Specialist practices and focused City firms in the second 50 thrived in what remained an uncertain market.
The second 50 is a hard place for any law firm without a strong claim on their chosen patch. Overall this section of the market saw a flat year despite the support of a relatively upbeat domestic economy and surging property market.
But for many London firms, particularly those with a defined focus, 2014/15 went by just fine. More than fine. Of the 18 London-based firms that occupy the second 50, six posted double-digit growth in both revenues and profits per equity partner (PEP) – among them Stewarts Law, Forsters, Fladgate, Wedlake Bell and Penningtons Manches. Other City practices to post robust numbers include Bristows, Lewis Silkin, Bircham Dyson Bell and Winckworth Sherwood.
‘Those firms that are more focused on a particular area have benefited,’ argues Bristows co-managing partner Iain Redford. ‘We are better known for acting for clients in IP or technology. We will continue to benefit by being independent. There are firms that are combining with Canadian or US firms but that’s not our strategy.’
Demonstrating the rising stock of specialist practices in the UK top 100, the disputes and private client player Stewarts Law was one of the strongest performers overall in 2014/15, with turnover rising 13% to £52.4m and PEP up 14% to £1.3m.
While that level of partner profits – on this measure above Clifford Chance and Allen & Overy – is somewhat flattered by its tightly-held equity, the firm is still generating revenue per lawyer of over £400,000, comparable with a top ten City law firm.
As one of the fastest-growing practices in the UK top 100, Stewarts Law has continued to turn up on high-profile disputes, including last year securing a role on a shareholder claim against Tesco for a multimillion-pound overstatement of Tesco’s profits.
Revenue 2010-15
Total Lawyers 2010-15
Managing partner John Cahill comments: ‘Boutiques are often conflict free, have an ability to make decisions quickly and respond to market opportunities and can perhaps more readily innovate. We have been very innovative in how we fund litigation – damages-based agreements, the willingness to share risk with clients, developing products with third-party funders and looking at contingency fees. Having partners understand the model and the whole firm is a real advantage.’
Forsters also showed robust returns with a 14% uptick in revenue to £41.4m while PEP rose 11% to £539,000, reflecting buoyant conditions in the City property market and the private client sector. Turnover in the last five years has grown a striking 85% – the second highest in the entire Legal Business 100.
Real estate work accounts for around 60% of Forsters’ business, with bread and butter work in investment, planning and construction picking up pace, and, according to Roberts, recent increases in rural land prices have also generated more activity. The firm is increasingly building out its corporate practice to service private wealth clients, corporate property work and the hotel industry.
Similarly upbeat is Bristows, which saw revenues up 11%, consolidating a more-than-respectable five-year run in which revenue increased by 58%.
Redford says the firm’s historic focus on the technology and patent-heavy industries has driven its practice despite mounting competition to tap the City as a tech hub, citing the high number of its lawyers with science backgrounds.
Though the firm has increasingly evolved towards a full-service coverage, it remains heavily focused on knowledge-driven industries. ‘London is good for technology, especially from a transactional perspective,’ says Redford. ‘There is increased competition, but clients seem to see our distinction.’
If there was one prominent specialist firm that appeared to buck the trend of robust growth it was pension boutique Sacker & Partners, which saw flat revenues, although PEP did increase by 6%. The lack of five-year growth for the 48-lawyer firm reflects the maturity of its pensions market, and its huge market share of the trustee clients.
| Fastest-growing firms in organic revenues 2010-15 | |||
|---|---|---|---|
| Firm | 2010 | 2015 | % change |
| Mishcon de Reya | £47.5m |
£116.7m |
146% |
| Forsters | £22.4m | £41.4m | 85% |
| Osborne Clarke | £83.7m | £151m | 80% |
| Browne Jacobson | £32.9m | £58.9m | 79% |
| Macfarlanes | £92.4m | £159.6m | 73% |
| Fladgate | £21.8m | £37m | 70% |
| Brodies | £35.8m | £57.9m | 62% |
| Gateley | £49.6m | £80m | 61% |
| Stephenson Harwood | £91.9m | £145m | 58% |
| Bristows | £24m | £38.1m | 58% |
| Slowest-growing firms by revenue 2010-15 | |||
|---|---|---|---|
| Firm | 2010 | 2015 | % change |
| Maclay Murray & Spens | £52.5m | £43.5m | -17% |
| Trowers & Hamlins | £89.4m | £79.4m | -11% |
| Ince & Co | £86.3m | £79.4m | -8% |
| Bevan Brittan | £37.7m | £34.9m | -7% |
| Payne Hicks Beach | £22m | £21m | -5% |
| Brabners | £31m | £30m | -3% |
| Clarke Willmott | £40.8m | £39.8m | -2% |
| Walker Morris | £42.6m | £42m | -1% |
| Gordons | £22m | £22.5m | 2% |
| Sacker & Partners | £23.2m | £23.7m | 2% |
The horse before the cart
Beyond the clearly defined specialists, a number of stalwart London players posted credible results. The 55-partner Wedlake Bell was a notable performer, with revenues up 13% to £31.3m and a 10% rise in PEP to £352,000. The result makes the firm one of the fastest risers in the top 100, placing it at 82nd place, indicating the firm has benefited from its 2012 takeover of London rival Cumberland Ellis, which put the combined practice into the top 100.
