Having invested £17m on expansion and added £44.9m to the firm’s top line in doing so, DWF managing partner Andrew Leaitherland is now focused on recovering the firm’s profitability through successful integration.
At the moment DWF’s profit margin is barely above the 11 per cent it was in 2008, when it was turning over £66m. Since then the firm has grown almost three-fold in revenue and has 169 more partners, but after a year of mergers in 2012/13, the margin dropped from 14.22 to just 11.05 per cent.
“The big push was for the top 20,” Leaitherland says, unfazed by the unimpressive metrics. “We don’t need to change that vision at this point because unless we do something very radical we’re unlikely to get into the top 10.”
However, he admits that a push on the firm’s profitability is important and the strategy remains as it was in its last iteration, to achieve a 22 per cent profit margin.
The LLP accounts released in January confirmed DWF is still just outside of the UK top 20, but with audited revenue of £142.7m, a 46 per cent increase from 2011/12’s £97.8m, the growth curve is undeniably impressive.
DWF’s five latest mergers added almost £45m to the top line, increased headcount by 60 per cent and grew audited net profit by 61 per cent from £23.5m to £38.1m. They were also relatively inexpensive.
According to the firm’s latest LLP filing, Biggart Baillie (7 June 2013), Buller Jeffries (2 April 2012), Claimbase and Fishburns (18 January 2013) cost a total of £12.9m, equal to the net assets of the acquisitions. While the pre-pack acquisition of Cobbetts (6 February 2013) cost it £3.9m, including £1.8m in work in progress (WIP).
“I think momentum builds momentum,” Leaitherland says when asked how the firm has maintained the stamina to grow at such a rapid rate. That momentum may be yet to reach the bottom line but the firm appears to be in a stable financial position from which to undertake the notoriously expensive process of post-merger integration, having kept debt down to just 9.43 per cent of turnover.
Together the five deals introduced partner capital of £13.1m, giving the firm total members’ interest of £40.9m at the end of the financial year.The firm restructured its debt during the 2012/13 financial year, reducing its £980,000 overdraft and instead adding £5.6m to the firm’s committed bank funding, taking borrowings to £16.3m in total, up from £10.7m in 2011/12.
While Leaitherland is adamant that turning his back on the regions in the way other ambitious national firms have done will not be a feature of DWF’s evolution, the focus has firmly shifted to London this year.
“At the moment we recover at significantly less than our competitors, which in some ways is good because we’re still profitable but, equally, it could signal that we lack a little confidence,” he admits.
What better way to demonstrate confidence than to move into one of London’s newest and most iconic skyscrapers. Is Leaitherland worried about squaring the move into the Walkie Talkie building with regional partners?
“It’s an asset for the whole firm, it says we’re serious about London,” he says, admitting, “it’s a brand statement building”.
DWF is all about creating brand consistent, flexible and efficient working spaces. The firm’s Manchester office features an airport lounge-style client suite for meetings, open plan offices and hot desks. Primary colours and clean lines reflect the firm’s branding, with just a few life-size pictures of celebrities giving away that the building’s former occupier was Manchester Evening News.
Leaitherland says the office in the Walkie Talkie will take what has been done in Manchester a step further, providing more meeting room space and better flexible working facilities. There’s no doubt that taking 43,000ft at 20 Fenchurch Street is a very deliberate statement of intent.
There’s a little less clarity over how the firm’s international aspirations fit into the picture. Leaitherland says its clearly stated aim is to target UK plcs and take the lion’s share of the UK market for those clients.
As such, there are no plans for the firm to open offices in other jurisdictions but head of London corporate Jay Birch believes it would be a mistake to rely entirely on the UK market. To mitigate heavy dependence on the UK economy, Birch is making proactive moves to connect with clients with UK-based work but with foreign ownership and investment.
Birch is also at the helm of the London recruitment drive. The firm has already brought eight partners into London this year, five from Lawrence Graham, and another three from Wragge & Co, Stephenson Harwood and TLT.
Despite the commonly held assumption that you can’t attract quality London laterals without offering equity, Leaitherland says the abundance of talent in London makes it an easy market to recruit for.
“Would a magic circle equity partner fit with DWF?” he asks, bluntly adding, “probably not, because we have a different offering, but buzzy entrepreneurial people really like it here.”
He seems a little baffled by the assertion that the firm’s equity is tightly held.
“We have 67 equity partners, is that a tight equity?” he says. Which at just under 23 per cent of the partnership, it is, compared to a traditional law firm.
That aside, he says being able to pay a high fixed-share has been enough to attract the right people, adding candidly: “What pisses people off is laterals coming in on equity and then not delivering.”