Brexit-related woes aside, City firms in the second 50 enjoyed a bumper year
When a firm depends on a signature practice area or specialism in certain sectors, a boom year can quickly turn bust during periods of economic turbulence. However, a number of the London-based practices and boutiques that occupy the second 50 of the Legal Business 100 (LB100) were the standout performers over 2015/16, despite Brexit-related headwinds during the second half of the year.
The London cohort – 20 firms in the second half of the table in total – was the most successful peer group of any in the LB100 during the last financial year in terms of year-on-year growth in revenue and profit per equity partner (PEP). The average revenue across those firms was up 3% to £37.8m – the average for the entire second 50 as a whole – while PEP was up 7% to £435,000.
Stewarts Law has reaffirmed its position as the strongest-performing LB100 firm of the last five years. Turnover is up 118% since 2010/11, while PEP has grown 81% from £890,000 to £1.6m. The disputes-only firm celebrated its 25th anniversary in 2015 by posting double-digit revenue growth for the second year running, up 19% to £62.1m.
Ongoing disputes include the £4bn shareholder group action against The Royal Bank of Scotland and preparing for a legal action against Tesco following the supermarket’s overstatement of profits in 2015. On the personal injury side, the firm is representing three of the victims of the Alton Towers rollercoaster accident and the family of Formula One racing driver Jules Bianchi, who sustained fatal head injuries at the Japanese Grand Prix in 2014. The firm also recently widened its disputes capability with the hire of a new head of trusts disputes from Farrer & Co, James Price.>
The picture is equally strong for pensions boutique Sackers, which has been one of the most consistent performers in the LB100 since it began to feature every year from 2009. Since then, revenues have grown by 27% to £26.9m in 2015/16, up 14% from the previous year, with PEP shooting up 29% year-on-year to just over £1m – unsurprising for a firm that counts Lloyds Bank, HSBC, John Lewis Partnership and ITV as clients.
The £3.2m revenue growth was again organic, with the firm staying at around 20 partners and 45 fee-earners for the last decade. Senior partner Ian Pittaway says: ‘It was a very good year. The general routine work was of a higher level and there were a few mega-projects too. Generally the pensions world was pretty busy.’
Fastest-growing firms in organic revenues 2011-16
| Firm | 2011 | 2016 | % change |
| Stewarts Law | £28.5m | £62.1m | 118% |
| Clyde & Co | £211.8m | £447.1m | 111% |
| Mishcon de Reya | £65m | £132.7m | 104% |
| Freeths | £32m | £63.9m | 100% |
| Osborne Clarke | £90.3m | £178.6m | 98% |
| Forsters | £25m | £46.7m | 87% |
| Browne Jacobson | £35.2m | £64m | 82% |
| Fladgate | £23.5m | £42.7m | 82% |
| Brodies | £36.9m | £65.1m | 76% |
| Howard Kennedy | £29.5m | £50.7m | 72% |
Slowest-growing firms by revenue 2011-16
| Firm | 2011 | 2016 | % change |
| Ince & Co | £86.2m | £76.2m | -12% |
| Maclay Murray & Spens | £48.6m | £44.8m | -8% |
| Brabners | £30m | £30m | 0% |
| Hill Dickinson | £100.1m | £103.1m | 3% |
| Walker Morris | £40.6m | £42.4m | 4% |
PEP: Fastest-growing LB100 firms 2011-16
| Firm | 2011 | 2016 | % change |
| Addleshaw Goddard | £328,000 | £679,000 | 107% |
| Howard Kennedy | £250,000 | £506,000 | 102% |
| Fladgate | £347,000 | £688,000 | 98% |
| Nabarro | £310,000 | £585,000 | 89% |
| Stewarts Law | £890,000 | £1,611,000 | 81% |
| Mishcon de Reya | £575,000 | £1,000,000 | 74% |
| Macfarlanes | £752,000 | £1,284,000 | 71% |
| Bristows | £293,000 | £486,000 | 66% |
| Brodies | £365,000 | £597,000 | 64% |
| Osborne Clarke | £403,000 | £636,000 | 58% |
| Wedlake Bell | £210,000 | £332,000 | 58% |
PEP: Slowest-growing LB100 firms 2011-16
| Firm | 2011 | 2016 | % change |
| BLM | £303,000 | £205,000 | -32% |
| Lewis Silkin | £370,000 | £255,000 | -31% |
| Brabners | £239,000 | £167,000 | -30% |
| Trowers & Hamlins | £440,000 | £310,000 | -30% |
| Capsticks | £418,000 | £322,000 | -23% |
| Kingsley Napley | £430,000 | £331,000 | -23% |
| Norton Rose Fulbright | £485,000 | £393,000 | -19% |
| Ince & Co | £311,000 | £253,000 | -19% |
| Ashurst | £713,000 | £603,000 | -15% |
| Walker Morris | £466,000 | £400,000 | -14% |
He adds: ‘Last year was a perfect storm of lots of work and although this year we’re halfway through – we account on a calendar year basis – is looking good, I’m not sure it will be the [same] exceptional levels as 2015.’
