Diminishing corporate and real estate deals have taken the biggest toll on the West End players, but as Kit Chellel finds, a fighting spirit prevails
They get to eat in the best restaurants, drink in the hippest bars and act for the most glamorous clients. Yet partners at West End firms have taken a hammering in 2008-09. The average profit taken home by a partner at one of the five biggest firms dropped by more than a third last year.
The West End is suffering – legal practitioners in the area have always made most of their cash by advising on large property deals or small company takeovers, and both areas dried up last year.
“These firms are traditionally biased towards property and that sector’s been hit particularly hard. Corporate work’s also fallen away and that’s affected profits,” says Taylor Root recruiter Mike Walter.
And lucrative media, sport or private client practices have not been quite enough to make up the deficit.
A new hope
Despite all this, those in charge of the West End’s biggest firms remain surprisingly upbeat.
Finers Stephens Innocent has seen its turnover shrink by 22.7 per cent during the 2008-09 year, the largest fall in the bottom half of the UK 200 table.
The firm did not disclose its profit when asked by The Lawyer to provide information for this feature – a sure sign of a drop.
But managing partner Paul Millett was circumspect. “We’ve had a difficult year,” he admits, “but I think larger firms out there across the whole piece will have had even more difficult years. West End firms have held their end up reasonably well overall.”
This could be seen as head-in-the-sand optimism, or it could be a signal of the continued recruitment activity in the western half of the city.
Hire and hire
West End firms are scrambling to grow out of their traditional real estate base and there is real competition for talent.
Davenport Lyons – famed as the libel defender of Private Eye, but in many respects a traditional West End corporate and property firm – has made eight lateral hires in the past 12 months alone in areas as diverse as tax and IP. Management board member Michael Hatchwell and his team have ambitious plans to use the recession to become the leading firm in the West End.
Fladgate also took on four new equity partners in 2008-09, including two corporate lawyers and one litigator.
“In the early ’90s we moved away from being largely property and litigation and built up a strong corporate commercial department,” says Fladgate chairman Paul Leese. “We also set ourselves a target of having 25 per cent of work sourced from overseas. It’s about hedging.”
But the sword cuts both ways and last year was also marked by several high-profile departures.
Manches had a reasonable year, with average profit per equity partner (PEP) down by around 10 per cent, but the firm was hit by the exit of litigation stars Clive Zietman and Andrew Shaw to Stewarts Law right at the end of the financial year.
“They were big billers. That’s got to hurt them, if not this year than next,” predicts one City headhunter.
Similarly, Teacher Stern lost one of its best earners when media and sports litigation partner Graham Shear left for Berwin Leighton Paisner (BLP), although that happened well into the current financial year, during August.
“Graham was the figurehead,” reveals a source close to the firm. “He led from the front. It’s going to make people ask questions. But they’re not a litigation-focused firm. Their core business will be fine once the property market comes back.”
One firm has disappeared from the West End altogether since the year-end. Campbell Hooper, which suffered many of the same problems as its rivals, merged with Speechly Bircham in May. At the 2007-08 year-end the firm had turned over £13.9m, but that figure is understood to have fallen considerably during the 2008-09 year.
The firm’s 23 partners are moving out of its Westminster office and into Speechly’s City base.
There is sure to be more consolidation over the next year as the smaller players find it increasingly difficult to survive and larger firms looking to expand in London come knocking.
The reliably profitable Fladgate in particular, which still managed a PEP of £390,000, would be an attractive merger partner. The firm is on the move, but not into the arms of a partner just yet: it is relocating to a new home in Covent Garden.
As long as the spirit of optimism abounds among the managing partners there, the West End will remain a desirable place to be. “If you’re pessimistic by nature you could see it as a drain on resources,” explains Finers’ Millett. “We see our location as an opportunity.”