The absence of this peer group’s two leading performers, Mills & Reeve and Gateley, has seen averages for the Central region take on a distinctly ‘average’ hue. The region is now officially the worst performing peer group in the LB100 in revenue terms, a wooden spoon that it inherited last year from the South group and has secured once more in 2011.
The simple fact is that the majority of the firms that have Major UK status dominate this region of the market. Strip them away and what’s left behind are firms that are surviving on scraps.
Browne Jacobson heads the revamped peer group with revenues of £35.2m – a mere £28m behind Gateley. However, its revenues are up 6% – the LB100 average – without the need for a merger or the acquisition of a large team. ‘We are delighted to have broken through the £35m barrier, posting our best ever turnover figures in a market which remains very competitive,’ says managing partner Iain Blatherwick.
Second-placed Morgan Cole has seen a dip in both turnover and net income this year – the one partner at the top of equity earns just £190,000.
Few firms in this over-saturated market have had reason to be very optimistic and this year is no exception – Morgan Cole is only budgeting for a meagre 1.6% increase in turnover and net income going into 2012.
However, there have been pockets of strong performance among Central region firms. Ipswich-based Birketts enters the LB100 for the first time, via the most popular route this year of growing revenue – a merger. Its tie-up a year ago with Chelmsford-based Wollastons created a 50-partner firm with combined revenues of £23.8m – placing the firm comfortably inside the top 100. As a result, revenues have jumped 35% from 2009/10 and the firm has nearly doubled its net income.
Another firm with a healthy increase in turnover, thanks to not one merger but two, is Birmingham-based Shakespeare Putsman – now Shakespeares.
An astonishing 71% leap in turnover to £28.4m has come about through its 2010 takeovers of Stratford-based Needham & James and Nottingham’s Berryman. Shakespeares’ numbers, however, look a little odd as the massive increase in turnover and headcount (equity numbers are up by a third since the start of the last financial year) has yet to filter through to profit growth, skewing net income and PEP negatively.
‘The Midlands economy and the legal sector as a whole both remain very difficult markets in which to operate,’ says chief executive Paul Wilson. ‘We are very pleased that in four of our five main business areas we have seen a small growth. The Midlands property market remains very flat compared to the highs of three years ago – we continue to have a very successful, if somewhat smaller, business in this sector. Total revenues have met our expectations in a year of significant change and growth.’
He adds: ‘Our decision to amalgamate Shakespeare Putsman, Berryman and Needham & James was based on our firm view that the economy will stay flat for the next three years, clients will become more demanding, and that we will therefore need to invest heavily in our people, technology and brand to serve their needs.’
Despite pulling off three mergers since 2007, Wilson says that the firm will not rest on its laurels, with the express aim of bringing more firms under the Shakespeares brand to become a dominant force in the Midlands.
Martineau, which posted a small drop in revenues against a 33% leap in profit per lawyer, falls out of the LB100 this year. However, it plans to follow this year’s most popular fashion trend after announcing in May it was in merger talks with 75 fee-earner London firm Sprecher Grier Halberstam.
Adding the £10m City firm is expected to increase Martineau’s turnover by a third, while still keeping Birmingham as its largest office. The intention behind the move is to build a greater platform in London while remaining a Birmingham firm. Martineau’s London outpost is seriously underweight with just 15 people staffing it. The merger, if it goes through, should propel the firm comfortably back into the LB100.
The firm is generally holding up better than most in the Central peer group as it has not been as exposed to the turbulent real estate market as say, Geldards (Martineau has nine partners in real estate, while Geldards has 15). Some of its key practice areas, including energy and private client are performing well, while private equity is beginning to show faint signs of recovery, which augurs well for the firm.
Geldards has managed to staunch the wound that saw the firm fall from £25m in turnover in 2008 to £21m last year. Keeping turnover static this year represents a considerable achievement for a firm that has suffered from heavy exposure to the real estate market – around a third of its business comes from commercial property – but it doesn’t hide the fact that the firm’s five-year compound annual growth rate for revenue stands at -4%, a worrying period for the firm. However, Geldards is budgeting for a 3.5% increase in turnover for 2011/12, which should equate to a 7% rise in net income, so the signs are positive. Generally speaking however, the Central peer group firms are a long way from feeling upbeat. LB