Mourant and Ozannes were a natural fit for a merger, but the combined firm needs to expand in the Caribbean and Asia to have a true impact on the offshore world
Jonathan Rigby and Robert Shepherd don’t look much like the Prime Minister and his deputy. And the office in which we meet isn’t much like the Rose Garden at 10 Downing Street. But there is definitely an echo of David Cameron in the way that Mourant Ozannes managing partner Rigby declares: “We’re all in it together”, when talking about the merger that formed the firm in June 2010.
Luckily for Mourant Ozannes’ 52 partners, the honeymoon period has lasted significantly longer than that of the UK’s coalition government. A year on from the merger, the firm picked up the Offshore Firm of the Year gong at The Lawyer Awards in June and is now preparing to launch its fifth international office in Hong Kong.
The secret to the firm’s first-year success, according to Rigby, is the big tent philosophy of being a united whole. He and Guernsey managing partner Shepherd have seen Mourant Ozannes through the physical and technological integration of the two practices and are now set to guide the merged firm through the next stages of development.
Clearing the way
Only a couple of years ago, the merger would have been impossible, although it was always something that was potentially on the cards.
“It was a very obvious fit,” claims Rigby, revealing that Jersey’s Mourant du Feu & Jeune and Guernsey’s Ozannes had chatted informally about linking up for “many years”.
The catalyst for the merger actually taking place, however, was the sale of Mourant’s fund administration business Mourant International Finance Administration (Mifa) to global custodian bank State Street in late 2009. The fiduciary business was administering $170bn (£105.43bn) in assets, but the firm felt it was a barrier to any merger.
None of the proceeds of Mifa’s divestment went into the merged firm as the administration business was owned privately by some of the Mourant partners, the management of the business, staff and some external shareholders, who each received a share of the money from the sale.
On the other side, Ozannes had begun expanding with a smallish office in Jersey.
“Even when we opened in Jersey we knew it was the first step to a more global approach to providing legal services,” Shepherd says. “We felt that the Far East was where we needed to be, but without a Cayman offering we were never going to make that a success.”
He says Ozannes felt that a merger was the obvious way to accelerate the firm’s growth. Mourant du Feu & Jeune had a much bigger Jersey presence than Ozannes, as well as a small Cayman office; Ozannes’ larger base in Guernsey would give the firm a solid base from which to grow.
The merger talks did not take long: from start to finish, just seven months. What sealed the deal on a cultural level was a top-secret partners’ meeting of both firms in Jersey. The Guernsey partners were bussed to the back entrance of a hotel to keep the talks confidential – not an easy task in a small jurisdiction where everyone knows everyone else. After an introductory talk by management, the different practice groups were left alone to chat to each other. The day, says Shepherd, proved that the two firms could get along well on a personal level.
On the business front, both Rigby and Shepherd say they kept finding unexpected synergies beyond the obvious crossover of practice groups. Both firms used the same insurer and the same bank. They both had locksteps of seven years.
The lockstep similarity helped in the creation of a single profit pool and an all-equity partnership, although again this was possible only because of the sale of the administration business. Prior to that, Mourant had run as an incorporated business for seven years, with partners as employees and shareholders, but it reverted to a modified lockstep in 2010.
Rigby says it was with some relief that the Mourant partners went back to being in a partnership. Now both he and Shepherd believe the all-equity partnership is something of a unique selling point in the offshore world. Of the big firms, Mourant Ozannes is the only one with a single profit pool.
Among its nearest competitors by size – Appleby, Maples and Calder, Walkers and Conyers Dill & Pearman – only Maples will reveal the size of its equity partnership, which stands at around a third of the total number of partners. The other three firms are understood to be running a similar model.
“I think it’s a really strong differentiator for us,” Rigby says. “We’re in a business that’s all about people and getting good people in. What we’re finding is that a lot of people are very attracted to the model.”
“There are no inter-island issues because of the single equity pool,” adds Shepherd.
Mourant Ozannes has kept the seven-year modified lockstep of both its legacy firms. Ascension is not automatic, meaning that partners can be accelerated up the steps or held back depending on their performance.
The management team is keen to stress that it has instituted a partner development programme to make it clear to senior associates how their careers can progress within the combined firm.
The firm also plans to grow through lateral hiring. The focus so far has been on the Cayman practice, with the hire of Walkers partner Robert Duggan and Maples partner Simon Palmer.
Private client is also a strategic growth area; the firm announced this week that barrister Douglas Close was joining the London office as global head of the team.
Another two partners are set to join the firm imminently in its new Hong Kong office. The team will be led by Guernsey partner Paul Christopher, who is relocating in August, while the newcomers are qualified in both Cayman and British Virgin Islands (BVI) law.
“The main driver is demand from clients in the region for the Cayman services,” Rigby says. He admits, though, that Jersey and Guernsey law also have a part to play in the development of the jurisdiction, both for the firm and more generally. Recent deals such as the dual London-Hong Kong IPO of Jersey company Glencore, on which Mourant Ozannes gave Jersey advice, demonstrate this trend neatly.
The addition of Hong Kong to Mourant Ozannes’ arsenal is a natural progression, but also sees the firm playing catch-up to many of its rivals. Channel Islands firm Ogier is already in Hong Kong, alongside Appleby, Walkers, Conyers, Maples, and BVI firm Harneys.
The fact that Mourant Ozannes is planning to offer BVI law in Hong Kong is likely to raise a few eyebrows in the offshore sector. The firm has not previously had any BVI capability, even in London, and does not have any on-the-ground presence in the jurisdiction itself.
This, says Rigby, could well change in the future. He says the prospect of a BVI office is “under review”, but adds that Mourant Ozannes is determined not to follow a “flag-planting” strategy when it comes to expansion.
