It might not be very sunny at the moment, but Leeds' second-tier firms are certainly making hay.
For the city's big six – Addleshaw Booth & Co, DLA, Eversheds, Hammonds, Pinsent Curtis Biddle and Walker Morris – the past six months have brought mixed fortunes. Hammonds has been the victim of rumours of financial worries and partner dissatisfaction, Addleshaws had its well-publicised night of the long knives and the plc market that the firms have spent the past five years chasing has reduced from 300 to around 75 in Yorkshire alone.
But step down to the tier below and things have rarely looked brighter. A group of firms including Cobbetts, Gordons Cranswick, Irwin Mitchell and Lupton Fawcett are proof that the profitable work is there if you know where to look.
Lupton Fawcett, with 29 partners, has increased its turnover 66 per cent in the past four years and has appointed eight new partners this year alone. In the past four months its corporate team has acted on deals worth more than £30m and its client list includes ICM, Mondi Packaging and automotive parts manufacturer Federal-Mogul.
“I think several of the big six have got problems with their strategies,” says Lupton Fawcett's managing partner Richard Marshall. “Most of them have City offices that cost them a lot of money and aren't profit centres, but cost centres, taking up huge amounts of management time, financial resources and effort in the hope that they are going to break into the big City market. They're not. The magic circle is never going to let them in and they have a very tight grip on that.
“The European strategy for most of them has not been a roaring success either, perhaps with the exception of DLA, and I think going for the big plc market in general has not been the ideal tactic, partly because of the City firms, but secondly the fully-quoted market has contracted enormously. That's not just a Yorkshire thing, it's a European problem.”
The magic mark for the past four months' corporate performance seems to be £30m. Irwin Mitchell, despite losing several Leeds partners to Cobbetts, completed around £31m of corporate deals in the past four months and Gordons Cranswick completed deals totalling £31.5m, including the £4m-plus purchase by JCT600 of two rival Mercedes dealerships.
But everything is relative, and impressive though these figures might be for the size of the firms in question, they are a long way short of figures for the same period from the big six. As an indication, Walker Morris's total corporate deal value was £250m and for DLA in the past five months it was £600m.
Walker Morris and DLA are widely perceived to be the two firms that have achieved the greatest success in their chosen strategies. Walker Morris is the home-grown firm, able to compete at the top table while not turning its back on its own back yard. Even its rivals recognise this, with one managing partner commenting: “We don't come across dissatisfied Walker Morris clients.” DLA, on the other hand, is the award-laden firm that effortlessly moved from having a Leeds to a national reputation, and now has a considerable international profile.
When publicly focusing on the bigger ticket work, there is a danger of alienating yourself from the local market. Walker Morris seems to have avoided it, but for many of the others it is a real risk and one that the second-tier firms are seeking to exploit.
Michael Shaw, managing partner of Cobbetts, which now has 21 partners in its Leeds office, says: “The difficulty for some of the big firms is that they've become London-centric. They've developed cost structures and a financial architecture that is appropriate to a particular type of practice. It's difficult then for them to realign themselves for a different sector of the market. They're like large ocean liners and they can't suddenly change direction quickly.”
At least that's what the firms below them are hoping.