The LB interview: Gowling WLG

LB: What’s been happening in the two years since the Canada tie-up?

David Fennell (DF), chief executive: One of the reasons for doing that combination was access to the US market, so our US sales are up by 18% year-on-year.

LB: What would the rough ballpark be in terms of the amount of US business that you’re doing now?

DF: Probably about $20m for the UK and Europe, more than $80m globally. That’s the tip of the iceberg. Every day when someone is talking to a US client, you want them to have at the front of their mind the capability we’ve got in the rest of the network. US sales have been a big boost for us.

Andrew Witts (AW), chair: A couple of years ago we made a very deliberate statement that we weren’t looking for a US partner and since then a few firms have gone into the US. It’s distinguished us in a favourable way.

DF: The US is such a huge market and I’m not sure whether those mergers that everyone’s undertaken are delivering cross-border flows of work to the extent people thought. Bombardier was a Canadian connection but Canada didn’t do much work for them, we didn’t do any in the UK, but the combination made a big difference to Bombardier’s perceptions of what the Canada business could deliver. One of our successes around US sales is Estée Lauder, which came via that US connection from a US law firm.

LB: Any other names you can highlight?

AW: We won some global mandates in intellectual property (IP). The relationship between the IP teams goes back 20 years. We’ve seen good quality laterals come in, particularly around IP in Dubai, in Paris, in Singapore, which we never would have attracted without that Gowling reputation in IP. We’ve seen Weetabix come in – we’re now doing their global portfolio.

DF: And Takeda, a huge Japanese pharma business. In addition to the existing relationship between our UK business and Takeda, it is also a Canada client, and we have recently picked up some UK litigation from them. The things we’re really pleased [about] are where we didn’t have the client at all or we did but only serviced out of one office. The key is joining it all up, and that’s a challenge for all of the law firms that are building international networks.

LB: What will you regard as a successful financial performance over the next two or three years?

DF: You’d have to look at that in the context of the whole market for legal services, which in the UK and globally is pretty flat. So growth of 2%, 3%, 4% is a pretty good performance for any firm. That’s why Osborne Clarke, Fieldfisher and Watson Farley have done a good job. Canada is up 4% or 5% year-on-year: it’s hard to pin why that is but some of that is the brand lift out of doing the combination. We’ll be down this year [in the UK] but that’s largely because we moved on our private capital business. Our ambition is to keep growing but we’re not just chasing turnover. (Following the interview, Gowling announced its global revenue had grown to £455m.)

‘I am more interested in the number of clients we are adding to the roster than profits.’
David Fennell

LB: So what are the key performance metrics? Top line? Bottom line?

DF: I’m more interested in the number of clients we are adding to the client roster and the number of jurisdictions we are serving those clients in. I target that rather than profit or revenue because most of the research suggests if you can deliver those then the other two things will follow.

LB: But if it doesn’t feed through to the bottom line, who cares?

DF: There’s also a piece around investing over a medium term and looking at returns over a medium to longer term. If you go back to the [John] Crabtree and Quentin [Poole – legacy Wragge & Co] days, they were making decisions on the medium to long term. It was just they were in a market that was flying. Now it’s quite difficult to deliver stellar organic growth in the post-2008 period.

LB: Wragge & Co did do it, Wragges was the Mishcon de Reya of that age.

DF: Sure, we want to see revenue and profit growth, and you’re right, that is the sort of thing that galvanises firms and we were 5% up last year on the back of a strong performance. I’m just saying that won’t be the case this year because of the impact of the private capital team dropping out, but what I do want to see, ideally, is above peer average growth. Otherwise you’re not succeeding.

LB: You’ve got people coming through the door, you’re investing internationally. Surely once they’ve had time to settle down on a three-to-five-year basis, that’s going to give you a lift in terms of profitable growth?

DF: It does and the reason it’s a challenge, we don’t set revenue or profit targets in that time horizon that we’re talking about so we’ll set a budget that is 12 months ahead. The organic growth rate is going to struggle to beat 3-4% in most firms.

LB: How do you see the firm’s service offering evolving in the next three to five years?

DF: We’re definitely not chasing broad service or even full-service mid-market work. We’ll compete in a broader range of sectors than a Watson Farley or an Osborne Clarke, partly on heritage, partly because we’ve chosen to compete in those markets. Real estate, IP, life sciences, pensions, equity capital markets, top-end commercial litigation, and then some smaller sectors where we have a strong market position, like automotive. We have a tech focus but tech is becoming ubiquitous, cutting across everything.

We’re not trying to deliver every single product line, so I would distinguish us from the 50 offices in 50 countries like DLA Piper and to an extent Dentons are pursuing. Their challenge is how they take the top-end slice the Magic Circle and Wall Street firms are chasing. Our focus is on particular sectors and service lines. IP will be a key feature of most of our offices outside of the UK because that’s a service line where we’ve got a compelling offering to clients. I’d like more real estate capability across Europe, or it would be great to do something more in Germany.

LB: The firm stated with the Canada merger that it wanted another one by 2018 and maybe two by 2020. What’s the state of play with those?

AW: There’s lots of conversations. Germany’s still priority number one; South-East Asia, we’ve always said we’d like more scale there, most probably Singapore, but because we haven’t found that yet we’ve continued to develop our own office. I know we said those dates but our partnership would prefer us to come to it with something that we credibly can say works on all levels rather than just: ‘Here’s a firm in South-East Asia.’

