Many of the firms in the Major City group will look back on 2010/11 with mixed feelings. Some firms will feel a sense of relief that, broadly speaking, any further disasters were averted but others will be frustrated that key transactional markets refused to pick up significantly. Strategically, however, there are still a couple of firms in the group that have to ask themselves some difficult questions over the coming year.
The peer group has changed somewhat since last time around, with Hogan Lovells and SNR Denton, as a result of transatlantic mergers, moving to the newly created Major International group.
Norton Rose is also out given the firm’s aggressive expansion over the past 21 months, which has seen it sign agreements to merge with firms in Australia, South Africa and Canada.
Field Fisher Waterhouse (FFW) and Withers arrive into the group this year, with both firms posting good performances throughout the recession. The firms recorded 2010/11 turnover of £94m and £100.8m respectively, figures befitting their inclusion in the Major City peer group.
While profitability does lag at the two firms compared to their new peers – their net incomes are comfortably the lowest of the group, with FFW at £20m and Withers at £19m – their commitment to investment will likely see that improve over the next 24 months.
FFW managing partner Moira Gilmour believes the firm’s strategy has served it well, particularly the move the firm made for a team of IP lawyers from the now defunct Howrey in Munich.
‘It is easy to lose your nerve in these tough markets but we are very proud that we continued [growth] throughout. We are not a firm that makes huge headlines but we do keep coming up the inside track,’ comments Gilmour.
In stark contrast to 2009/10, this peer group performed solidly, with average turnover growth at 5% compared to a 1% drop the year before. Of the 14 firms in the group, only two recorded turnover dips; Nabarro’s revenue dropped by 1% to £112.6m, Simmons & Simmons saw a 3% turnover decrease to £243m.
Both firms have had a tricky few years but neither are in dire straits. The new management duo of Jeremy Hoyland and Colin Passmore at Simmons will be somewhat relieved that last year’s 14% drop in revenue has not been repeated. There is, however, still work to be done around clarifying the firm’s structure and strategy.
‘I think you’d want to be international as a law firm right now, UK managing partner. Think about where the work is coming from, it leaves you less exposed.’ – Tim Eyles, Taylor Wessing
Meanwhile, Berwin Leighton Paisner and Stephenson Harwood both increased turnover by 16%. The former’s net income jumped to £62m from £34m last year, representing a 49% rise, illustrating that the firm’s investment at home but also in Russia and Singapore is paying off. Maintaining this level of growth will be difficult but the appetite for expansion still burns strong in managing partner Neville Eisenberg.
Stephenson Harwood continued its run of top form with the usual mix of shipping and disputes work, however investment in its corporate transactional practice has paid off with some decent mandates.
The firm’s revenue five-year compound annual growth rate (CAGR) is at 12%, the second highest in the group, placing it behind Bird & Bird’s 17%. Its profit per lawyer is marginally above the average of the group at £86,000.
While the City is the one element that ties these firms together, a handful of practices have seen success come in the form of excelling in different markets; geographically and practice based. The international offices of Ashurst, Simmons and CMS Cameron McKenna have become increasingly important as the domestic market continues to flag.
‘I think you’d want to be international as a law firm right now,’ suggests Tim Eyles, Taylor Wessing’s UK managing partner. ‘Think about where the work is coming from, it leaves you less exposed. We have much greater international reach. In terms of generating revenue, we do operate on a global basis because we have mobile key client programmes and all partners input that.’
Taylor Wessing will reflect on a successful year after posting an 8% rise in revenue to £192.3m, cancelling out its 6% drop in 2009/10.
It is worth noting though that while the Major City peer group is a much happier place to be in 2011, put into context, much of the increase in revenue is coming off one or two years of decline. The market is still devilishly uncertain and if that continues, as is expected, then a fourth year of patchy deal flow makes some of those transactional teams look rather unwieldy. Most are budgeting for single figure growth in the current year, if that is achieved across the board then that will be judged a success.
jeremy.hodges@legalease.co.uk