajectory continued until 2008-09, when revenue dipped from £186m to £180m and PEP slumped 33 per cent from £620,000 to £414,000. With property and corporate accounting for more than 60 per cent of the business, though, such figures were to be expected.

According to managing partner Neville Eisenberg, the 2010-11 bounce is down to investing during the downturn, specifically paying lockstep-breaking sums for a host of high-profile laterals.

Eisenberg says that the ­majority of the firm’s increased revenue is due to improving its standing with existing clients so they give the firm more work across a more diverse range of sectors, which in turn boosts the bottom line.

Marginal gains

Yet despite these profitability jumps, which are unlikely to be repeated in the current financial year, BLP and SJ Berwin have some catching up to do in terms of the key metric that sets the elite City firms apart from the competition: profit margin.

In this respect, Macfarlanes and Travers Smith remain the clear leaders, posting margins of 42 per cent and 39 per cent respectively. While these figures are a far cry from the heady days of 2006-07, when Macfarlanes’ margin was 51 per cent and Travers’ was 49 per cent, they are an indication that the firms are continuing to win high-end City work.

In April this year, both firms acted on Lion Capital’s £215m ­secondary exit of noodle bar Wagamama, with Macfarlanes acting for buyer Duke Street ­Capital while Travers advised minority shareholder Graphite Capital Management.

During the financial year, ­Macfarlanes also won a role on the Liverpool FC takeover saga, acting for Singapore tycoon Peter Lim on his £320m bid, which he ultimately withdrew.

Travers, meanwhile, advised Arle Capital Partners on the acquisition of Candover Investments’ private equity investment management division Candover Partners Ltd.

Elsewhere in the City table, Stephenson Harwood did well, breaking the £100m turnover barrier for the first time after posting a 16 per cent rise to £107m.

While the firm is a solid City player with 77 per cent of its revenues coming from the UK, it was helped in part by the growth of its Greater China and Paris practices. The former office posted a turnover rise of 20 per cent while the latter’s revenue jumped 72 per cent after the firm doubled its Paris headcount with the hire of a two-partner Norton Rose team.

Click table below to view ’Top 10 City Firms 2010-11’