But it is not just the specialists that posted robust years. London firms with broader practices are also outperforming a number of firms in the top half of the table. Technology and IP specialist Bristows has followed up an impressive showing in 2014/15 with further growth. The firm reported success across its life sciences and technology, media and telecoms sectors to match the previous year’s revenue growth of 12% to reach £42.5m.
‘We budgeted to make less profit last year. The partners knew it was coming. It is an investment point.’
David Raine, Penningtons Manches
Joint managing partner Theo Savvides, a litigator who arrived from Osborne Clarke in 2014 before being appointed to Bristows’ leadership in May, says the firm has benefited in recent years from a number of significant disputes reaching their conclusion, particularly in patent litigation.
Bristows has a track record of acting for enviable tech clients, including Google and Samsung. Savvides says the firm is busy on a number of tech start-up deals. ‘On the corporate side of things, we’re looking at technology ventures, particularly investment coming from the US.’
While Bristows and many smaller City firms have often fiercely guarded their independence, and made a virtue of being nimble, the recent growth of Penningtons Manches was precipitated by consolidation. After posting revenue growth of 23% in 2014/15 following the takeover of an ailing Manches in 2013, the rate of growth slowed over the last financial year, with revenues up 7% to £61.6m. While still an above-average performance in the context of the LB100 as a whole, profitability suffered a setback, with PEP falling 16% to £269,000.
Chief executive David Raine described the firm’s failure to match the financial performance of last year as ‘disappointing’, but notes: ‘We budgeted to make less profit, strangely, last year. The partners knew it was coming. It is an investment point.’
He adds: ‘We are trying to build IT which helps us do our work rather than getting in the way at times. This is always going to take time and resource, but that had to be done.’
Not every firm could maintain revenue growth in an unstable market. Boodle Hatfield and Capsticks Solicitors both posted negative revenue growth, down 7% and 2% respectively.
Boodle Hatfield had a particularly slow year, with turnover falling 7% from £23.9m to £22.3m, although this was partly the result of a 14% drop in lawyer headcount year-on-year. It was a year of investment for the firm, which moved most of its workforce from Mayfair to a new space in Blackfriars. All departments hit budget, aside from commercial property, but as real estate accounts for 42% of the firm’s revenues, this is significant.
Chief operating officer Andy Wansell says: ‘We have seen some domestic investors saying they will sit this out until they know where the market stands.’
‘The real estate market will be quiet in the next quarter. There’s a degree of uncertainty and property markets will hate that.’
Paul Roberts, Forsters
However, Boodle Hatfield’s performance contrasts with another London firm that has a similar business model, a focus on real estate and private client. Forsters is another of the LB100‘s leading performers over the last five years, achieving 87% revenue growth since 2011. In 2015/16 the firm followed up on the 14% growth of 2014/15 with another 13% spike in turnover, from £41.4m to £46.7m. PEP edged up only slightly, following an 11% increase last year, this time up 2% to £550,000.
However, managing partner Paul Roberts feels that more Brexit-related uncertainty in property deals is yet to come. ‘The real estate market will be quiet in the next quarter. We don’t know what will happen. There’s a degree of uncertainty and property markets will hate that,’ he says.
However, he notes that for an agile firm such as his own, there will be opportunity as much as uncertainty. ‘There has been a bit of contraction in real estate investment and firms with global perspective struggle to have a major real estate focus. There’s a schizophrenic approach to what they’re really about. We are very clear and do not have distractions. We’re not looking at US mergers or launching in Asia, but we are concerned about the currency fluctuations.’
In conversations for the LB100, Brexit unsurprisingly dominated months of work for the UK-focused London firms and boutiques. But there are some striking differences in outlook for 2016/17.
Says Raine: ‘There are quite a few opportunities in all this. We just have to make sure the transactional work continues to get done.’
Wansell, meanwhile, echoes the sentiments of many desiring an end to the political upheaval. ‘If I had one wish now, it would be to wave the magic wand and find a way for us to make our exit.’
If only it were that simple. LB
matthew.field@legalease.co.uk