Stricken Martineaus stakes profit recovery on management rejig

As partners vote with their feet, Husnara Begum asks how the new leadership will turn the firm around

Last week, Birmingham’s Martineau Johnson suffered the loss of head of private client Matthew Hansell to Mills & Reeve. As first revealed on www.thelawyer. com (30 October), this was the second head of department departure this year, following the firm’s highly- rated head of education Nicola Hart to Pinsents in May. London-based education partner Rachel Woolf also left the firm in the summer.

These departures are a huge blow to Martineaus, which, in its recently agreed business plan for 2003 to 2006, identified education and private client as two of the targeted key areas of growth – alongside energy and venture capital trusts.

Key clients of Hart, who is still on gardening leave, include Aberystwyth, Aston, TurnoverBirmingham, Cardiff and Coventry universities. How-ever, Martineaus did bolster its expertise in the higher education field, with the hire in May of DLA projects partner Catherine Burke.

Preventing any further losses and stopping the alarming decline in profitability at the firm in the past two years – last year average profits per partner fell by 21 per cent from Profits per partner£170,000 to £135,000, according to The Lawyer 100 – is the difficult challenge facing Martineaus’ new management team, elected just two weeks ago.

Tellingly, after 15 years as managing partner, David Gwyther will now return to fee-earning, having lost out in his bid to become the new senior partner. That election was won by private client partner Hugh Carslake, with incumbent William Barker becoming managing partner.

Carslake is adamant that, despite the departures and plummeting profits, the firm is on the right track.

Martineaus has been able to maintain a steady, if unspectacular, growth in turnover, up 3 per cent to £18.5m in the last financial year. Managing partner elect Barker admits that his new role is “going to be a challenge” and recognises that the burden of boosting the firm’s profitability rests on his shoulders. “The key point is that the level of profitability we achieved last year is not acceptable to the partners and I realise that if it doesn’t improve, partners will leave,” he says.

Formerly Martineaus’ youngest-ever senior partner, Barker recognises the need to rationalise and points to the cost-cutting measures taken by the firm.

Last month, Martineaus made five secretarial staff redundant, while in June this year, the firm shocked the legal market after The Lawyer revealed that it had made trainees redundant by group email (The Lawyer, 30 June). In the previous month, Martineaus deferred three trainees who were due to join the firm in September, as well as half of its 2004 starters.

Barker does not think that any further fee-earner redundancies will be necessary. “Right now we’ve got work coming through the door,” he says. Barker also rejects any suggestion that the firm’s financial woes have been worsened by the investment in its new prestigious headquarters. The rent at One Colmore Row is at the very top end of the Birmingham property market, but he argues that the cost of the redevelopment will be offset by the landlord’s inducement fee (see story below).

Carslake is upbeat about the firm’s future prospects. “My appointment does not herald any change in direction for the firm. We’re already on the right road to build on the platform we’ve established,” he argues.

Little was known of Hugh Carslake until he was elected senior partner. The 57-year-old private client lawyer has been a partner at Martineau Johnson since 1974 (then the firm was known as Ryland Martineau). Carslake also headed the firm’s private client department between 1990 and 2000. Commenting on his appointment Carslake said: “I would certainly not pretend to be as high profile as some of the other lawyers in the Birmingham legal market. I’m realistic.” Outside of law, Carslake is Registrar of the Diocese of Birmingham and chairman of the Barber Institute of Fine Art.