LB100 Major UK – Pairing Up

As far as merger headlines go, the Major UK peer group has had a bellyful over the past 12 months.

Even in a year where the LB100 has seen consolidation across the board, the UK’s leading national firms still stand out as the most acquisitive. It’s a trend driven by necessity.

On the face of it, the merger between insurance players Beachcroft and Davies Arnold Cooper (DAC) was probably the most high-profile union but although DAC Beachcroft saw turnover rise by a hefty 22% to £163.2m in 2011/12, its growth still didn’t top the group.

Ambitious North West player DWF saw revenues leap by 23% to £102m following a year of strategic tie-ups, absorbing Newcastle outfit Crutes in January 2012 and Birmingham insurance boutique Buller Jeffries in April.

But it was Weightmans that recorded the highest growth in turnover in the peer group. The healthcare and insurance specialist saw revenues leap by 33% to £77.1m on the back of its acquisition of Vizards Wyeth’s insurance practice in April 2011 and its merger with employment and litigation boutique Mace & Jones one month later. The firm’s prominent UK presence combined with its strong revenue hike to guarantee its relocation from the North peer group. Despite its success, it’s not resting on its laurels just yet.

‘A year ago I would have said definitely that we’re not looking for another merger. But we’ve had DAC and Beachcroft, BLG and Clyde & Co and Pinsents and McGrigors – so I think we’ve got to start looking again,’ says Patrick Gaul, managing partner of Weightmans. ‘We’ve got to make sure we’re not left behind. We’re approaching the settling down phase following last year and now we need to look up again; there are new entrants to the market, more mergers – you’ve got to stay on your toes, you can’t sit still for a minute.’

 

 

Gaul encapsulates the mentality of the market. Out of the 18 players that make up the table, 12 have had a merger or hired a significant bolt-on practice over the past two years. Only Addleshaw Goddard, Wragge & Co, Burges Salmon, Mills & Reeve, Dundas & Wilson and Thompsons have figures based purely on organic growth and those firms posted revenue changes of 5%, 4%, 7%, 3%, -12% and 4% respectively – only Burges Salmon hit the peer group average of 7%. However, expansion comes at a price and while merger-shy firms may not be growing at the exponential rates of their entrepreneurial rivals, they are generally more profitable.

The best profit per lawyer (PPL) figure in the group is Wragge & Co’s £75,000, while Burges Salmon is second on £73,000 and Addleshaw Goddard is next with £66,000. Traditionally, Dundas & Wilson would also have been in that elite band but the firm had an annus horribilis that saw turnover dip 12% to £54.5m, while PPL tumbled 36% to £49,000. It’s been a turbulent year for the Scots firm, with the shock resignation of managing partner Donald Shaw in March (the firm elected joint managing partners Allan Wernham and Caryn Penley to replace him) and chairman David Hardie’s recent decision to step down three years into his four-year term.

‘We’re sitting in fairly uncertain economic times it has to be said but we need to look to make our business bigger and more competitive and look to areas where we can get some more work,’ says Wernham. ‘We’ve got four offices now and we’ve got a particular opportunity to build in Aberdeen but essentially we’re trying to get our partners focused on how they can each individually or collectively win more work.’

The firm’s renewed focus on the role of the lawyer is even evident in its new approach to management. Wernham says that he and Penley were voted in on the back of their commitment to generating revenue, deciding to split the managing partner function between them so they could continue to fee-earn and retain their practices.

There is no doubt that prudence is key in such an unpredictable market. Wragges, known for its conservative financial management, may not have grabbed many sexy headlines over the past year but it has recorded an enviable 10.5% revenue compound annual growth rate over the last 20 years and provides a more sustainable model for success than some of its more showy peers (interestingly, that figure is higher than Linklaters, Herbert Smith and Slaughter and May). Wragges has done well to recover from its 17% drop in revenue in 2008/09. While it is still nearly £10m down on the £125.6m turnover it recorded in 2007/08, it recorded a solid 4% climb to £118m this year on the back of a 17% hike last year.

‘I think that we will all look back on 2008/09 as the high watermark,’ says Ian Metcalfe, managing partner at Wragges.

‘My role as managing partner in the first two years of the job was to try and make sure that we got sufficiently capable and quality staff to do the work but that changed significantly in 2008. I don’t believe in the Armageddon scenario that it’s never going to be as good as it was, but I do think we need to recognise the challenges.’ LB

maria.jackson@legalease.co.uk