In tearing up the rulebook in this year’s Legal Business 100, this peer group has changed radically to reflect the global transformation of some firms and the increased national profile of others.
To our new Major International peer group (see page 84) moves global giant DLA Piper – whose presence in the Major UK group, contrasting with firms such as Burges Salmon, was always incongruous – and Squire Sanders Hammonds which, following a major transatlantic merger, can no longer be considered just a national UK firm.
In their place come six firms: Mills & Reeve, Gateley, Hill Dickinson, McGrigors, Dundas & Wilson and the 2011 Legal Business Awards National Firm of the Year, DWF. All are considerably ahead of their local peers in revenue terms, with turnovers in excess of £60m, and have developed nationwide reputations in certain practice areas that makes defining them purely by geography redundant.
Mills & Reeve and Gateley are simply too large in terms of turnover, headcount and geographical spread to remain in the Central peer group. Gateley has the smaller turnover of the two (at £63m) but this is still very close to £30m higher than the next ranked firm in the Central peer group, Browne Jacobson, with its revenues of £35.2m. Gateley now spans the Midlands, the North West and Scotland and, after adding 50 fee-earners, the firm is now further from being a Central law firm than ever before.
It should be noted, however, that Gateley’s turnover has been artificially inflated by an eye-watering 27%, thanks to its acquisition of the Manchester business of Halliwells last summer. And the firm’s profits have paid the price of taking on 20 new equity partners, with PEP falling by 41%.
While revenues have remained static this year at Mills & Reeve, its profit margin, at 29%, is comfortably higher than the average in this group, eclipsed only by fellow newcomer Dundas & Wilson and the tightly managed ships that are Burges Salmon and Wragge & Co.
Mills & Reeve’s managing partner Guy Hinchley points out that the firm’s expansion beyond its traditional home of East Anglia into Birmingham, and latterly Manchester and Leeds, underlines the firm’s national credentials that are backed up by a reputation in practice areas such as insurance, public sector, private client and, increasingly, corporate. ‘The challenge for us in our forthcoming business planning cycle is to push on and further our scale and reputation in our newer offices,’ he says.
The two Scottish firms that have joined this national group continue to outperform their local rivals, thanks largely to their UK-wide outlook. Dundas & Wilson may only just scrape into this category in revenue terms but its profit margin, at 41%, is comfortably the strongest in the peer group and one of the highest margins in the entire LB100. It also has the highest profit per lawyer figure of any firm in the group. Managing partner Donald Shaw says ‘a modest increase in turnover is an acceptable result and in line with similar firms and indeed our own business planning’. He also points to the fact that while revenue increase has not been dramatic, the firm is in very good shape: ‘Our LLP borrows no money. We maintain earnings per partner and a meritocratic spread in all our equity partners at acceptable levels and indeed ahead of many larger firms.’
He is also in no doubt that his firm belongs in this group. ‘We describe ourselves as a national law firm for a good reason: we are national in our approach, structure and in our work,’ he says. ‘We have UK-wide practice areas serving major national clients. We have no separate Scottish departments. It is telling that 40% of fee income is generated from the London office.’
Meanwhile at McGrigors, Scotland’s largest firm by turnover, senior partner Kirk Murdoch stresses the importance of a geographically diverse business, with offices in Scotland, England and Northern Ireland. ‘Our strategy is to be strong in all three UK territories,’ he says. ‘We work hard at being a single UK operation. We have to ensure that we are getting our clients the best people from across the business regardless of where they are based and we recruit very much along those lines. In London we have worked slowly and steadily to build the business to the point where it is now the largest office by headcount in our network.’
The Major UK peer group is set to change again next year. One firm that will change its shape dramatically is Beachcroft, which recently voted through a 1 November tie-up with insurance firm Davies Arnold Cooper.
DAC Beachcroft will become a firm with around 1,200 lawyers and £175m in revenue but more importantly will strengthen a high-end insurance and reinsurance practice that should complement Beachcroft’s successful volume insurance business nicely. Both firms are on a par in terms of profit, with Beachcroft’s 19% profit margin eclipsing DAC’s by one percentage point. Both firms would hope that the merger will allow for more profitable growth by encouraging more efficiencies in the combined firm. LB