“A number of our competitors have expanded their jurisdictional reach very quickly,” he notes, adding that some firms’ international offices remain small. “I think it’s difficult to maintain the quality of the offering and I think it’s very difficult to sustain a structure like that.”
Going back to the lockstep model, Rigby adds that the fact profits are shared equally across the firm’s offices encourages all partners to pull together to develop new practice areas and jurisdictions.
“We’re focused on being a law firm; we have a structure that’s cohesive and encourages cross-selling because we’re all in it together,” he declares proudly.
One notable feature of the merger so far is that no partners have joined any rivals since the tie-up was announced.
London-based Cayman practitioner Matthew Feargrieve resigned prior to the merger for Appleby’s Zurich office, and Shepherd notes that a Jersey litigation partner from Ozannes quit to start his own firm.
A team of three Ozannes senior associates and one associate joined Appleby just prior to the merger to set up the firm’s Guernsey office.
Apart from that, headcount among Mourant Ozannes’ legal staff has increased over the past year.
Rigby and Shepherd confirm that a small number of redundancies among support staff were made to take account of the scalability of resources generated by the merger.
ut they argue that the combined strength of fee-earners from both firms is what is enabling Mourant Ozannes to embark on its growth programme in Hong Kong and, eventually, in the BVI. Currently the expansion is funded from revenue, rather than any borrowing.
“What the combined firm has given both of the old firms is the firepower to match the ambition,” Shepherd says.
There is no doubt that Mourant Ozannes still has some way to go to match its ambition on the Cayman front. Partners in other Cayman firms note that the firm still has a relatively low profile there. Rigby and Shepherd are determined that this will change.
“In broad terms the strategy is to grow Cayman and to do that quite aggressively over the next three to four years,” Rigby says. In May, Mourant Ozannes is to move into new offices in Cayman, which, he says, will give the firm space to expand physically.
“We acknowledge that we’re not where we are in Jersey and Guernsey in Cayman, but nevertheless we’re very ambitious,” Rigby adds.
The Cayman practice must also extend to Europe. “A huge amount” of Cayman work originates in London, says Rigby, defending Mourant Ozannes against criticism that its funds practice lacks the strength of some of its competitors.
Accordingly the London office is also earmarked for growth. Following the merger, Guernsey-qualified senior associate Helen Wyatt moved to the City to add Guernsey law capability to the office. The imminent arrival of Close and the development of the private client business is the next stage in the development of London.
“That’s a very significant investment by the firm in the private client practice,” believes Rigby. “We want to be the go-to firm for contentious and non-contentious private client work offshore.”
For the foreseeable future Mourant Ozannes’ management is definite that the firm will focus on being a law firm. Although Rigby is quick to add “never say never” when questioned about the possibility of reintroducing a fund administration business, for the time being a pure law firm is the only focus.
“We’ll keep that question under review,” he says. “If we do it, it will depend on client demand and it will enhance the legal offering.”
Both Shepherd and Rigby see the lack of a fiduciary business as something that sets the firm apart from its competitors. They believe that the benefits of being fully independent and not tied down to an administration business outweigh the advantages of cross-selling clients between fiduciary and law firm.
Rigby is also adamant that any return to offering a fiduciary business would not see a return to the controversial incorporation model tested by Mourant du Feu & Jeune. He says the firm’s existing listing sponsor business and “small registration offices” in Cayman and Guernsey are nothing like the size of Mifa and do not detract from legal services in the same way, being merely an adjunct to the legal practice.
The challenge ahead for Rigby, Shepherd and the rest of the management committee is to implement the firm’s five-year strategic plan, which was approved by partners in November 2010. Elements of this are already in place, for example the Hong Kong launch. Others, such as complete physical integration, are almost completed, with only the phone and document-management systems left to bring together.
Objectives such as developing the Cayman practice are a work in progress. But the main aim, says Rigby, is for consistency. If Mourant Ozannes reaches a certain level of recognition in legal directories or wins clients, he wants the firm to remain operating at that level.
“We want to be recognised as the leading offshore law firm,” he says simply. It is an aim that is shared by most of Mourant Ozannes’ competitors, but this particular coalition thinks it has set its stall up strong enough to succeed and, unlike its counterparts in government, may well come out smelling of roses.
Mourant Ozannes: Impact on the offshore market
Although the Mourant-Ozannes merger propelled the firm up the offshore rankings by headcount, it has made relatively little impact externally. The mirror-image nature of the legacy firms’ profiles means that in their home jurisdictions of Jersey and Guernsey the main effect has been a rebranding exercise. Mourant had a small Guernsey office, which has been subsumed into the Ozannes headquarters; while Ozannes’ Jersey office was subsumed into Mourant’s.
Partners in rival Channel Islands practices say that on a day-to-day level little has changed in the firm’s profile in the market or its appearance on cases and transactions.
But when it comes to rankings and data on offshore firms, the merger has made a difference. Mourant Ozannes jumped ahead of Conyers Dill & Pearman in partner headcount to come fourth in The Lawyer’s annual offshore survey in February. By fee-earner numbers, it is second only to Appleby.
Client lists also put the merged firm high. According to Hemscott, it is second behind Carey Olsen by the number of London-listed clients, and its listed clients have the greatest combined market capitalisation of all offshore firms. Thomson Reuters has Mourant Ozannes advising more Channel Islands funds than any of its rivals.
In the Caribbean, the firm lags behind the truly international offshore practices, and behind Channel Islands competitor Ogier in Asia. The success of the merger may well be judged by the impact the firm makes in the Cayman Islands and Hong Kong in the next few years.