The Addleshaws Interview – The rebound guy

Legal Business (LB): Looking at the finances of the firm over the past five years, you are one of the LB100’s top performers. What’s the secret?

John Joyce, managing partner, Addleshaw Goddard: We’ve always had a good business. It lost its way, undoubtedly, and all we’ve done is refocus our efforts. We reintroduced focus on what the firm needed to be doing: international growth, quality work, the clients we look after and deliver in a proper way for, a sector approach… it was just bringing them all together.

LB: But law firms never just turn themselves around. They have to be made to.

JJ: There’s a lot of leadership that goes with that. We put in place a good leadership team. We surrounded ourselves with people that had lots of different views so you could come to a more balanced outlook. We arrived at sensible decisions on most things. I defied the odds slightly by people assuming I wouldn’t listen. It’s a people business: if you sell people a plan they believe in and then help them deliver it, they’ll deliver it. The plan’s not drastically changed since 2014. Still think it’s the right plan, touch wood.

‘I defied the odds by people assuming I wouldn’t listen. It’s a people business: if you sell people a plan they believe in and then help them deliver it, they’ll deliver it.’
John Joyce

LB: You talked about the leadership team. Who were the key figures?

JJ: It’s what we call central management, which is the senior director-level team: me, CFO, HR director, COO and the four divisional managing partners [DMP]. In the early days we had a separate exec in place, which included me, CFO Colin Brown, Adrian Collins, who’s now real estate DMP, and Michael Leftley, who’s head of employment. We had that for a while as we built the strength of the director team – probably half a dozen people – and then geographic and sector leads as well. We also have a 12-strong governance board.

LB: How many of that team did you bring in yourself?

JJ: Just about all of them were in the organisation somewhere. I put most of them into the roles. Yunus [Seedat] had just taken over as head of corporate and commercial anyway, but I then replaced all of the other ones. We put much more weight behind the sector teams. We tried sectors ten years ago; it didn’t get any traction, but one of the things I did was put someone in charge of sectors who believed in the approach, and he was involved for three years to get that up and running properly.

LB: Have you got targets around that? Are people comped on it?

JJ: Our comp isn’t formulaic. There’s loads of things taken into account, including delivery against sectors. There are targets for them, but they’re not all financial. Part of the reason our comp system works the way it does is because you know that knowledge can’t necessarily be put into a number, but you know the success is there.

LB: Apart from having a tighter ship operationally, what has been the broad narrative over the last three years?

JJ: The highlight has been the progress on some of the big, high-quality mandates. We’ve done some fantastic work in those last three years and continue to see big things arrive with us.

‘If you make the right connection with the partnership and they understand the strategy’s not full of shit, then people will work for it, even if they disagree with you.’

LB: Such as?

JJ: The Terra Firma one was enormous [the disposal of Wyevale Garden Centres] – the single biggest mandate we did last year and it brought together loads of different pieces: our premium corporate offering, our retail positioning, a great tech piece. Scotland was another highlight – the upside from Scotland has been enormous.

LB: In terms of driving profitability? Bedding down key clients?

JJ: Both. And because we found a very like-minded group of people.

LB: That was a £20m business?

JJ: It was £20m/£21m, grown a lot more now.

LB: Current ballpark?

JJ: £30m.

LB: In two years?

‘We were very late to the party, probably 15 years behind where we should have been, going into Europe. We’re catching up now. What we don’t want to do is go and drop flags.’

JJ: Two and a half, yeah. That £30m is blended right across the business. The work that we’re doing for Scottish clients out of London is at least as big, if not bigger, than the work we might be doing for some Leeds or London clients out of, say, Edinburgh. It works both ways.

LB: In terms of the international network, Addleshaws was late to the party. How has that gone?

JJ: It’s a combination of getting things properly going in Asia and the Middle East. Germany’s been a key element as well.

LB: Hamburg?

JJ: Yeah, we were very late to the party, probably 15 years behind where we should have been, going into Europe.

LB: We’re trying to spare your blushes.

JJ: It was a mistake. We’re catching up now. What we don’t want to do is just go and drop flags. I could be in six jurisdictions in Europe – I don’t want to be because I’ve seen other firms and what they’re losing in those spaces.

