Bevan Brittan’s new managing partner began work on 1 May, taking over a firm in a much stronger position than in 2008. While Duncan Weir is keen to move on and face up to future challenges, he will ensure his recent experience in helping turn the firm around will not be wasted.
Bevan Brittan wasn’t ready to participate in this feature initially. When we asked to speak to outgoing chief executive Andrew Manning and new managing partner Duncan Weir for our April issue, we were asked to hold off for a few weeks.
The firm was only ‘part way’ through deciding its new management structure, including electing a new senior partner and ‘discussing the next phase of strategy and organisational priorities over the next few years’.
While that may be so, the time to write about this firm is now. Having helped steer Bevan Brittan away from disaster and staying in a management role at the firm longer than he anticipated, Manning is off seeking fresh challenges at Harvard, handing over the reins to construction partner Weir. After relying on a non-lawyer chief executive to show the commercial savvy to help turn fortunes around, Bevan Brittan has turned back to its fee-earning ranks for a new leader.
In preliminary discussions for this article, Bevan Brittan’s spin doctors referred to how they saw this feature as a ‘very forward-looking piece’. It’s unsurprising really, given that the firm was in the mire when former chief executive Stuart Whitfield was voted out of his position in 2008, paving the way for Manning and Weir to complete the transformation.
The time to write about this firm is now. After relying on a non-lawyer chief executive to show the commercial savvy to help turn fortunes around, Bevan Brittan has turned back to its fee-earning ranks for a new leader.
Weir worked alongside Manning as operations partner during the firm’s restructuring between 2008 and 2012, but Manning was viewed externally as the architect of the changes that put Bevan Brittan in a much stronger position today. This culminated in Manning being shortlisted for the Management Partner of the Year gong at this year’s Legal Business Awards.
In Bevan Brittan’s submission, the firm talks about a strategic review ‘designed by Andrew Manning with board and senior management team support, which was amongst the best designed reviews seen in the industry’.
The firm also included a quote from Michael Roch, chief executive at KermaPartners, a management consultancy that advised the firm. He said: ‘During his tenure at Bevan Brittan, Andrew has done a stellar job in gaining the trust of the partnership by first turning around the firm’s financials. He then focused on the necessary and, once that was done, focused on the strategic. He has provided vision and has implemented his promises. Andrew has really delivered for the partners of Bevan Brittan and is one of a handful of non-lawyer chief executives in the UK to have done so in a major law firm.’
After years of pain, Weir now has Bevan Brittan in a strong position to move forward. But, as any historian will tell you, the past shapes the future. So while Bevan Brittan may not want to dwell on events of five years ago, a recap might be useful.
Past mistakes
Manning took charge in 2008, after previous chief executive Whitfield was voted off the executive team following a disastrous couple of years. The firm was a mess with poor and failing strategic focus, falling profitability, significantly increased debt, high-profile partner departures and a general lack of confidence in its leadership. According to the firm: ‘performance against critical key performance indicators (KPIs) had deteriorated significantly with PEP falling to £55k’.
The fact that PEP was never recorded anywhere near as low as £55,000 in the legal press showed how things were worse than expected. In the LB100, the nadir for Bevan Brittan was the 2007/08 financial year. The firm’s profit margin was down to just 15%, six percentage points lower than the firm’s five-year average, and PEP was down 13% to £168,000, after already falling 13% the previous year where the firm recorded a 22% fall in net income.
The problems really began with over-expansion in 2006/07. The mismatch in cost base against revenue then showed up in the disastrous results for 2007/08.
‘Things weren’t in Halliwells territory but we had over-expanded beyond our revenue,’ says Weir. The firm had taken an ambitious path in investing in the future by wanting to become a full-service firm and so the tensions were there: big support staff numbers, over-investment in IT and property. However, the revenue it needed to justify all of that wasn’t quite there.
