The year will be remembered for redundancies and consolidation, as firms looked to cut costs and reduce overheads.
Here The Lawyer takes a look back at what has been a transformative year, from the collapse of Cobbetts and the pre-pack sale of Manches to Penningtons to the coming together of SJ Berwin and King & Wood Mallesons.
The year did not start well Redundancies, office closures, the fallout from the closure of Dewey & LeBoeuf and the spectacular collapse of Cobbetts marked the start of 2013. For those wanting the sector to move away from doom and gloom, the wait continued.
While SJ Berwin set the tone for its expansive year with the opening of an office in Luxembourg (3 January 2013), other firms were looking to cut costs by retrenching.
DLA Piper revealed plans to shut its Glasgow office as it moved to offload its defendant insurance groups following a consultation (24 January 2013). At the time DLA said it would transfer 10 partners to its Edinburgh office, where there were also 30 jobs available for fee-earners and staff. The firm had around 75 staff in its Glasgow base.
There would also be cuts to DLA’s insurance teams in Birmingham, Manchester and Sheffield, which the firm planned to sell to two separate entities.
Office closures on the domestic front did not stop DLA investing in growth overseas. The firm opened in South Korea office after getting approval from the country’s Ministry of Justice to practise international law there.
Eversheds also began the year by implementing further redundancies as it strived to adopt a new strategy, an element of which was to bring the UK and Asia groups closer together (7 January 2013).
After winning a second term in October 2012 (9 October 2012) Eversheds chief executive Bryan Hughes set his sights on global growth, telling The Lawyer: “You can have it both ways; you can be collegiate and profitable.” (21 January 2013).
At Eversheds global growth, it seems, could not be achieved without some cost-cutting. The firm put up to 166 positions at risk across the UK and Asia, and announced the closure of its Copenhagen office.
As part of the changes global managing partner Lee Ranson became interim Asia managing partner, replacing Nick Seddon, who left the firm.
Radical management changes may not always be popular, but they are better than facing imminent closure.
The collapse of US firm Dewey & LeBoeuf, which happened in May 2012, (29 May 2012), continued to send ripples across the Atlantic, with details of the financial fallout emerging.
The UK arm was landed with a £36.7m claim from Dewey’s US LLP, with administrators revealing that £40m was being sought by unsecured creditors (9 January 2013). The claim was “in respect of an inter-company position that arose prior to administration”, understood to be related to the UK LLP’s guarantee for its revolving credit facility and the private placement it issued in 2010. The battle continues.
Elsewhere, mounting speculation about the fate of Manchester firm Cobbetts was finally laid to rest when the firm formally appointed KPMG as its administrators (30 January 2013).
The firm, which had 242 lawyers and more than 551 staff, suffered a significant downturn in its trading performance in 2009 due to the economic climate and the drop in corporate and real estate deals (see box). With overdrafts and lending on the rise, the cashflow issue became too much to bear and the firm sought a buyer.
By the time the firm formally went into administration on 6 February DWF had agreed to acquire it in a pre-pack deal worth £3.8m (31 January 2013).
News of Cobbetts’ demise continued to dominate the news cycle as DWF stepped in to sweep up the leftovers a little more than a year after the two firms called off merger talks (31 January 2012). The move marked the start of a prolific year for DWF in which mergers and acquisitions helped catapult it up The Lawyer UK 200 rankings, with growth of 84 per cent, to £188m (6 June 2013).
It was by no means the only firm looking to bulk up and, or change structure in 2013. Howard Kennedy and Finer Stephens Innocent officially came together in February, creating HowardKennedyFsi (4 February 2013).
While those lawyers celebrated there was doom in other corners of the profession. At the bar, former 39 Essex Street barrister Rohan Pershad QC was convicted of tax fraud.
Pershad was found guilty of cheating the public purse after “deliberately” not paying £600,000 in VAT over a period of 12 years. The jury took almost 10 hours to convict him by a majority of 11-1 (11 February 2013). Later in the month Pershad, who only took silk in 2011, was jailed for three and a half years (26 February 2013).
Former Ince & Co partner Nathan ‘Andrew’ Iyer was sentenced in February to four years and eight months after being convicted of forgery and false accounting (7 February 2013). It came a year to the day after Iyer, who had claimed to be a charity hero, had been struck off by the Solicitors’ Disciplinary Tribunal (SDT) after he admitted stealing £3m from the firm (7 February 2012).
“Iyer showed complete disregard for those he defrauded and a disturbing willingness to use the serious matter of terminal illness to try and win an honour, including by faking a letter from an imaginary cancer sufferer,” investigating officer DC Mark Cross of the Metropolitan Police’s Central Fraud Squad said at the time (8 February 2013).