LB: Are you looking at France?

JJ: Over the longer term, we’d like to end up in all the key jurisdictions in Europe: Germany, France, would be the top two.

LB: Are you prioritising making more ground in Germany first? You spoke to Luther a couple of years ago.

‘I don’t do the first thing that comes into my head. I’m prepared to listen; that’s not what people would expect.’

JJ: Allegedly…

LB: … so you did. Given the client base and the heritage of the firm, you could see a good case to go heavy in Germany.

JJ: We’d like to go heavier in Germany. It’s a great team and the service covering we’ve got from a relatively small team is broad: five partners, 12 lawyers in total – we’d like to build that up materially. Our experience in Asia and the Middle East suggests that you certainly need 30 lawyers for it to be self-sustaining.

LB: How difficult will that be given you were late into the market?

JJ: We’ve got much greater traction there than we expected we would get much more quickly and so there is a lot of interest in Germany. If we can make sure we keep some momentum going, we’ll be able to do it. If we start to pause and then pick it up again in two years, we’ll massively struggle. That was one of the mistakes that we saw in the early days of Asia and the Middle East.

LB: What’s the firm generating from outside the UK now?

JJ: North of £20m.

LB: We don’t want to be too happy-clappy. What has gone wrong over recent years?

‘There isn’t anything that we couldn’t afford to do. We’ve got £150m of headroom. That makes me feel secure.’

JJ: I’d like to have made more progress, faster. We’ve lost some people that we’d prefer not to have lost, we’ve lost some mandates we’d prefer not to have lost, I’d like to have grown bigger and faster in the City.

LB: How many people would you have preferred not to have lost?

JJ: A few. It’s changed dramatically from five years ago, but there are a couple.

LB: How would you describe your leadership style?

JJ: Reasonably inclusive. I would describe it as flexible.

LB: Hmmm…

JJ: You don’t believe that?

LB: Let’s see how long the list is.

JJ: That’s probably how I would describe it.

LB: Interviewing Gandhi here, are we?

JJ: It’s a very straightforward leadership style. A reasonably flexible one, because I don’t necessarily do the first thing that comes into my head. I’m prepared to listen; that’s not what people would necessarily expect. I don’t think there’s any magic to it.

LB: From the outside, I’d go for a word like robust. There was a sense that leadership at Addleshaws had lost its grip. Your style was certainly a lot more… direct.

JJ: Yes and direct would be right. Robust would be fair. But I don’t think people would regard me as unfairly or inflexibly robust.

LB: Looking back, it’s been five years, what were the lessons? Clearly a lot of stuff has gone right, but what are your regrets?

JJ: Don’t have many regrets at all. We got virtually everything bang on. The robustness is something that was absolutely right. You could easily lose control of a ship by not having control of the rudder, but you can only get that if people believe you’re doing the right thing for them. Part of that is the honesty about what you’re doing, why it needs to be done. People disagreed with lots of stuff and they have their chance to disagree. If you make the right connection with the partnership and they understand what you’re doing, and it’s all not full of shit and got some substance and realism in it, then people do believe in it and will work for it, even if they disagree with you.

LB: One of the things we looked at is the amount of cash the firm’s got on hand.

JJ: Nice, isn’t it? And that’s not because we’re not investing or paying out cash – the profits of this firm are paid out well within 12 months.

LB: I can see that, but it’s like £60m in the bank?

JJ: More now. Nearly £80m.

LB: What’s the purpose for all that, apart from retaining partners?

JJ: Well, it doesn’t retain the partners because they’ve had all their money out.

LB: So you’re fully distributed?

JJ: Yeah totally, within nine or ten months. When I took over, there was a bonus scheme that never paid out. Colin was at a meeting talking about bonus schemes and people were literally laughing at him. We pay now material amounts out via bonus. The cash that we’re holding is not undrawn profit.

LB: I take the point that you’ve been investing, but that’s an enormous amount of cash.

