The CMS group, which passed a major milestone this summer when it provided its financial results as a single entity for the first time, has told LB that it is looking to drop local firm names to strengthen its international brand.
‘We have been looking at the risks of being regarded as a single firm under this type of structure and we have decided we want to move forward towards being a single firm,’ said Duncan Weston, managing partner of UK member firm CMS Cameron McKenna. ‘We’ve already adopted a single visual identity as part of the conversion: the name CMS with law and tax underneath – a logo we decided upon two years ago.’
Weston explained that clients across the globe already get firm literature and business cards branded just CMS rather than the local firm names. However, there are some specific cases where the national firm name will not be dropped. CMS Bureau Francis Lefebvre, for example, is a registered brand and will retain its local name.
The CMS group financials show that while the UK member firm CMS Cameron McKenna has not grown as significantly as the network overall, its profitability has increased.
In 2011/12 Camerons LLP recorded a below-inflation 1.2% rise in turnover to £227.6m, as opposed to an overall 4% increase in combined CMS revenues to £692m. Significantly, CMS’s amalgamated global figures award the firm a robust 34% profit margin, which is 13 percentage points higher than Camerons’ published profit margin last year.
However, according to recent figures, Camerons managed to garner a 7.6% rise in net income to £51.8m during the past year.
Weston said those gains were driven by its high-profile Integreon deal in 2010, which saw it outsource its entire back office function. ‘I can tell you that we have made significant efficiencies in the business,’ said Weston. ‘I think it’s a market trend; I can’t think of a single law firm that hasn’t had to spend time driving efficiencies. We did the Integreon deal, which was a huge internal change for us. We’ve also been tight on new partners and managing the equity. We’ve managed costs very carefully across the piece and profitability has increased as a result.’
Although Weston said that growth had been pretty flat across Europe because of the turbulence caused by the eurozone crisis, the group had still seen revenues increase following additions to its network. CMS added offices in Luxembourg and Albania in early 2011 and Portugal in October.
Geographically, German member firm CMS Hasche Sigle has enjoyed significant success following its lead role advising the administrators in the Lehman Brothers bankruptcy, while its French arm is leveraging off its historical strength in tax and regulatory work to perform strongly in those areas. Most notably, CMS Bureau Francis Lefebvre successfully represented German investment funds in a high-profile case against the French tax authorities over the French practice of levying a 30% withholding tax on dividends paid to non-resident UCITS.
‘When we go to America we are going to be talking about CMS, not about London or Paris.’
Duncan Weston,
CMS Cameron McKenna
However the firm’s global coverage is still missing a US component, which has become a well-publicised priority recently.
‘During our partners’ meeting in June this year the management board of CMS decided to prioritise the US as a growth market and it is a CMS initiative not a German initiative, or a French initiative,’ said Weston. ‘When we go to America we are going to be talking about CMS, not about London or Paris.’
Following the flood of US firms to Europe, and European firms to the US, CMS is setting aside its traditional preference for loose referral relationships to adopt a more structured transatlantic approach in the DLA Piper/Hogan Lovells mould. However, it will need to address network inconsistencies to increase its attractiveness. In the UK the firm’s sector profile is solid in energy, insurance, real estate and human resources, but the story across CMS is patchier. In Germany, for example, CMS Hasche Sigle’s signature strengths are in corporate and IT, while France’s CMS Bureau Francis Lefebvre is top tier in tax. How will that come into play when it comes to choosing a merger partner?
‘We’ve been talking to firms that have national coverage in the same way that we have European coverage,’ said Weston. ‘Larger firms with areas of sector specialism that align to ours. It is a much more sector-driven strategy and that is new for us.’
Although Weston said that CMS will not financially integrate or share profitability, he did confirm that it is discussing how to reward partners to promote leadership responsibility and skills to increase its profile in certain areas. It is not just its practice areas that need to appear unified. As Europe’s financial instability continues to dominate headlines, is now the right time to start looking for a merger partner?
‘It’s probably not the most fantastic time to go to the US because they’re all very worried about the economic situation here, but I don’t see the US strategy happening within a week, or a month, or a year. It’s going to take time,’ said Weston. ‘I also think that although US firms are looking at prioritising Asia, there is still a very strong economic pull to Europe. Also we’re interested in Asia and the US, and a European and Asia proposition will be a much stronger proposition than either the US or Europe alone.’
CMS’s Asia practice currently fields offices in Beijing and Shanghai, including five partners. The firm has set up a small sector focus group in Beijing.
‘The combined initiative de-risks the liability and allows revenues to be contributed by all the firms to centre,’ said Weston. ‘This allows investment into expansion in places like China and other Asian countries. I think with a strong US firm, and with a stronger pot of money to invest, we’ll have the strategic edge in that.’