Leadership pivots and partner exits highlight a period of flux for Clydes – what next for the insurance giant?

Muna Abdi assesses a period of upheaval for one of the UK’s most upwardly-mobile law firms

Sudden moves in the legal industry are generally viewed with suspicion and the resignation of Simon Konsta as Clyde & Co’s senior partner in June, little more than halfway through his five-year term, was no exception. After all, it remains rare for leaders to step down part way into their term.

Moreover, the change at the top comes at a time of rare partner exits in London and San Francisco for Clydes, a firm that usually attracts attention for battering peers into grudging admiration with sustained growth and deftly-executed strategy.

And Konsta is not the only high-profile change, with long-standing chief executive Peter Hasson, one of the architects of Clydes’ long-term ascent, in July confirming that he was to stand down amid what some see as tensions at the top that have been building for years. Notes one veteran partner at an insurance rival: ‘They will miss Hasson. He has been a mighty force and in many ways the real senior partner.’

With Konsta and Hasson respectively replaced in November by arbitration partner Peter Hirst and Matthew Kelsall in January 2020, the obvious question stands: do recent developments reflect a mere next chapter for the global insurance giant or signs of a deeper discord? And will the new leadership team really stick as close to the continuity approach as currently claimed or is Clydes set for a shift in direction?

Strong and stable

Clydes’ reputation for stable leadership has been borne out by the almost 30-year tenure of Konsta’s predecessor, Michael Payton. The hugely respected Payton bestrode Clydes, having between 1984 and 2013 transformed the firm from a £6m, 16-partner insurance boutique in 1984 to a £287m, 285-partner business by the end of his term in 2013.

Payton at this time moved to a new, ambassadorial role of chairman, paving the way for a successor in insurance partner James Burns, who had been groomed to take over. But in contrast to Payton, Burns’ term was short-lived and he stepped down from the role after only three years in 2016 to become head of the Americas.

According to one account, this was directly linked to tensions between Burns and Hasson, who had amassed considerable authority as a proven chief executive under Payton and was unwilling to cede power. Under this reading, matters came to a head in 2016 when Clydes’ board effectively backed Hasson over its then senior partner, leading to Burns taking on the face-saving Americas job. Burns’ position had also arguably been undermined by the lack of a mandate, having been appointed senior partner in an uncontested vote. Burns retired from Clydes partners at the end of the 2018/19 financial year, in a move that the firm did not announce, and his Americas role was not replaced. Clydes insiders have indicated, however, that Burns’ departure was linked to personal reasons.

‘They will miss Peter Hasson. He has been a mighty force and in many ways the real senior partner.’

Not that such handovers have stunted Clydes’ startling growth in recent years. Turnover has more than doubled since 2013, with the 440-partner firm currently generating £611m, adding nearly £60m to its top line in 2018/19 alone.

Many hand considerable credit for such performance to Hasson, an accountant by background, who joined the firm in 1997 and became chief executive in 2005. Hasson is widely credited with professionalising the running of the firm into a business and, with a close eye for detail and a well-cultivated team under him, was also a superb pairing with Payton’s charisma and broad-strokes vision. Hasson further distinguished himself with the smooth 2011 integration of Barlow Lyde & Gilbert, one of the largest legal mergers ever in the UK.

Aside from tightening its grip on the high-end insurance market, the Barlows deal brought in Burns’ replacement, Konsta, who looked every inch the urbane and clubbable law firm chief.

Still, the appointment to Clydes’ top job was surprising given his background as senior partner at the far smaller Barlows. Yet there was an absence of partners willing to stand and the election was made on an uncontested basis, again raising the question of a mandate strong enough to govern a no-nonsense partnership defined by strong-willed litigators and insurance specialists. Notes one former veteran of the firm of its culture and reputation: ‘It’s a well-known phrase in the market – ABC, Anyone But Clydes. Some clients just won’t instruct them because they’re not a personable set of individuals. They’re a little internally competitive, sharp-elbowed.’