‘It’s the last bit of revenue that makes you profit,’ says Weir. ‘We actually weren’t that far away – these figures always look really dramatic – it’s true that in 2007/08 we had £55,000 PEP. Actually you don’t need much to go wrong to drop down to £55,000 PEP if your norm is £200,000. I know a number of firms have realised that since, but we were the first to find that out. It was self-inflicted and the reality was that extra couple of million on the top line wasn’t there and we had a shortfall.’
It became clear that a change was needed at the top and the partners decided the buck stopped with Whitfield, voting him out.
Not only was profit taking a hammering, the firm had taken on debt of around £10m to fund partner drawings. By November 2007, Whitfield had pulled in Manning as finance director and Weir as operations partner to help turn the tide. Weir’s remit was to look at the legal service delivery: everything from recruitment strategy, managing the lawyer cost base, looking at leverage and tackling profit per lawyer.
However, with the 2007/08 financial year drawing to a close, it became clear that a change was needed at the top and the partners decided the buck stopped with Whitfield, voting him out. After that, Weir, among others, felt the firm needed a non-lawyer chief executive to take it forward.
‘I think it would be fair to say that between autumn 2007 and August 2008 when Andrew became chief executive, it went from Stuart leading as chief executive with Andrew and me, to a position where we needed a change,’ says Weir.
Weir says he was the biggest advocate for putting Manning in place because he felt the firm needed someone who knew more about corporates and turning around entities that were in distress than the fee-earners. He also believed the firm would benefit tremendously from having a non-lawyer in charge from a ‘soft skills’ perspective.
He says: ‘I think the partners generally, and I was one of them, were rattled that collectively – and you can name individuals but in reality it was a firm run by partners – we had got the firm into a difficult place. I felt having a non-lawyer manager would take away some of the tension. Having someone who wasn’t a member and who could say “you really need to do this from a business perspective however painful it may be for you as lawyers” was really crucial. In retrospect, it seems to be absolutely the right thing to have done but, at the time, it was a really radical step.’
Weir would remain as operations partner – ‘effectively the lawyer input when you’ve got a non-lawyer chief executive’.
Trimming the fat
Objective number one for the new team was cost-cutting. Bevan Brittan took the decision that it would need to instigate a redundancy round and became the first firm to do so in 2008, while Whitfield was still in charge, losing 30 staff. It would have to make a further two redundancy rounds in the two subsequent years, losing 36 staff in 2009 and 25 in 2010. Weir says most of 2008 was taken up with cost-cutting, which was the toughest spell for the new management team.
The other priority was reducing the firm’s £10m debt pile, which meant equity partners would have to experience some pain too, as the debt was funding some of their drawings. Weir and Manning had to manage partners’ expectations that the PEP was suddenly going to rocket to something unrealistic. ‘We had to tell them that PEP would have a two in front of it for a couple of years and they should be grateful for that given the £55,000 before, but also some of this was being used to offset against the loans,’ he says.
Given the problems that the firm had been experiencing, it wasn’t too much of a fight. However, some partners did vote with their feet and leave. There were a number of additional changes, which included reducing the equity (see box, ‘Paring back: Bevan Brittan equity partner numbers 2007-11, above) and ensuring that the equity spread was fairly narrow, with no-one earning mega bucks.
But a major factor in prompting some partners to leave was a strategic overhaul of the firm, led by Manning and devised in conjunction with Weir and the rest of the board. It was time to look at which practice areas were working and which weren’t and make some tough decisions.
Back to knitting
Weir describes the problems experienced by Bevan Brittan in 2007 and 2008 as the result of a double-whammy of ‘the firm itself catching a cold and then the market catching a cold too’. Certainly some of the firm’s problems were self-inflicted but it wasn’t alone in aggressive over-expansion in the boom years.