JJ: But it’s not like it’s burning a hole in our pockets. There isn’t anything that we couldn’t afford to do. People say, ‘Why don’t you do an IPO? Why don’t you get private equity investment?’ We don’t need it. We burn £30m in cash a month so, yeah, we’ve got £80m – it’s only three months’ cash. And maybe that’s just the way my mind works, but that’s a good place to be. We’ve got a £60m facility on top, so we’ve actually got £150m of headroom. That makes me feel secure. It’s become a question in lateral hires: what your cash balances are, what your debt position is. We’ve probably got one of the strongest cash balances now in the top 100.

‘We would like to move the dial further in London. We’ve got 550 people, maybe 600, in this building. It’d be great to have another 100, 150.’

LB: Would you ever look to it for firepower if you ever did see an opportunity to do something, though? There’s being cautious and then there’s…

JJ: We are careful, but if the right opportunity came along to make some big splashy investment, then we would do it. The opportunities to make investments like that are few and far between, so it’s not like we let these things sail past.

LB: Is there something that clearly presents as the right opportunity?

JJ: Tech is the obvious one, but we already spend a fortune on tech. BD [business development] is an obvious one we’re investing more in. The lateral hire pipeline is enormous, the investments we’re making in new partners is enormous… we’ve probably never had as many candidates on the go as now.

LB: Talking of lateral hires, how is the firm doing in London? There was definitely a feeling that London was fine but could have progressed a lot faster than it did in the wake of your London merger [with Theodore Goddard].

JJ: The brand in London has improved hugely. The work we’re doing in London is materially better than five years ago. A lot of people still question, is it a City brand? Is it a national brand? Would we like to move the dial further in London? Yes. We’ve got 550 people, maybe 600, in this building. It’d be great to have another 100, 150 people in it. It’s a very difficult market in London from our peer group, to make that kind of leap, and it’s probably a lot harder than I thought it would be.

LB: What would be the areas in London you think are the best for you to invest?

JJ: Corporate, financial services, prime real estate, litigation, things like global investigations – it’s tapping into a bigger international market, which is why the international footprint matters more.

LB: One of the things that tended to mess up national-heritage firms in London, is the model is broader than London firms and often the investment gets diffused. Don’t you have to narrow it down?

JJ: How many areas would that be though? I’m not talking about more than three, four areas.

LB: So equity capital markets? Investigations?

JJ: What we also can’t afford to do is get pigeon-holed as one thing, as a litigation firm or as a real estate firm or as a corporate firm, because that alienates the other stuff. But that doesn’t mean in the City that you couldn’t make massive progress just in corporate, or just in investigations, or just in one thing. It’s almost any of those.

LB: But in corporate, presumably the firm’s only going to get real traction if it narrows that down a lot? Whether that’s equity capital markets or private equity – although that’s going to be almost impossible now.

JJ: We’ve got a great private equity business, but it’s not a US private equity business. We’re not going to become a US private equity business in London, are we?

LB: Historically, the firm had a rock-solid brand with sponsors, but it didn’t capitalise on that in London when the long international private equity boom started.

JJ: We’re catching up on investments that could or should have been made ten years ago, 15 years ago. Maybe in 2003 when the Theodore Goddard merger was done, that should have been a massive springboard into Europe and deeper into the City. I don’t know why that didn’t happen, maybe people tried and it wasn’t possible? Maybe people just didn’t try hard enough? Then you get the global financial crisis – I don’t think the firm managed its way through that properly, and all of those things come reasonably quickly and you then need to catch up. Back in ’03 was the time we should have said: ‘That’s London, now we either double up in London or let’s go to Paris, Germany.’

LB: Internationally the firm has looked at a few mergers, some of them fairly big…

JJ: … allegedly.

LB: Is that something you’re still open to? The American question is obvious. You looked at a few of those over the years.

JJ: We’re still open. We recognise where we are in the market. We’re at 21 in the league tables even after headline growth of 14%. Is that where we want to stay for the rest of our lives? No. We gained £100m in turnover in the last five years and we’ve stayed at 20/21. The highest we’ve ever got to is 15/16, donkeys’ years ago. To make a leap like that you need to find a bigger way of doing it and if the right thing is there to enable us to push ourselves strategically into that position then we would definitely look at it. But do we have to do that to stay successful? No.

LB: The difference with America is it’s a binary thing in terms of strategy. It does shift the flow of the business if you aim for a deal. But it sounds like you would see Addleshaws as wanting to do that deal with a reasonably-sized American firm.