There was better news for legacy Herbert Smith, which opened its first standalone base in Germany a year after it ended its alliances with German firm Gleiss Lutz and Benelux firm Stibbe because the pair voted against a merger (24 November 2011). Gleiss partner Ralf Thaeter planned to join HSF on 1 April to help launch an office in Frankfurt. At the time the base was not expected to open until later in the second quarter of 2013 (13 February 2013).
Pinsents continued to diversify its offering with the launch of a contract lawyer service for clients. The new business, Vario, aimed to provide a hub of freelance lawyers who could be called on to help clients deal with spikes in activity or fill in gaps caused by staff absences (6 February 2013).
For legacy SJ Berwin growth would come from further afield in 2013. In February The Lawyer revealed the firm had sent a delegation of senior figures to Australia to seek a combination with a local firm. At the top of that shopping list was King & Wood Mallesons (20 February 2013).
March was a month of mergers: both mooted and abandoned.
Addleshaw Goddard and Nabarro called off merger talks after early-stage negotiations (6 March 2013) as Graham Stedman replaced Simon Johnston as Addleshaws senior partner at the start of the year (24 October 2012).
The merger between the two top 25 firms would have created a £280m firm, changing the landscape of the Top 20 significantly.
At the same time, Speechly Bircham was romancing Withers, with both firms looking to tie the knot. Together, the firms would have created a £170m private client firm with around 200 partners across the globe. The coupling was heralded as “the world’s biggest private client firm” by one market commentator and was seen as an opportunity for Speechlys to expand internationally, while Withers would benefit from Speechly’s more substantial corporate and real estate practices, but it later fell through as partners voted against the merger in May.
Meanwhile, the public sector was revelling in the joys of spring. South London councils Lambeth and Southwark thought they could save a cool £3m each by creating an alternative business structure (ABS) together (18 March 2013).
And it was not only in-house lawyers looking to diversify using an ABS licence. Schillings, the don of media boutiques, was also granted an ABS licence in March (1 March 2013).
With few growth opportunities on the high street and continuing downward pressure on rates it soon became clear that Cobbetts was not going to be the only casualty of the year.
Experience shows that when a firm goes into administration the consequences can be huge. No sooner had HL Legal bought up the debt recovery business Incaso from the now-defunct Cobbetts than it was issuing a redundancy consultation for those who joined the business (1 March 2013).
If hiring and firing is not your bag, why hire at all? Wannabe solicitors are finding it tougher than ever to get a training contract, let alone a job. With control firmly in employers’ hands, some trainees are left with little option but to take up short-term contracts.
And how much to pay trainee lawyers has been a theme of the year. It is fair to say that the number of available lawyer positions may be in decline, but this has done little to prevent salaries rising hugely. There was uproar when recruiter Edward Gibson was bold enough to suggest that NQ salaries should be capped at £50,000 (20 March 2013). How dare they, The Lawyer readers asked. Well, trainee nurses are only paid £14,200.
That said, there are big bucks to be made in the law, particularly if you are a heavyweight litigator who counts British Sky Broadcasting as a client.
Step forward former Herbert Smith Freehills (HSF) litigation heavyweight Ted Greeno, a stalwart who commanded mega-fees for the firm before quitting for US outfit Quinn Emanuel Urquhart & Sullivan (27 March 2013).
His was the ninth departure from the team (they included financial services regulatory chief Martyn Hopper, who joined Linklaters (3 September 2012). Jason Fox left for Bracewell Giuliani (5 March 2013) and Kevin Lloyd jumped ship to Debevoise & Plimpton (5 December 2012), raising questions about what impact the tie-up with Freehills would have on the firm in the longer term (8 April 2013).
As the 2012/13 financial-year drew to a close April saw the familiar round of promotions by UK firms. But the numbers being made up this year turned out to be smaller than in the past two years, with a drop of 15 per cent among the top 20 UK firms (7 May 2013).
All the magic circle save Freshfields Bruckhaus Deringer announced promotions in April – Allen & Overy (A&O) (11 April 2013), as seems to be traditional, kicking things off, followed by Linklaters (29 April 2013) and Clifford Chance (29 April 2013).
Meanwhile, salaries were under the microscope. Both A&O (23 April 2013) and Slaughter and May (30 April 2013) lifted salary freezes. The former gave trainees a rise for the first time since 2010, while the latter gave all its junior lawyers a pay hike for the first time since 2011. Both firms cited “the market” as the reason for the raises, commenting that they were monitoring what their competitors were doing.