The cost-cutting had dealt with some of the most pressing issues. In the first year, the priority was to get the firm’s financials back on track to somewhere half decent. According to the firm, in 2008/09 PEP went from £55,000 to £203,000, which was the result of cost-cutting rather than strategic plays. But by the end of 2008, Weir and Manning realised they needed to deal with the root of the problem – cost per lawyer in unprofitable practice areas.
‘It was at the end of that year that we then looked at what strategically needed to be done as opposed to the need to deal immediately with the excess costs and we looked at the areas where we were most unprofitable,’ recalls Weir. ‘Andrew led on that and worked with me and other key fellow partners to focus on what we did well and what made us money, as opposed to the things that were nice to have and maybe even sometimes a bit more sexy but actually weren’t playing to our strengths.’
‘We tried to be in too many practice areas to be blunt,’ he adds.
The key areas to look at were mainstream corporate and finance work. Bevan Brittan, like so many others, had unrealistically imagined that it could compete with leading corporate firms both locally and nationally for big-ticket mandates.
At the core of the strategic review was redefining the firm as a public services specialist
Having corporate and banking as standalone areas, as opposed to a service support function, was symptomatic of the firm’s over-ambition. In Bristol, for example, Bevan Brittan was always going to struggle to compete for mainstream corporate and finance work against the likes of Burges Salmon and Osborne Clarke, let alone DLA Piper or Eversheds nationally. Taking work from the big City firms was even more of a pipe dream.
‘The reality was we weren’t able to compete and yet we were resourcing up to try and do that,’ says Weir. ‘I think if you look back at it there is a place for corporate and finance capability but it’s in support of what we do in terms of commercial, regulatory and private finance initiatives.’
The first stage of the strategic overhaul was a root-and-branch review of all of the firm’s service lines, looking at where Bevan Brittan was making money and where it had established expertise. It came as no surprise that this typically occured in the same areas. So, the strategy fell to scrutinising the practices on the periphery of that core and deciding whether the firm wanted to continue with them. This entailed not only an exit from sectors outside the strategy, but an equally necessary managed reduction in partners whose work fell outside of the strategy. Aside from mainstream corporate and finance, other areas where the firm decided to no longer focus included telecoms and leisure sector work. Perhaps as a result, the firm was dropped from Orange’s panel in 2009.
At the core of the strategic review was redefining the firm as a public services specialist. Bevan Brittan has enjoyed a longstanding reputation for advising both public sector and private sector clients on legal work related to the provision of public services, from large-scale private finance initiative projects to judicial review cases for NHS trusts. Around 40% of the firm’s revenue comes from NHS trusts, while another 30% comes from local government and private sector entities that provide services to the public sector. This decision was in recognition that diversifying into mainstream areas hadn’t paid off.
Weir denies that this plan was a simple case of ‘going back to your knitting’, and says that it was the result of re-evaluating the firm’s key strengths and realising that the strongest and most profitable areas were still the most longstanding practices. ‘I wouldn’t say doing housing or charity work is going back to our roots,’ he says. ‘I’m not saying it was easy, but it was a process that was made easier by being brave and looking at what you do well and what makes you money.’
However, this strategic focus on public services afforded no room for any sentimentality, so even service lines that were ‘on message’ in terms of strategy were jettisoned if they failed to contribute to the top line.
‘There was work we did that made sense in terms of acting for a public sector body but it was actually making us a loss,’ says Weir. ‘Then it was a question of whether we could turn around that loss by better management or better use of people at different levels, or decide that for a firm like ours, even after the cost-cutting, this was never going to make sense.’
One example of this was a specific strand of work for the Solicitors Regulation Authority (SRA). The firm has a pre-eminent legal regulatory practice headed up by partner Iain Miller, which was shortlisted for the Regulatory Team of the Year at the Legal Business Awards this year for his work advising the SRA on the administration of Halliwells. The firm worked hand in hand with the SRA, The Royal Bank of Scotland and accountants BDO, as well as the other firms that acquired parts of the now defunct practice. However, Weir says the firm had also handled a lot of interventions work for the Law Society and the SRA in the past, which was not profitable. That work went to Michelmores, which with its pricing levels, was able to take it on. Weir adds that the firm still advises on the complex end of SRA intervention work. He says that his experience suggests clients have been impressed by firms that say no to work that they cannot do profitably, just as they are by firms that do not pitch for work they have no chance of winning.
