Growth was the theme for 2011, with many offshore firms investing in people and expanding into new practice areas and locations
Offshore law firms had a strong – and in some cases exceptional – 2011, the results of The Lawyer’s annual offshore survey have revealed.
In an effort to shed some light on the murky world of the market’s financial results, this year’s survey asked respondents to provide an estimate of revenue increases. While no firm provided turnover figures for this year, several provided guides to growth.
Up a bit
The picture varied around the world, but was largely positive. Bermuda firms Cox Hallett Wilkinson and Wakefield Quin both said their turnovers were largely flat compared with the previous year’s. Given the jurisdiction’s reliance on the insurance sector and Bermuda’s current economic woes, flat turnover is actually a pretty good result.
Other Caribbean islands seemed to ride out last year’s turmoil better. Forbes Hare, which has offices in the British Virgin Islands (BVI) and Cayman, reported growth of 27 per cent, the largest increase of the offshore top 30. Cayman Islands-headquartered Solomon Harris said turnover had risen up by 16 per cent.
Campbells, which also has BVI and Cayman offices, said income had risen by 5 per cent, while fast-growing, partner-heavy outfit Thorp Alberga confirmed that its revenue was up.
Two of the three Isle of Man firms to feature in the survey said their revenues had grown. Cains, the largest Manx firm, reported an increase of 12 per cent, while the smaller Dougherty Quinn reported an 8.4 per cent hike.
Only two Channel Islands firms commented on turnover. Mourant Ozannes was the largest of any offshore firm to give an indication of its financial results, saying revenue had risen by “over 5 per cent” in the first full year since its June 2010 merger. Collas Crill, also a product of merger, said it had recorded double-digit growth.
In all, nine firms out of the 30 provided some information on revenue. Compared with other markets, particularly the UK, where disclosure of revenue and profit information is now commonplace, it is a poor result. However, it is a tiny glimmer of light into a legal market that remains highly secretive and an indication that offshore firms are managing to survive well in the current climate – or at least claiming to do so.
This is borne out by headcount figures. The 18 firms that appear in both this year’s and last year’s surveys (see Methodology box for more information) collectively had 484 partners at the end of 2010 and a total of 1,456 qualified lawyers.
Both figures rose substantially in the course of 2011. The same 18 firms reported a total of 546 partners and 1,578 qualified lawyers by the end of last year, a rise of 12.8 and 8.3 per cent respectively. This means that on average each firm added 3.4 partners and 3.3 associates to its roster. The fastest-growing firm last year was Collas Crill, thanks to the merger between Guernsey’s Collas Day and Jersey’s Crill Canavan. Collas Day, the larger of the two, had nine partners in 2011 against Crill Canavan’s six. By the end of 2011 promotions and hires had brought that total of 15 up to 24. Combined staff headcount had also risen, from a 2010 total of 132 to 137.
In some ways Collas Crill is following in the footsteps of its larger Channel Islands rival Mourant Ozannes, a year ahead in post-merger integration. Mourant Ozannes added four partners last year and a further 14 qualified lawyers, although its total headcount rose by only four people.
The firm also opened in Hong Kong and is tipped as one to watch by commentators thanks to its vision to move from being a purely Guernsey-Jersey outfit to being a true global player.
However, not every offshore firm was on an upwards trajectory last year. The gap between the sector’s largest firm Appleby and its closest rival Maples and Calder closed significantly thanks to the former’s loss of lawyers and partners and the latter’s recruitment efforts.
Appleby saw its partnership decrease by seven, from 82 at the end of 2010 to 75 at the end of last year. Its qualified lawyer count dropped to 210 from 222, while fee-earner numbers went down to 255 from 270. Total staff numbers rose slightly, from 801 to 805.
Maples added two partners and 10 lawyers, meaning it joins Appleby as the only offshore player with more than 200 qualified lawyers.
There are also signs that Maples is opening up its equity. The equity partnership has been steady at 19 for the previous two years, but 2011 saw four partners join the ranks. That means the firm’s equity is held by 36.5 per cent of the partnership – still a small proportion, and still the most tightly held in the top 10, but significantly better than 31 per cent in 2010.
