How Masons doubled its IT turnover with a perfect match

Masons’ IT group brought in a revenue of £9.5m in its last year before the merger with Pinsents. This year Pinsent Masons’ outsourcing, technology and communications (OTC) budget is £17.6m and the group believes it is well on track to smash £20m.

Considering that Pinsents’ commercial group brought only £2m-£2.5m to the party, that is quite some growth. Consider also that Pinsent Masons’ only other national rival in the technology sector is DLA Piper Rudnick Gray Cary, which has a turnover somewhere between £10m and £15m – there is a story worth telling.

Pinsent Masons’ revenue figure includes IT litigation in OTC, while DLA Piper’s does not, but the point is that DLA Piper is not quite as dominant as some would imagine.

“Masons had hit a glass ceiling,” says Pinsent Masons OTC head Clive Seddon. Prior to the merger the team knew that if it was going to grow it needed something drastic. With no synergy with the construction side of the business, the IT group seemed ripe for US raiders looking to bolt on a successful outsourcing practice.

“We were a niche practice,” says Seddon. “And in IT, being a niche practice was becoming a lot more difficult. With panel appointments and general counsels leveraging their spending power with panel firms, it was difficult.”

No sooner had Seddon raised the issue with the board than the prospect of a merger with Pinsents loomed. Masons’ IT group was seeking greater expertise in supportive practices such as procurement, employment, pensions and tax. Pinsents provided this and a credible corporate practice to boot.

Pinsents provided Masons’ IT group with a corporate client base and they have used it well. The firm has just completed a business process outsourcing deal for HSBC, which Seddon believes “none of the Masons’ guys would have got anywhere near”. The firm fielded a pitch team that combined talent from both firms. Legacy Masons’ outsourcing partner Angela Cha and legacy Pinsents commercial partner Simon Pigden led the team and brought in data specialists Louise Townsend and Rosemary Jay, formerly at Pinsents, for the deal itself. The latter two are the perfect example of the kind of specialists that Masons thought it lacked for large outsourcing deals.

This has not always been the case. One client, who had used pre-merger Masons, says: “Broadly speaking we’re still using the people we knew from Masons… we’re gradually getting to know the Pinsents people, but we’ve been trying to keep more and more work in-house.”

This, of course, was one of Seddon’s original problems, but the public sector team has experienced none of these issues. David Isaac’s team recently helped the Department of Work and Pensions (DWP) renegotiate its failed contract with EDS. While Masons had a strong employment team, the pensions and VAT expertise provided by Pinsents has been extremely valuable.

The public sector team has been a roaring success over the past 18 months. In addition to the DWP project, the team has closed deals for the Criminal Records Bureau and the Criminal Justice IT system. It has recently won a tender to provide the legal advice on the e-borders project, a Home Office programme that records and checks details of people entering and leaving the country. Part of the Government’s so-called War on Terror, the project will integrate with the ID cards project. “If you haven’t been involved in the public sector in the last three years, you haven’t been anywhere in IT,” says Seddon.

DLA Piper and Field Fisher Waterhouse are Pinsent Masons’ biggest rivals in this space, but even Allen & Overy has ventured into an area that for years was considered unprofitable and unsexy. The National Programme for IT in the NHS changed all that when it became the largest civil IT project yet.

Prior to that, Bird & Bird had a stranglehold on public sector IT work through its close connections with the Office of Government Commerce, the organisation that tries to make government procurement efficient.

In December 2003, that all changed with the creation of the Government’s super-panel known as L-Cat. Many did not take it seriously. Masons and Field Fisher did.

“L-Cat was a watershed in that it destroyed Bird & Bird’s grip on public sector technology law,” says Field Fisher IT partner Michael Chissick.

Chissick now considers Pinsent Masons to be his biggest competitor. “I normally see them on the way in or the way out of most tenders,” says Chissick.

Both firms have targeted the public sector as they have watched the private sector’s in-house departments bulk up. Many of the banks and financial institutions even have technology lawyers now. Certainly outsourcing providers, such as IBM, EDS and Pinsent Masons client Fujitsu, have tried to keep the majority of their transactions work in-house.

“The Government has no lawyers who deal with technology procurement. They’re fantastic at drafting legislation and I couldn’t touch them on planning, but they have no technology expertise. The Government is the dream client,” says Chissick.

Of course, rates are not as high as in the private sector, but because of the need to outsource all the legal work, law firms record more hours as they are involved in the project from beginning to end.

One advantage that DLA Piper and Pinsent Masons have over Field Fisher is their regional offices, from which they can offer discounted rates. Chissick claims that “rates are far more homogenised across the UK”, but DLA’s Leeds office was essential for the NHS project, and outside London Pinsent Masons has OTC groups in Birmingham, Glas-gow, Leeds and Manchester. These offices do have lower overheads.

The OTC group has been the biggest beneficiary of the Pinsent Masons merger, but it’s not all blue skies. “Profitability is a big issue for us,” admits Seddon.

Last year, average profit per equity partner slumped to just £234,000. Barring Cobbetts and Hammonds, that is the lowest in The Lawyer’s top 50 firms.

Seddon concludes: “The results were not very good and it’s frustrating when we’re doing this well. There were several million pounds worth of merger costs and hopefully this year will have been the best we’ve ever had. It certainly will be the best that I, as a former Masons partner, have had.”