This strategy has not just been about paring back on service lines but also bulking up in areas that complement Bevan Brittan’s client focus. The most recent example of this was the hire of Elizabeth Cooper from Nabarro in February to lead the firm’s national procurement team in London. Before her arrival, the firm didn’t have a full-time procurement partner in an area that has massive potential for its business.
The strategic focus on public services afforded no room for any sentimentality, so even service lines that were ‘on message’ in terms of strategy were jettisoned if they failed to contribute to the top line.
‘The fact that Bevan Brittan can acquire people like Elizabeth Cooper speaks volumes about its ability to attract talented lawyers and its dedication to public services work,’ says Jannica Backwell, a Bristol-based recruitment consultant for Chadwick Nott.
Weir believes that public services lawyers in many of the larger firms are ‘feeling unloved’ right now, which presents a host of opportunities for a firm that has nailed its colours firmly to that mast.
One reason that fee-earners in this area may feel unloved is because firms are nervous about dwindling revenues from public services work. Budgets are being cut; big projects are being scrapped and legal panels at local authorities are consolidating, reducing the number of panels and demanding value for every £1 of legal spend. This all adds up to a very volatile market. Indeed, Bevan Brittan has undoubtedly been affected by the current government’s move to scrap the Building Schools for the Future programme. So is putting all your eggs in the public services basket a risky strategy?
Weir argues that the work has never really gone away, it has just been repackaged. While the significant, three-year private finance initiative projects have disappeared, there is a higher volume of lower value work around.
It’s worth noting that Bevan Brittan is a public services-focused firm, not just a public sector firm. There’s an important distinction. When the public sector needs to reduce numbers, restructure, or deal with budget cuts, one way they tackle the issue is to outsource to the private sector. It is at this level where Weir sees opportunities. He points out that Bevan Brittan is one of only three firms, along with Addleshaw Goddard and Pinsent Masons, on the Costain panel and is sole legal services provider to Wates for Academy work in the education field.
The firm has had no shortage of big-ticket work in recent years. In this year’s Legal Business Awards, the firm was shortlisted for Dispute Resolution Team of the Year for its work representing a group of 97 local authorities plus leading universities in a two-year, complex multi-jurisdictional battle following the Icelandic banking crisis. The team’s work ensured clients were paid in priority to other creditors, recovering over £680m.
One key piece of work recently sums up Bevan Brittan’s market position perfectly. The firm is sole adviser to Birmingham City Council in procuring a delivery partner for
itself and 39 other contracting authorities (including other local authorities, registered providers, fire authorities and police authorities in the West Midlands region) in
what is the UK’s first procurement by a local authority under the government’s Green Deal initiative and the Energy Act 2011. Described as the largest refurbishment of housing in the UK since the end of the second world war, the project has a potential capital value of £1.55bn.
This is a brand new area of work for the firm for an existing client, and because registered providers are involved, it also opens up private sector opportunities. ‘The type of private sector clients that we didn’t get to see are now ringing us – that’s a sea change,’ says Weir.
Delivering results
There are clear signs that the strategic focus is paying off, particularly on the bottom line. According to the firm, in 2008/09 PEP went from £55,000 to £203,000, largely the result of cost-cutting rather than strategy. But Weir attributes the 2009/10 PEP increase to £288,000 to not only continued cost control and another redundancy round, but also the beginning signs of delivering the strategic focus. The percentage of revenue achieved from public services areas has increased from 65% in 2009 to 90% in 2011.
