Is Kennedys keeping up? Insurance player claims innovation and expansion provide the right cover

Kathryn McCann and Victoria Young discuss Kennedys’ prospects with longstanding senior partner Nick Thomas

‘I’d like to tell you that Kennedys is a crap practice,’ one law firm leader tells Legal Business, ‘but it is reasonably good. The unfortunate thing is that it follows rather than leads in its market and that’s a strategic disadvantage.’

This back-handed compliment to the 700-lawyer insurance specialist is a bit wide of the mark: there is little evidence of a strategic disadvantage. Despite serving an industry under constant pressure to cut costs and innovate, Kennedys has proven to be a credible mid-tier player thanks to a combination of aggressive international and domestic expansion, as well as a genuine focus on innovation.

Under the long-term leadership of Nick Thomas (pictured), who joined the firm in 1977 and became senior partner in 1996, Kennedys has achieved a consistently solid financial performance, with revenue growth up 7% to £138.8m for the financial year 2015/16 – a result which is particularly impressive in the context of an overall tougher year for the mid-market. However, increased international investment has meant profit per equity partner (PEP) fell marginally by 1% to £406,000. Over five years, revenue is up 43% – during a period when the firm expanded its aviation practice and grew geographically, particularly in Latin America. Over ten years, revenues have grown nearly 200% from £46.5m to £138.8m. And, as Thomas gears up for another five-year term as senior partner, further expansion is on the cards.

Despite all this, Kennedys is sometimes compared unfavourably with rival Clyde & Co, even touted as ‘Clydes-lite’ by some competitors. Clydes’ revenue far outstrips Kennedys, up 13% to £447.1m this year, with PEP up 8% to £649,000. In a cruel twist, Clydes also benefited from the takeover of Scottish independent Simpson & Marwick in October 2015, a business that turned over almost £30m in fees and was previously in advanced talks with Kennedys.

After 18 months, the talks fell apart and Kennedys made its own move into Scotland in January 2015, with greenfield sites in Edinburgh and Glasgow.

While one Scottish partner at a rival firm says Kennedys has made a ‘limited impression’ north of the border, there is no doubt the firm is in growth mode, having opened five new offices in the last year alone. The firm also announced a boost to its shipping practice through a City merger with boutique firm Waltons & Morse, adding £11m to the top line when it completes in November, as well as most recently confirming its plans to double in size in Dublin.

Bigger ambitions

Over the past two years Kennedys has embarked on aggressive expansion, which has included opening in Brazil, Peru, Colombia and Chile, acquiring Danish firm Erritzøe, as well as boutique Waltons & Morse in London. This followed adding US capability to its Miami base in 2015, as well as a Moscow office and forming a joint legal venture with Singapore practice Legal Solutions. International offices have consistently brought in about a quarter of group revenues over the past five years, with non-UK revenues making up £36m of a total revenue of £138.8m.

And the firm shows no signs of slowing, with plans to make two associate offices in Mexico and Argentina part of the Kennedys brand by the end of the year. Additionally, Kennedys is targeting further growth in Asia, hoping to expand in Australia as well as in the south east of the region.

‘To say we will by hook or by crook reach £200m by year 2020 or whatever is a bit fanciful isn’t it? Anyone can grow by taking on a load of crap.’
Nick Thomas, Kennedys.

‘The big insurers we serve really require us to have an international footprint if we are to get on their panels,’ says Rupert Skrine, who heads up Kennedys’ Hong Kong practice. ‘For example, in Australia, clients now require a national presence, so we are looking at other offices in Australia. And then in South-East Asia we are looking at a couple of markets – Thailand is one of them and the other is a bit further on the back burner. If a client wants us to be in a market then we will open there. Ultimately we would like to be in China under our own banner, but we have to respect local culture and move at a pace that’s appropriate; it will be offshore.’

However, Thomas says that although it seems like there is a lot being rolled out at one time, the moves have been years in the planning: ‘It might look as though we have done a lot in a hurry in the last 15 months, but all of that has been in train for a long time. Sometimes it feels like the last act of The Godfather where all these things unfold at once, but for all these moves we are having years of discussions.’

All Kennedys offices are part of the same profit pool. ‘We are not a Swiss Verein or a franchise operation. We are not a bunch of people who have decided to wear the same badge,’ says Thomas. ‘We are one firm. That’s important to us.’