That focus on trainees was reflected at the end of the month in our focus on retention rates among UK firms, as we examined the business imperatives for lawyers in keeping on their young talent (29 April 2013).
Money was also on SJ Berwin’s mind, with the firm finally paying out partner profits that were originally due in February (30 April 2013).
In the in-house world, April saw the announcement of two panel reviews and the results of a further two. In the UK, both Network Rail (19 April 2013) and the NHS (5 April 2013) confirmed shrunken legal panels. Infrastructure giant Amey said it was looking at instituting a panel (29 April 2013), as did Chinese bank ICBC (15 April 2013).
Back among the private practice firms, internationalisation continued – but not always smoothly. Baker & McKenzie sealed a high-profile merger in the UAE with local firm Habib Al Mulla & Co (17 April 2013). HSF made good on its promise to open in Germany (2 April 2013), but ended its Saudi Arabian association (8 April 2013). Also in Germany, Shearman & Sterling said it was consolidating in Frankfurt after a wave of exits (23 April 2013).
But April was not a month of many big lateral hires – although in an unusual move, Ashurst made a splash when it picked up A&O chief financial officer Brian Dunlop (29 April 2013). Dunlop replaced Nigel Morland, who stepped down from Ashurst’s board to work on integrating the firm’s merger with Australia’s Blake Dawson.
April is also the month when in-house counsel from across Europe gather at The Lawyer’s annual strategy summit in Lisbon. Delegates came from across the spectrum of businesses and discussed a range of hot topics affecting the legal market and the business world.
The state of the world economy was covered by keynote speakers, business consultant Stephen Archer and KPMG economics and regulation chairman Bill Robinson, while other sessions looked at the increasingly powerful role in-house lawyers are playing in their companies.
In May DLA Piper harked back to the pre-recession heydays by holding its annual partner meeting on a cruise ship. The firm allegedly paid $3.1m (£2m) for the luxury liner to take partners on a four-night Mediterranean cruise (3 May 2013). This was a little more than six months after the firm put 251 staff at risk of redundancy (13 November 2012).
Partners on board would get to try wine tasting, attempt rock climbing and, most certainly, enjoy a round of miniature golf. It could have been 2008, with echoes of the firm’s meeting aboard a Royal Caribbean cruise liner (31 March 2008).
For the rest, it was another month of austerity.
Berwin Leighton Paisner (BLP), Osborne Clarke, DWF and Wragge & Co all launched redundancy consultations, with BLP’s affecting 58 legal and 44 secretarial staff (14 May 2013), Wragges’ resulting in the voluntary redundancy of 26 staff (14 May 2013) and Osborne Clarke’s affecting 13 senior associates (15 may 2013). The announcement of the latter followed the news that one staff member would be made redundant in the wake of the firm’s move away from outsourcer Integreon (2 May 2013).
Meanwhile, lawyers and support staff in DWF’s Edinburgh and Glasgow offices were put on redundancy notice as part of the firm’s wider restructuring programme (14 May 2013). The restructuring was part of the 2013/14 budgeting process, lawyers and staff were told, and came amid a wider strategic review of commercial services and predicted workflows.
Merger mania also continued. Australia-listed Slater & Gordon unveiled plans to merge with Simpson Millar, Goodmans Law and the personal injury practice of Taylor Vinters (7 May 2013). On the same day defendant insurance firm Plexus Law, a subsidiary of Parabis, announced it would merge with Greenwoods (7 May 2013).
Other firms sought to relieve budget pressures by pulling poor performers down the lockstep. Ashurst moved six partners down from its so-called ’super-plateau’ – the first time it had removed members from the 65-point level since it was introduced in 2007 (7 May 2013).
While Ashurst deliberated over how to financially integrate with Australian firm Blake Dawson, legacy Herbert Smith was also having to deal with its own remuneration structure to bring it into line with Freehills.
Withers, meanwhile, put the brakes on its romance with Speechly Bircham, calling off merger talks.
Those in need of light relief wondered what the hell Coleen Rooney, wife of Manchester United star Wayne, was doing at Old Trafford holding a Linklaters umbrella. (13 May 2013). It turned out to be the ultimate unplanned PR stunt as the firm said she must have got it from a brand ambassador. What next, Miley Cyrus brandishing a Dundas & Wilson foam finger?
Back to those poor law students. For many, the prospect of going to law school seems a luxury only the rich can afford. But when £10,000-a-term Westminster School attempted to auction off a mini-pupillage for more than £700 it found itself in hot water with the Bar Standards Board (