Managing partner Martin Arnold says the firm’s growth had been driven by active commercial property markets and its core high-end residential real estate practice, as well as private client. The firm in early 2014 set up iGlobal Law, a standalone subsidiary to manage international labour projects.
Arnold sums up the firm’s approach: ‘We don’t look five years ahead. We don’t get big for the sake of big. All our strategy is around doing bespoke legal work for quality clients – we will only grow as a result of this success as opposed to getting bigger in order to get success. We try to put the horse in front of the cart, rather than the other way around as people often do.’
It is a similar story at Lewis Silkin, which saw plenty of activity in its corporate and real estate practices, helping to drive an 8% growth in revenue to £44.7m.
Revenue per lawyer 2010-15
PPE 2010-15
But it is the firm’s employment and immigration group and its media, brands and technology practice that contribute the most, generating 41% and 25% respectively of the firm’s turnover. ‘Diversification has helped us but it’s a particular type of diversification having singled out where we want to specialise and achieving a good balance between our two chosen areas [employment and TMT],’ says managing partner Ian Jeffery.
Penningtons Manches, likewise, put in a standout performance, with revenue up 24% – a confident showing for the firm coming after the 2013 takeover of the ailing Manches by Penningtons. The firm also hit the headlines last year after launching a branch in San Francisco to help build its profile with IT and technology clients.
With Howard Kennedy, Bircham Dyson Bell and Winckworth Sherwood all posting respectable increases, the only comparable firm to go against the grain was Boodle Hatfield, which saw a 3% fall in revenue, making it one of the few top 100 firms to post declining turnover.
| PEP: fastest-growing LB100 firms 2010-15 | |||
|---|---|---|---|
| Firm | 2010 | 2015 | % change |
| Macfarlanes | £711,000 | £1,555,000 | 119% |
| Mishcon de Reya | £450,000 | £897,000 | 99% |
| Nabarro | £321,000 | £631,000 | 97% |
| Forsters | £295,000 | £539,000 | 83% |
| Fladgate | £370,000 | £648,000 | 75% |
| Brodies | £323,000 | £532,000 | 65% |
| Freeths | £196,000 | £307,000 | 57% |
| Bristows | £267,000 | £392,000 | 47% |
| Eversheds | £515,000 | £749,000 | 45% |
| Shoosmiths | £268,000 | £386,000 | 44% |
| PEP: Slowest-growing LB100 firms 2010-15 | |||
|---|---|---|---|
| Firm | 2010 | 2015 | % change |
| Capsticks | £452,000 | £283,000 | -37% |
| Trowers & Hamlins | £515,000 | £336,000 | -35% |
| Geldards | £227,000 | £167,000 | -26% |
| Ward Hadaway | £283,000 | £225,000 | -20% |
| Weightmans | £352,000 | £285,000 | -19% |
| Walker Morris | £535,000 | £434,000 | -19% |
| Ince & Co | £314,000 | £275,000 | -12% |
| Withers | £309,000 | £275,000 | -11% |
| Holman Fenwick Willan | £520,000 | £469,000 | -10% |
| Sacker & Partners | £858,000 | £793,000 | -8% |
Looking ahead
If it has been a generally strong year for London practices in the second 50, the need to adapt is much on the mind of many partners in the sector, aware that they don’t have the brand awareness or resources of larger firms to fund their investment in new ventures.
Bristows, for example, is currently trying to develop its software to speed up processes within international litigation. ‘In-house procurement functions are focused [on] receiving optimum legal advice. Twenty years ago clients never used to question fees. The role of procurement is more visible now and more aggressive in terms of its importance,’ says Redford.
Forsters is experimenting with using paralegals more substantially on property work to deliver more efficiency to clients. ‘It’s a challenge for a firm our size – [launching back-office arms] in Manchester or Belfast is beyond us,’ comments Roberts. ‘We have to be very clever around how to offer our clients a similar choice.’
Lewis Silkin’s Jeffery strikes a similar chord. ‘We try to keep an ear to the ground about what’s happening with the wider market. I have a lot of respect for the innovators in our industry – Riverview Law, Axiom, Lawyers On Demand. That’s a healthy thing and improves overall service.
Profit per lawyer 2010-15
Leverage 2010-15
‘The market is much more competitive – new service providers are coming in, there are better in-house teams. But we try to come up with new ways of offering better service so we remain attractive.’
While many are keenly aware of the need to evolve their service to keep up with a changing market, there is a consensus that the level of consolidation seen outside the UK top 50 in the last three years will now pause for breath.
Says Arnold: ‘There will be some more consolidation but this has slowed massively. People were looking for something to do in terms of a strategy a year or so ago, if they were finding growth difficult. Some of them, of course, were enforced mergers and some for whatever reason wanted to be bigger in order to attract far more work.’
But while there is agreement that the second 50 is an unforgiving place for advisers that lack coherence in their partnership and business, for the well positioned, business is pretty near booming.
As Redford concludes: ‘No doubt there is competition across the board. How you package everything is ever more important. But clients still recognise the value in specialist advice.’ LB
jaishree.kalia@legalease.co.uk
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