At a time when City firms increasingly resemble wounded bears hibernating in the chill of a recessionary winter, any exception stands out even more. Given which, Stephenson Harwood’s performance over the past two years has raised more than a few eyebrows.
Last October’s half-year results showed an impressive 8 per cent revenue hike for the firm against 2008’s figures, outperforming all its mid-market peers. The £85m in fees it recouped in 2008-09 represented a flat return compared with the previous year, but that was after a 17 per cent leap 12 months earlier. And although the firm placed a modest 36th in The Lawyer’s UK 200 table, an average profit per equity partner (PEP) figure of £610,000 has seen it break into the top 10 for partner profits.
Such figures represent a remarkable turnaround since the early years of the decade, when the 2002 merger with Sinclair Roche & Temperley hit the firm’s partners where it hurts.
Say it loud…
So why the sudden change in fortunes? New chief executive Sharon White, who took over from Sunil Gadhia in October last year, is keen to emphasise the role communication has played in raising the firm’s profile.
“Stephenson Harwood has always done good-quality work,” she says. “What we’ve not been so good at is letting people know we’re doing that work, and this is something we’ve got a lot better at over the past few years.”
While it is certainly true that the firm has become more adept at blowing its own trumpet, the real secret of its success may have more to do with timing.
That is because things were not always so rosy in the Stephenson Harwood garden. The Sinclair merger foreshadowed a period of retrenchment for the firm: management was streamlined, partner numbers cut and profits took what had all the makings of a very long bath. But making the tough decisions then has seen the firm flourish in today’s even harsher climate.
“Having had the hard times we had a while back meant we had to do the naval gazing – the looking at who we had and who we ought to have in the business – all those years ago,” says White. “That wasn’t a pleasant experience and it was one we didn’t want to repeat, so we’ve been quite demanding looking at new partners.
“Whether externally or internally we’ve set quite a high bar so our partnership was in better shape than many.”
In fact, the partnership has developed at such a pace at Stephenson Harwood that as many as 50 per cent of current partners were not even at the firm five years ago. It is a startling statistic that reflects an ability to attract top-quality laterals as well as a subtle change of attitude.
“In the past we probably tried to do too much,” admits senior partner Andrew Sutch. “We were too broadly spread, we had a private client practice that was less profitable than the rest of the firm and we were less sector focused than we are now. We were much more of a traditional City firm.
“There’s been a change without being an in-your-face change. What we’re trying to do is still retain a broad practice but be market leaders in some areas.”
Evolution is clearly the key to what Stephenson Harwood has achieved through the recession, as evidenced by a glance at what has happened to what was previously a core area of business – shipping.
Having been perceived by the market primarily as a shipping firm, with strong litigation and finance practices in the sector and a well-established office in Piraeus to court Greek clients, the downturn in the industry should ave scuppered Stephenson Harwood. Instead the firm has adapted to a new world order and turned its shipping finance expertise into an asset finance offering that it believes is up there with the best.
Again, timing is crucial. Stephenson Harwood has been able to grab both business and talent from some of the top firms as pricing has squeezed out the heavy hitters. The firm has taken on a major chunk of what was once a stellar asset finance group – known at the firm as ‘Team Four’ – at Freshfields Bruckhaus Deringer.
As an asset finance partner at a rival firm points out, Stephenson Harwood was nimble enough to take advantage of the magic circle’s loss of interest in the sector.
“Given the way the asset finance practice is going, the rates people can charge are getting lower, so top-tier firms are coming out of the market – the magic circle certainly can’t do it now.
“Freshfields was winding down its aviation practice. It tends to be very price competitive, and for a firm like Freshfields pricing was going to be difficult to match. For Stephenson Harwood, their cost base is a lot lower.”
A corporate partner at a top 10 City firm agrees that Stephenson Harwood has made a number of canny partner hires.
“They’ve recruited well,” he says. “Firms like them have benefited by attracting good partners from firms where they may have become surplus to requirements.”
Head of finance Mark Russell brought over both Paul Ng, who now leads the aviation practice from Singapore, and Richard Parsons from Freshfields. They joined fellow alumnus Asheesh Das, a 2007 lateral.
Another former member of Team Four, Graeme McLellan, who joined late last year following a three-year spell at Pinsent Masons, says part of the attraction was teaming up with so many of his former colleagues.
“Joining the transport finance group was like going back to the asset finance team at Freshfields,” he says. “There’s half a dozen of us here now, so from my perspective it was a safe bet. The group is very strong. Mark’s got a clear idea of what we want to achieve and he’s got the rest of the partners lined up with him. It’s a very tight ship.”
The firm’s profitability has certainly been a reason it has been able to attract so many lateral hires – 26 at partner level across the firm since 2007. But the bottom line is not the be all and end all.
“There are lots of different characters here, but there are core values that I think we all hold,” says White. “Anyone who just wants to make money regardless doesn’t fit in well here.”
Collegiality is a word trotted out by every firm in the land when asked to characterise their partnership. But it seems to actually mean something at Stephenson Harwood.
“The people there are good people and that’s what’s attracted the laterals,” says the corporate partner.
It is a feeling echoed by new corporate partner Duncan Stiles, who joined from Ashurst last year.
“There’s no arrogance here,” he explains. “People are charming – they have a very good style about them and concentrate on getting deals done, not grandstanding.”
Not shouting their names from the rooftops could be why the firm’s success has snuck under the radar. But plans for the coming year could see that about to change, with talk of expanding into the German market as well as building on its offerings in China and Singapore.
Another pressing bit of business is an impending move from its current offices overlooking St Paul’s. There was disappointing news before Christmas when one potential option fell through, but the firm is understood to still be looking for a new home.
Wherever the firm finds itself in the coming year, there will be no resting on laurels within the partnership.
“The recession has shown that we weren’t just riding on the back of a rising market, which I know was a question that many had posed,” says White. “We’ve always had to go out and fight for our business. We’re not Slaughter and May – it doesn’t just walk in through the door.”
Who’s who at Stephenson Harwood
Stephenson Harwood has made an impressive 26 partner-level lateral hires since 2007, and 10 last year alone.
Below is a handy guide to 2009’s new signings:
Steven Dewhurst: A January recruit from DLA Piper’s Hong Kong office, Dewhurst is part of Stephenson Harwood’s insurance practice in Singapore.
Natalie Elphicke: An ex-Denton Wilde Sapte partner, project finance expert Elphicke joined in May from Addleshaw Goddard.
Tim Elsworth: A 20-year shipping litigation veteran, Elsworth was another addition to the Singapore office.
Stuart Frith: Drafted in to head the firm’s corporate insolvency and restructuring practice, Frith has advised creditors of Lehman Brothers, Leeds United FC and XL Airways.
Clare McConnell: McConnell is a PPP/PFI specialist who came over from Pinsent Masons to head Stephenson Harwood’s projects group.
Graeme McLellan: McLellan, another former Pinsents partner, joined in November as part of a major push into transport finance.
Paul Ng: Ng was one of a clutch of former Freshfields Bruckhaus Deringer asset finance partners taken on in the past three years. He now heads the aviation finance practice from Singapore.
Richard Parsons: Another former colleague of McLellan and Ng from their Freshfields days, Parsons is seen as a rising star in aviation finance.
Duncan Stiles: The only corporate hire in 2009, Stiles spent 18 years at Ashurst, including a spell at the helm of its Madrid office.
Andrew Wiseman: A former real estate partner at Blake Lapthorn, Wiseman now heads the environmental law practice.