LB: You have an unusual mixture of legacy firms and a broad-spectrum practice. How do you get that message across to clients, potential clients and people you want to recruit about what you are?

DF: The easiest answer to brand is just to narrow it down and do one thing. That’s not a strategy for us for obvious reasons.

LB: Isn’t there the danger that you just continue being a pretty successful firm? How hungry are you?

AW: Doing the Canadian deal sets us apart in the sense that we didn’t want to get in on someone else’s particular bandwagon. We had the confidence to say: ‘Let’s set the stall out.’ I accept we’ve got to then start delivering on growth.

DF: I admire Watson Farley but I’m not sure you could describe them as ambitious. What they’ve done is focus very well on what they do. Macfarlanes would be another good example, where they know what they’re about, and it’s delivered revenue and profit. I look around the marketplace and see other firms who do lots of stuff, lots of publicity, when you come back to your acid test, are they really growing revenue and profit over the medium term sustainably and consistently? The picture gets a little patchier. Don’t assume we’re not ambitious. I’m not going to start shouting to say that my ambition is to be the world’s leading polycentric law firm and we’re going to have 80 offices in 80 countries.

‘We’re not sitting back thinking job done. We made commitments and we’re doing what we can to deliver on that. There’s ambition and commitment.’
Andrew Witts

LB: You could be Birmingham’s most polycentric law firm?

DF: The Gowlings transaction took most of the market by surprise and I don’t think lacks ambition. We might do something else in one or two years’ time of a similar scale and you’ll go, ‘we didn’t see that coming’.

LB: But not seeing it coming, that’s not a catch-all answer for every point is it?

AW: No, but we’re not sitting back thinking ‘job done’. We made commitments a couple of years ago and we’re doing what we can to deliver on that. There’s ambition and commitment.

LB: Let’s imagine Hamish is general counsel of a FTSE 100 client, and he says to you, ‘why did you do that deal in Canada?’ What would you say to Hamish the GC?

DF: We gained a truckload of deep experience in sectors that we’re embedded in, so IP, life sciences, energy, nuclear, infrastructure – so we’re collaborating on corporate work and in two of the biggest stock markets in the world we’re sharing knowledge and knowhow on things like innovation and technology around client development.

LB: But not profits, you’re keeping it as separate finances?

DF: You’re asking me about clients and in my experience clients don’t really care how you’re structured.

LB: They are interested in how much you co-operate across borders.

DF: I agree but I don’t think that’s a profit-driven thing because otherwise the accountants would completely integrate profit centres.

LB: But clients are extremely focused on law firms with offices that operate like different law firms.

DF: Absolutely, which goes back to my point, about culture and integration in the way people work together. If they’re running a global transaction and they get a wholly different experience in Singapore to Calgary, that has a massive impact.

LB: Have sceptics in the firm been won over to the concept of a Canadian merger?

DF: I do meet them every now and again, there are people who said: ‘Why would we do this? Our practice is entirely UK real estate or UK pensions.’

LB: What do you say to them?

DF: The same things we’ve said to you.

LB: Would you not want to be bringing in a few more punchy laterals in the UK business? It’s been a bit low-key.

AW: There’s been quite a regular flow. What we haven’t done is taken a team, which is more of an impact. One or two we haven’t announced as well.

DF: I’d be delighted to add real estate partners.

LB: Haven’t you got enough?

DF: Why wouldn’t I want to keep scaling that up? It’s an incredibly successful practice area. I could add as many people as you want into the residential development practice at the moment.

LB: Would you want to though?

DF: We’re in business to make profit.

LB: Do you really want to become a huge real estate boutique? How’s that working out for BLP?

DF: Depends. We act for some fantastic clients across the whole spectrum, from residential development to social housing and providers to institutional investors in real estate, to logistics to developers to US debt funds.

LB: I get that you don’t want to get too heavy in transactional but do you not want to juice up contentious?

AW: I’ve always thought if you can get the right disputes, it’s a great business model. We’re always looking for good quality people. We’ve got contentious trusts, we’ve got fraud and so on. It all links together. So some of the bigger cases we’ve got over the last couple of years have been family disputes or rich individuals falling out. And we’ve always kept clear of Russia for commercial disputes. We always worried about that for various reasons.

LB: What’s disputes as a percentage of the business?

DF: About £35m. I would like to grow that but what I would call the general commercial disputes market, certainly in our experience is quite a tricky market.

LB: If there’s two things you’d like to change about the firm in the next three to five years, what would they be?

AW: Client account management. We are looking at making sure there’s a programme of consistency, making sure the right partners are running the right relationships, making sure there’s succession in those relationships, all the things that we pick up anecdotally that some firms are doing well.

LB: What’s the other thing you’d change?

DF: We need to deliver on Germany and South-East Asia. That is in the two-to-three-year time horizon. We have an extraordinary client base across the firm, there’s more we can do to explain the benefits of using us for a range of different services.

LB: Any final points to emphasise?

DF: Our client base, I think,

LB: You’ve done the client base, move on.

DF: We’ve got great people.

LB: David flamed out with great people – Andrew, can you do better?

AW: We don’t take ourselves too seriously. We’ll be roaming the floors and people will come up to us and people ask us anything. I like the informality about the firm. Everyone’s relaxed here; we don’t have this great hierarchy with people tiptoeing around the place. Clients see that and like it too.

hamish.mcnicol@legalease.co.uk

alex.novarese@legalease.co.uk