The region's legal industry has been forced to endure a frustrating time of late as the corporate sector keeps its powder dry on the deals front, but that has allowed many firms to consolidate their position in the market ready for the long-awaiTed upturn in activity. Gareth Chadwick reports
ALL QUIET ON THE YORKSHIRE FRONT
The region's legal industry has been forced to endure a frustrating time of late as the corporate sector keeps its powder dry on the deals front, but that has allowed many firms to consolidate their position in the market ready for the long-awaiTed upturn in activity. Gareth Chadwick reports
It's not been an easy year for Yorkshire's lawyers. The green shoots of recovery from last autumn quickly perished in the deserts of Iraq, to be replaced by the same quivering timidity that has bedevilled the corporate market for the past three years.
And although law firms may not live or die by their corporate work, it is the foundation on which the region's leading practices are built and on which their strength relies. Without the strong foundation, the whole structure looks a little shakier.
The top of the market was the worst affected - the big corporate deals, the national and international mergers, disposals, joint ventures and acquisitions that are the hunting ground of Yorkshire's big six: Addleshaw Goddard (formerly Addleshaw Booth), DLA, Eversheds, Hammonds, Pinsents and Walker Morris.
There were still deals to be done, as evidenced by the £3297 million sale of the homes division of John Laing to George Wimpey late last year, a deal led by Martin Shaw in Pinsents' Leeds office. But the big deals were fewer and further between and took longer to put together.
"It's been a very unusual, benign economy, neither rising nor falling," says Richard Marshall, managing partner of law firm Lupton Fawcett.
"Nobody has the confidence to commit to large transactions or invest money. But on the other hand, money is so cheap that businesses aren't going bust either. It's an odd situation and one that's beyond the understanding of most professionals in the country, never mind in Yorkshire," he says.
The big firms are in most cases maintaining growth, but they are having to work harder for it. Turnover at the largest firms is generally up by between ten to 15 per cent - not to be sniffed at, but a far cry from the heady days of 20 per cent-plus growth three years ago.
DLA was up 15 per cent nationally, for example, Eversheds up 13 per cent and Walker Morris, the only firm with a solely Leeds presence, up 15 per cent. Hammonds on the other hand reported a turnover rise of only 2 per cent nationally.
Hammonds' Leeds-based practice has traditionally been one its strongest and figures for Yorkshire could be expected to be healthier, but it is a sign that even the largest firms are not immune from the downturn.
Corporate teams in particular have suffered.
"There are far fewer transactions around which means that most firms in Leeds, if they are honest, have had at best static turnover in the corporate department and at worst a drop in relation to budget," says Sean Lippell, head of the corporate team at Addleshaw Goddard.
The confidence of Yorkshire's corporate dealmakers is directly affected by the situation in London, and with new issues down on the stock market, venture capitalists keeping their wallets firmly under the table and a number of City law firms laying off staff, a lack of corporate confidence up north is to be expected.
While the region's corporate lawyers are enjoying long lunches and the novelty of arriving home in time for Coronation Street, however, their colleagues in other practice areas have never been busier.
Commercial property continues its market-busting growth, partly driven by low stock market confidence. Corporate recovery work, although not reaching anticipated levels, is significantly up, human resources teams are busy, as is dispute resolution, where Nigel Kissack, managing partner of Pinsents, reports growth of 30 per cent above budget and partners regularly working 14-hour days to keep on top of their teetering in-trays.
The stellar performer though, is the public sector, and its mountain of projects, public-private partnerships (PPP) and private finance initiatives (PFI).
"It's been a brilliant year for our projects team," says Kissack. "We are one of the leaders for commercial work in the healthcare sector and have worked on four new hospital openings from Leeds in the past year."
Pinsents also advised on a £3163 million street lighting project in Sunderland.
Other firms have similar tales. Addleshaw Goddard acted on the largest water PFI deal in Europe, advising Brey Europe on a 25-year contract with the Ministry of Defence to supply water to 1,200 sites across England and Wales.
Earlier this year it advised on another big-ticket project, a £3220 million street lighting project with Staffordshire County Council.
DLA is the sole adviser to Leeds City Council for PFI work and Eversheds is reportedly the number one legal adviser in the country in terms of projects signed, having worked on 107 projects with a capital value of £32.8 billion.
It is currently working on a £31 billion waste management scheme for a large - but undisclosed - council and has just completed a £370 million schools project in Calderdale.
"There's been enormous growth in projects work," says Stephen Hopkins, Eversheds' regional managing partner.
"And it is growth that has a much broader impact than just on the projects team itself. It affects related areas such as planning, environmental law, construction and helps drive growth in those areas as well," he says.
It is a specialism that also opens up opportunities further afield. The Government regards PFI as a know-how export for the UK, and those firms with successful projects practices at home can expect to export that expertise abroad.
Some of them already are doing just that. Eversheds has been appointed to advise on a regeneration project in Ghana. Hammonds has established a Russian joint venture to help it tap into the vast Russian market and DLA's Singapore office has recently advised on a £321 million ship conversion and commissioning project.
