Ahead of our LB100 report next month, one merger is on the table that requires some hard choices now to be a future success.
Lawrence Graham (LG) has confirmed it is ‘evaluating a merger’ with City rival Field Fisher Waterhouse (FFW). The deal would put the new firm comfortably in the top 25 of the LB100 with an expected turnover of over £150m.
LG has recently shown its ambition, announcing that it is to open an office in Singapore and more recently that it plans to open in Brazil through a local association with Motta, Fernandes Rocha.
FFW has revamped its management structure, scrapping its senior partner role and introducing a supervisory board. Both firms are in the mood for change.
However, both will have to deal quickly with two key issues if LG/FFW is to avoid simply becoming yet another unwieldy beast.
The firms will need to address the disparity in profit per lawyer (PPL). Using 2011 LB100 data, LG is the smaller firm (219 lawyers compared to 386 at FFW) with smaller revenues (LG £59m; FFW £94m) but is more profitable.
After a number of years of relative obscurity, both firms will need to be decisive and ruthless.
The inescapable fact is that the average LG lawyer generates more revenue (£269,000 to £244,000) and, most tellingly, £20,000 a year more profit. Cutting back on partners may be one way of improving PEP but ultimately the two firms will have to work hard to increase average revenue per lawyer at FFW, because lawyer costs are broadly the same.
Both firms also need to recognise which practices will not work and ditch them fast.
FFW’s IP and technology practice is first rate, so the firm should concentrate its efforts in other practice areas around this sector. Its respected mid-market corporate practice, when combined with LG’s noted strength in similar work, could make an attractive package if put together as a cohesive whole to market to corporate clients in the hi-tech sector.
LG and FFW have fashioned strong connections with clients in India, and LG also has a recognised presence in the Middle East. This, combined with LG’s excellent international wealth management practice, means the firm could position itself as a go-to adviser for wealthy family businesses and entrepreneurs out of countries such as India and Dubai, particularly technology companies looking to invest or raise capital.
Both firms have other standalone strengths, such as fraud and insurance. If that work justifies itself as clearly profitable, then of course it should remain. Otherwise, a rethink is required. Carrying dead weight into a merger would be costly.
After a number of years of relative obscurity, both firms will need to be decisive and ruthless. Any tentative steps made now will come back to haunt them.