The secret to expansion, as head of insurance Nick Williams puts it, is a long courting period: ‘We don’t bite off more than we can chew; we don’t buy huge law firms elsewhere and put a Kennedys badge on them – that’s not our style. We build organically.’

A rival partner agrees: ‘Kennedys are slick operationally and good at bedding down mergers.’ The acquisition of Waltons & Morse, for example – broadly a cargo recovery practice – made good sense as Kennedys’ shipping practice is much more insurance-based than its aviation offering, which developed following the acquisition of specialist firm Gates and Partners. While Kennedys retained most of the partners brought in when Gates was acquired in 2013, lead partners John Korzeniowski and Aoife O’Sullivan defected to form their own firm 12 months ago. Korzeniowski, who had led Kennedys’ London aviation litigation team, says the pair exited because it was ‘just the time in our lives to try something new’.

Thomas says: ‘John and Aoife just took a view, which they are entitled to, that they would be happier in a small, niche firm. It is nothing dramatic; they came from a small firm and the whole big-firm ethos didn’t suit them.’

Despite this ‘big-firm ethos’, the constant expansion into new practice areas and new geographies is not simply the pursuit of critical mass in the hope of achieving a notional turnover target. ‘To say we will by hook or by crook reach £200m by year 2020 or whatever is a bit fanciful isn’t it?’ says Thomas. ‘Anyone can grow by taking on a load of crap. In proper business, like proper growth mode, you are adding business lines and therefore more eggs and baskets; you are adding more good people, you can invest in more people and all the toys – sorry, I mean innovation.’

Innovation, innovation, innovation

While every law firm is waving the innovation flag these days, Kennedys is going beyond the rhetoric having divided off a separate resource and development budget, separate from IT, and says it spends about £500,000 a year on new innovations. Both Kennedys’ key products, virtual lawyer KLAiM and the newer @scene, are already licensed so they can be sold off to clients as a separate revenue stream.

‘Sometimes it feels like the last act of The Godfather where all these things unfold at once, but these moves have years of discussions.’
Nick Thomas, Kennedys

KLAiM, which manages personal injury claims traditionally sent to law firms, was the focus for Kennedys taking home the award for Legal Technology Firm of the Year at the Legal Business Awards – Kennedys claims 75% of cases using the technology are settled successfully, with one client saying it saved £400,000 in legal costs in its first full year of using KLAiM.

Kennedys head of liability Richard West says: ‘Our market share has grown considerably even though the market is consolidating. We work from top to bottom, from the low-value claims to the most serious catastrophic event. Our technology is one of our differentiators and removes the need for us to price on a “too good to be true” basis. Instead, we differentiate other than on price by helping our clients to use their lawyers less through our innovation. We have built a reputation for volume litigation alongside our catastrophic injury expertise and now receive considerable volumes.’

Williams says the firm’s innovation has allowed partners to offer clients access to both high-end specialist advice as well as low-volume process-driven work, which means that the firm has not had to pull back from any less profitable markets.

‘We know that clients are interested in being able to deal with one law firm who will help them with all their problems. So we are very happy to work in all those areas where our insurance clients need us,’ he adds.

Thomas has been at the helm of the firm as senior partner on his own since chief executive Guy Stobart stepped down at the end of 2014 and insists there is now no need for a second leadership role. Stobart had established a board of non-lawyer executives, comprising the director of human resources, finance, IT and business development, which Thomas says helps with the day-to-day running of the firm.

Thomas also has strong support behind him in Williams. As one rival partner puts it: ‘Even though Nick Williams has no formal leadership position, if you try and do anything with Kennedys, you’re dealing with the Two Nicks. When partners change hands Nick Thomas is the face – you start by talking to him – but Williams is the operations guy underneath it all.’ Williams has been at the firm almost as long as the senior partner, joining in the late 1970s and becoming the firm’s second articled clerk after Thomas.

That Thomas has been in the role for so long is perhaps evidence that the firm has managed to protect its culture, despite its significant expansion. The firm is described both internally and externally as open, supportive and collegiate.

Williams concludes: ‘He and I joined in the 1970s when it was a much smaller firm and the culture has been maintained. We are a big firm in performance, but we like to think we still have some small firm values. We do things well, but we also do things the right way.’

 

kathryn.mccann@legalease.co.uk

victoria.young@legalease.co.uk