Once again, there were tensions between Konsta and Hasson, in which it is claimed that the board once again came down in a dispute on the side of Hasson, contributing to the decision that Konsta was to stand down.

While Clydes partners make great play of his desire to stand down from leadership at the age of 55 – the professional liability specialist had previously indicated a desire to return to full-time practice – it was not in the original plan for Konsta not to serve a full term.

The second early departure of a senior partner in a row triggered calls for a contested election, the first that the firm had held for years.

In particular, Hirst ran a slick campaign focused on handing power back to the partnership – a stance that would likely impact Hasson’s remit, triumphing in a three-way contest in the spring against two prominent UK-based partners.

Clydes announced Konsta’s departure and his replacement by Hirst in June, making no mention of the vote. The following month it was announced that Hasson was to leave the firm. Hasson was replaced by one of his deputies, Kelsell, a trained accountant who joined the firm in 2007 and was latterly chief operating officer for North America, who has a far lower profile.

While Clydes partners interviewed for this article made studious efforts to portray the repeated leadership changes and Hirst’s elevation in business-as-usual terms, it seems inevitable the move will usher in some change in style and priorities.

Although there is talk from partners of ‘nudging of the tiller’ and ‘no massive desire to disrupt’, the handover has fired speculation that the firm will look for further growth beyond its insurance heartlands.

This could include further investment into its already sizeable oil and gas client base, and growth in its general disputes practice, reflecting Hirst’s drive to build the firm’s arbitration when he was co-team head.

It was not in the original plan for Simon Konsta not to serve a full term.

Notes one high-billing partner in its City disputes team: ‘Given the scale of [Clydes’] litigation and arbitration practices, why are we not picking up more of the big mandates? Definitely, there’s a focus on that, but that’s not new. We need to bang the disputes drum more.’

One department head comments on the firm’s direction: ‘The core tenets will not change. One of the reasons for success is consistency. The new team will look at the way we’re working and tweak things, but the leadership haven’t expressed anything yet that they’d like to change.’

Well-trodden paths

However leadership’s priorities play out, it is certain that international growth will play a major part in its calculations with Clydes’ expansion owing much to heavy foreign investment, not least at its much-vaunted Middle East practice. In the last two years alone, Clydes has opened in Chicago, Washington DC, Mexico City, Los Angeles, Kuala Lumpur, Auckland, Muscat and Hamburg. There was also a Bristol launch in May 2018.

And as a response to the political and economic uncertainty from the UK’s torturous bid to leave the EU, Clydes launched in Dublin to focus on its Irish law insurance practice. The foreign growth looks set to continue, with further investment planned in other jurisdictions, including the US and Africa.

Yet for a firm known for rarely losing prominent partners, the recent exits of a six-partner shipping team, the global marine group and an eight-partner cyber security team in San Francisco have raised questions.

Andrew Preston and Elizabeth Turnbull led the marine team, including Rob Collins and Fanos Theophani, to form a marine trade and commercial litigation boutique, Preston-Turnbull.

Along with their resignations, fellow partner Ed Mills-Webb resigned with immediate effect in early September. He has now joined the boutique as a consultant. In July, the firm confirmed that it had suspended two lawyers in this team, including a partner, following alleged breaches of accounting rules.

The departures are seen as a reverse to Clydes’ 150-lawyer marine group, which constitutes 15% of UK partners, but a manageable issue. One Clydes partner plays it down: ‘There is something of a well-trodden path in the marine sector between operating in a larger firm and then going to a smaller boutique. What has happened is an example of the sort of thing that has happened before, many times over the years.’

The plan will be to restructure the marine practice with further hires, promotions and geographical expansion over the next two years. The potential shake-up is being considered as part of a review of the business as a whole, with the group tabling a departure from its sub-practice structure towards offering a full suite of services across all sectors, including ship owner, cargo interests, insurers and P&I clubs.

Pressures remain in the shipping sector as commoditisation has led to a squeeze on margins, although other related areas such as international trade are considered more lucrative.