‘The numbers haven’t been produced by magic,’ says Weir. ‘There is work out there, it’s just that we’re operating in a climate, both public and private, where people are cautious.’
While Bevan Brittan ‘will never be top of the PEP charts’ its business strategy is providing sustainable profit. Since Weir and Manning took control, the firm generated its highest-ever operating profits (above £8m a year) and increased the profit margin to 17%. However, revenues were down 9% last year to £34m, which Weir attributes to the firm losing work that did not fit with the revised strategy. 2011/12 numbers are not ready yet but Weir is expecting revenue growth for the first time in four years.
Sustainable strategy
At press time, Bevan Brittan was in the process of voting in a new senior partner as the departure of Manning to Harvard sees the firm dispense with the chief executive role and return to the traditional managing/senior partner roles. Weir says he doesn’t see the need for a non-lawyer chief executive at the firm now as there’s no-one appropriate to replace Manning. Weir has a background outside the law, coming late to the profession and qualifying at Richards Butler in 1993 and describes himself as ‘the most commercial person in the partnership’. Having a non-lawyer chief executive has been critical to Bevan Brittan’s transformation but Weir has strong views about a lawyer occupying that role.
‘There isn’t a huge market of non-lawyer chief executives out there,’ he says. ‘In terms of having a lawyer managing, I’m eminently qualified so why would we go looking? Also, it’s fine for a non-lawyer being a chief executive but I think it’s a different story for a member of the LLP. If you’re sharing profits and therefore buying into the risk and reward of the membership, the chief executive role almost has you sitting above the partnership. It’s trite, but I think the managing partner role is closer to the “first among equals” idea.’
‘What’s nice is five years ago we would have needed to do a merger out of necessity. Now we can choose who and on what terms.’ – Duncan Weir, Bevan Brittan
In his first term as managing partner, Weir says the priority is reaffirming the existing strategy and maybe refining it slightly in some areas. This includes pushing harder on cross-selling, leveraging off the firm’s regulatory expertise to win more work advising its housing sector clients on governance and trying to widen the number of private sector companies the firm works for as they go into more green projects.
The main challenge is addressing pricing in some areas of the firm where the expectation is for ‘an absolute Rolls-Royce service’ for a fixed fee or a discounted hourly rate. Weir cites a recent example where the firm lost out on a tender to a firm for ‘rates I couldn’t do in my garden shed. If you’re going to buy revenue like that then good luck, but we’ve worked out that you can’t do that’.
Lowballing is one route the firm won’t go down as it knows that buying revenue equals growth-for-growth’s sake, folly in Weir’s eyes. This is why profitable growth is the only option for Bevan Brittan, either organically or bolting on strategically important teams. It is for those reasons that a merger is unlikely: Bevan Brittan doesn’t feel the pressure to do one anymore.
‘What’s nice is five years ago we would have needed to do a merger out of necessity. Now we can choose who and on what terms,’ he says. ‘I think that is one of the biggest most significant changes to five years ago. If Andrew and I hadn’t done what we did then, the only alternative would have been to merge. It’s wonderful to be away from that scenario.’
Bevan Brittan, and in particular Manning and Weir, deserve credit for taking a firm in disarray and not only tightening up the finances but also executing a long-term business plan. It is now a firm that has sustainable profit levels and no real debt. It has a clearly defined brand and is targeting a specific client base with service lines suited to those public sector clients. How many firms in the mid-market can lay claim to being in that position?
‘I think it is set apart from the rest of the market in its focus on public services work, which is a subtle but hugely important distinction from public sector work,’ says Chadwick Nott’s Backwell. ‘It is focused on private sector work feeding into the public sector and I envisage that is an area that is going to continue to be very busy.’
‘I don’t want to say we’re unique but I’m not aware of any other firm that is so focused on this market,’ says Weir. ‘We are one of the few that have such a clearly defined strategy.’
Somehow, it seems unlikely that Bevan Brittan will repeat the mistakes of the past. LB