Of those firms that disclosed their equity partnerships, nine are all-equity. Mourant Ozannes is the largest of these, while 12-partner Gibraltar firm Triay & Triay is the next biggest. In contrast, the tightest equity partnership is found at the other Gibraltar practice in the survey, Isolas, where the equity is held by two out of seven partners (28.6 per cent).
Isolas and Harneys were two firms to reveal their equity numbers for the first time this year, in contrast with Channel Islands firm Carey Olsen. The latter said 28 out of 37 partners in 2010 were equity, but declined to reveal figures for 2011.
There was little change in partner to associate ratios between 2010 and 2011, with the majority of firms hovering somewhere between one partner to every 1.5 associates and 1:2.
There are a couple of outliers: Ogier employs three associates for every partner, as does four-partner Guernsey firm AFR Advocates. At the other end of the scale, there are just four associates at Cayman firm Thorp Alberga, which expanded last year and which now has 10 partners, while eight-partner Bermuda firm Marshall Diel & Myers has two associates.
Return to gender
Thorp Alberga also stands out for its commitment to diversity. Its partnership is split evenly between men and women, a figure matched only by Guernsey’s AO Hall. Women made up more than 25 per cent of the partnership at eight of the top 30, albeit the same proportion had no female partners.
Walkers and Appleby maintained their lead among the big firms in the diversity stakes, with women making up 30 and 28 per cent of their respective partnerships. Harneys, with one more female partner than last year, improved its standing slightly.
Further headcount growth seems inevitable in the coming year, with the majority of firms stating their intentions to grow in either particular practice areas or regions. Recruitment from onshore firms remains popular, as hiring from these sources brings not only a high level of training, but also the possibility of picking up more work from new recruits’ former firms.
That said, the majority of ’key clients’ identified by survey respondents are not law firms, but banks and other financial institutions. Six firms said Barclays was a key client, with four pointing to RBS, three to Deutsche Bank and HSBC and two picking out Lloyds TSB. Asset management companies also continue to make up a large proportion of key clients.
Strategically, the focus for many of the bigger offshore firms last year was Asia. Half of the top 20 firms now have offices in Hong Kong, Singapore or mainland China, with more planned. This week sees Appleby announce its move into Shanghai, for instance.
The BVI is also tipped as a jurisdiction for growth according to firms already there, thanks to its continued popularity for domiciling vehicles for Asian money.
But the ’onshorisation’ of the offshore world is also set to continue. Maples and Walkers are satisfied with the results of their forays into Ireland, while Ogier is following a similar pattern with its imminent launch in Luxembourg. Gibraltar and the Channel Islands are likely to continue punting themselves as places with sensible regulation that bridge the gap between flexibility of use and the greater transparency many investors are now looking for.
Managing partners predict that consolidation within the market will continue, while there seems likely to be a continuation of the busy lawyer movement between offshore firms as well as recruitment from onshore sources.
But while all the offshore firms are seeking (much like their onshore counterparts) to hedge their bets in uncertain times, they are also confident that their jurisdictions do have a continued place in the world.
Profiles of the offshore top 30
The offshore top 30 at a glance (click for bigger image)
This is the seventh edition of The Lawyer’s offshore survey, and in response to growth in the market we have expanded the number of firms involved from 20 to 30.
The jurisdictions covered are the same as in 2011 – the major Caribbean jurisdictions of Bermuda, the British Virgin Islands (BVI) and the Cayman Islands, Crown Dependencies Guernsey, Jersey and the Isle of Man, and Gibraltar.
Last year’s 11th-largest firm, Maitland, has been omitted from the survey. Although Maitland has offices in the BVI and the Isle of Man, the bulk of its operations are onshore and it is increasingly positioning itself as an onshore firm, similar to established UK practices such as Withers or Speechly Bircham.
In late 2011 firms were sent a questionnaire asking for information on headcount, revenue, key clients and strategic developments. Information that was not provided by a firm was sourced from its website.
Firms are ranked by number of partners and, in the case of a tie, by the number of qualified lawyers.