In the face of those challenges, Andrew Nicholas, a partner in the firm’s marine practice, strikes a bullish note: ‘I know there is a certain amount of doom and gloom elsewhere in the market around shipping work, but speaking for my own practice area, we intend to maintain growth going forward. Clients are expecting innovative fee schemes and we are at the forefront of such developments.’

If it is easy to dismiss losses in Clydes’ muscular marine team, the recent departures in its US practice look more problematic. The San Francisco-based cyber security team, led by Joan D’Ambrosio and Bill Casey, includes Julie Hawkinson, Christina Terplan, Jamie Narbaitz, Christina Marshall, Eric Moon and David Jordan. The group on 1 October opened up as Atheria Law, a 35-lawyer insurance boutique.

Hawkinson discusses the background to the move. ‘We decided we wanted to break off and do something new. Clyde & Co has become a very big firm and certain things had started to come up, including conflicts that you would expect at any big firm. Being part of a smaller organisation allows us to be a little more agile when it comes to things like the use of new technology.’

‘It’s crucial the opportunity is taken to pause and reflect on where we are as a business.’
Peter Hirst, Clyde & Co

Clydes’ partners cite a difference of opinion between management and the team around the practice’s profitability. The insurance coverage and monitoring work was deemed to have low margins and the management’s efforts to boost profitability by moving administrative staff away from San Francisco, where property and recruitment costs are high, and into lower-cost locations, were rejected by the team.

One London-based partner maintains that Clydes is unfazed by the departures and that it will create opportunities to go after more profitable mandates as Clydes was restricted in carrying out professional liability, cyber defence and cyber breach response work while it had a cyber-monitoring offering, due to US conflict laws.

Relaxed Clydes may be, but there is little doubt that the firm will want to get back to the expansive form that has seen the firm build a 60-partner US practice with 250 lawyers spanning branches in Atlanta, Chicago, Los Angeles, Miami, New Jersey, New York, Orange County, San Francisco and Washington DC. Further investment in Clydes’ professional liability practice – a traditional calling card for the firm – is now on the cards for the US. The firm in November recruited a three-lawyer team, specialising in defending lawyers, from US practice Hinshaw & Culbertson, led by partner Rick Supple.

Pause and reflect

Aside from a potential restructuring of its marine group and a recalibration of its US business, the strategy also includes a sustained push into the Africa market where Clydes currently has 55 lawyers, based in three offices in Cape Town, Johannesburg and Dar es Salaam. Investment in the firm’s tech support and infrastructure is cited as a priority. ‘The firm is now in a period where it wants to make sure that its infrastructure is up to the task for a business of its size,’ says one London partner.

‘We’re investing very heavily in our infrastructure and in new global IT systems. These investments are expensive, but it’s got to be done because we want to keep pushing the firm forward. We’ve got to have a modern structure,’ the partner adds. It is also tipped that Hirst will focus on more ‘balanced growth’ as Clydes matures with more emphasis on organic expansion over the relentless bolt-ons of recent years.

Hirst is upbeat about the firm’s position but is currently keeping the detail to himself: ‘We have a hugely successful sector-focused strategy that has driven the firm’s growth over the past 20 years. Like any large, successful and global organisation, it’s crucial that the opportunity is taken to pause and reflect on where we are as a business and affirm our long-term strategic direction. Our leadership transition is the perfect opportunity to do this and we’re in the fortunate position of doing so from a position of strength.’

For now, that view is borne out by peers, reflecting decades of success. ‘Clydes is still a strong operator, a strong proposition – I don’t imagine anything will fatally damage the firm. It’s big enough to withstand those setbacks,’ notes one leader at a rival firms, summing up common sentiments.

Nevertheless, the nothing-to-see claims cannot quite conceal that after 20 years of success and growth, Clydes is moving on to a different stage of its development with a new ethos and less certainty on its direction. With Clydes for years established as the dominant insurance brand at home and abroad, there will be plenty of observers watching how this new chapter plays out.

muna.abdi@legalease.co.uk