JJ: With the right firm with the right opportunity that fitted in with everything we wanted to achieve. Do I think in 30 years’ time this firm will need to have a branded global footprint that includes a presence in the US, Europe, Asia, the UK? Yes. In 12 months’ time? I doubt it.

LB: So what, broadly, are the marks you would need to hit to do a deal?

JJ: The biggest component is a firm that is compatible on a cultural, ideological outlook that fits with our broad service offering. But also an inclusive, collaborative firm, not an origination credits, 2,500-billable hours, there’s only one way, one-to-one leverage approach to life. That’s not workable. Do any of those firms exist? I actually don’t know.

LB: You mentioned people have asked you about the IPO and investment question. I’ve heard that Addleshaws has looked at it in one form or another. How seriously have you looked at it?

JJ: We’ve been approached by lots of people trying to sell it and we’ve listened to those pitches. We’re absolutely not actively pursuing it. I can’t think of a reason why we would want to, unless we wanted as a partner group to cash in on a high asset value with a good sales pitch and market that’s willing to take on a law firm float. It’s a great exit plan, but it carries massive long-term risk. I could cash in now on a float. It’d be an amazing deal for most of the partners now. How you then go into the City of London and try to attract people who need to be paid what they want to be paid is impossible if all you’ve got to offer is a piece of paper that you can’t sell for five years. I don’t understand how that works.

LB: In the next three years, what are the things you’d like to achieve?

JJ: I want to see us with the graphs going top-right and to keep that progress, would like to see us grow the City more and get more of the bigger mandates, much more of the better people. And if there is a strategic leap that can be made along the way to have people suddenly accept that we’re not a national or provincial firm, that would be great too.

LB: How do you stand on diversity?

JJ: We are behind where we want to be. That is a massive priority for us to fix. Really hard to work out why that is, because we do pride ourselves on having a very, very inclusive culture and so…

LB: Not those bluff, manly Northerners then?

JJ: I don’t think so. We must be doing something that’s not right for it to not show better in the outputs. I don’t have the answer. But we do have a team that’s been given the task of leading that. I’m hoping we make massive progress.

LB: The firm’s made a few interesting moves in re-engineering the business model. How much do you see yourself building on that?

JJ: I don’t think there’s any choice other than to keep building. It’s a market expectation, but it’s an essential part of what you need to deliver anyway.

LB: I know you’ve done things, but I’ve a slightly less clear sense of what exactly. Is that an issue in terms of reaching potential clients?

JJ: I would put us in the top five firms in all of that. I don’t think our PR around what we’re doing is as strong as some other firms. When we read lots of stuff and delve into what other people are doing, we’re either ahead of them or at least alongside them. We’ve got all the key elements. We deliver well on it. We know we’ve lost a couple of mandates because we’ve not sold as well and we know some of the clients have been let down by people who have sold it.

LB: Is it a case of needing to, not necessarily separate the brand fully, but create something more around it? There seems to be two clear strategies where firms are either putting it at arms-length or saying this is part of the overall delivery. The problem with the latter is that sometimes the message gets lost.

JJ: There are two business models and we’ve debated them. We’re not particularly interested in building something to sell it off. We’re interested in building something that works to the benefit of what we want to do, and enhances the brand and delivers the work. We have put it altogether under a brand – Intelligent Delivery (ID) – but we’re not featuring highly enough, it’s not getting across.

LB: I recently talked to one GC who works with you about ID and they didn’t recognise the brand name, and even said that the firm was boring and not doing much in this space.

JJ: That surprises me.

LB: There is a challenge around how you articulate and package up the service… A lot of firms struggle with it. It was just one GC, but…

JJ: … yeah, but even one.

LB: 2021 is when your term finishes, I assume you’re going to take another crack?

JJ: Might do.

LB: Allegedly. What do you want your legacy to be?

JJ: As long as the firm is a lot better than it was when I took it over, which I can guarantee will be the case. Every day you go forward you want the legacy to be that you’re better than the day you’ve just left. There’ll come a day when it won’t be as good. We’re better than everyone thinks we are.

hamish.mcnicol@legalease.co.uk

alex.novarese@legalease.co.uk