There is a theory that as the larger firms increasingly focus on ever larger deals, often outside the region or even internationally, opportunities open up in the regional market for those firms below them.
Mid-tier firms such as Lupton Fawcett, Gordons (formerly Gordons Cranswick), Irwin Mitchell and Cobbetts are certainly convinced that the opportunities are there.
John Holden, head of the corporate team at Gordons, says: "The large national firms are excellent operations and very good at what they do, but their focus is on national and international work.
"They have much larger organisations to support, higher overheads and a higher cost base. It only works if they attract a sufficient quantity of large jobs.
"There are firms in the mid-tier that have got the expertise and the market focus and can do 80-90 per cent of the work that the big firms do in the region, but they are doing it from a lower cost base, are closer to the ground and are generally more suited to the type of work that is around at the moment."
The big firms, of course, deny that they have lost interest in the local market.
With the economy showing little sign of life, it looks like they will have a few more months to prove it
Addleshaws steps up a gear
Yorkshire and the UK's legal market changed dramatically in May 2003 with one of the largest legal mergers in recent years.
Leeds-based Addleshaw Booth merged with City firm Theodore Goddard to create Addleshaw Goddard, a 173-partner, 500-lawyer firm with a total staff complement of more than 1,250 people.
After months of rumour, merger discussions between the two firms were confirmed in February 2003, before an agreement was reached on April 16. The new firm was launched on May 1.
Addleshaw Booth's senior partner, Paul Lee, stepped up to become senior partner at the firm, Addleshaws' Mark Jones became managing partner and Theodore Goddard's managing partner, Paddy Grafton Green, became partnership chairman.
It is now the 16th largest legal practice in the country and has three UK offices - Leeds, London and Manchester, a branch in Brussels and an international network of partner firms.
Jones says: "Our ambition is for Addleshaw Goddard to become one of the 25 most profitable firms in the country over the next four years and we are already looking at ways in which the new business can deliver greater business value to our clients."
The firm announced a combined fee-income for 2002/2003 of £3130 million, with profits per equity partner of £3289,000.
It is too early to say what the long term impact on the regional market will be.
Addleshaws has lost a few clients, notably FTSE 250 company Signet. Signet was understood to be concerned about the number of senior departures from Theodore Goddard in the 18 months prior to the merger, during which time seven corporate partners left the firm.
But on the whole market reaction has been positive. It has secured some impressive appointments, including BT, Barclays and Sainsbury's and the banking team - one of the firm's strengths - hit the ground running when it acted opposite City giant Linklaters on a £3130 million multi-jurisdictional deal for Anglo-Dutch private bank Insinger de Beaufort.
If the merger does work, it could leave the region's other big firms fighting for the scraps at the top of the corporate table.
Gordons is pick of the bunch
Gordons is rated by this year's Legal 500 as "the pick of the bunch in 2002", but the firm doesn't make things easy for itself.
The Bradford-based firm merged with Leeds firm Cranswick Watson in 2000, opening a Leeds office in the process - just as the corporate market took a nosedive
Another merger in November 2002, with Bradford firm Sugden Spencer, boosted the partnership to 34.
The number of partners fell to 31 a few months later when the firm shut its Keighley office. This year, hardly a bumper one for most law firms, it has embarked upon an ambitious rebranding strategy and recruited several new lawyers.
But if you can do well in a bad market you can do well in any market, and the firm is certainly doing that.
It has doubled in size in the past five years and has just enjoyed its most successful year ever in terms of growth and profitability, with turnover increasing by 17 per cent to just over £39 million.
Gordons' aim is to be the natural alternative to the Big Six in Yorkshire, a lofty ambition but one it is capable of achieving. It has already lured some key lawyers from local rivals, including partners Peter Barton, David Smyllie and Rupert Nevin from DLA; plus Rachel Tunnicliffe from Addleshaws.
Clients include Coors Brewers, Peter Black Holdings, Hornbeam Park Developments, car dealership JCT600 and the jewel in the firm's crown, William Morrison Supermarkets PLC.
It is the William Morrison connection which has seen the firm's profile rocket over the past 12 months, as the supermarket group battles for control of Safeway.
So highly does Morrison rate the firm, it asked partner and head of corporate John Holden to recommend a City firm to work alongside his team on the Safeways bid.
Holden is based in the eight-partner Leeds office. His own profile has also been boosted by the Morrison's work. In April he was rated 12th nationally in terms of the number of deals worked on in the first quarter of this year, a survey that is normally notable for the dominance of City-based lawyers at much larger law firms.
He is confident that the firm strategy is the right one, but isn't taking anything for granted. "We want to be the natural alternative to the Big Six in the region. To achieve that we've got to continue to build our service levels, we have to continue to grow the practice and we have to bring in more top quality lawyers.
Legal 500 Review
This year's Legal 500 (www.legal500.com) - the annual legal industry publication that surveys and analyses the performance of the nation's law firms - reports that the domination of the Big Six Yorkshire firms - Addleshaw Goddard, DLA, Eversheds, Hammonds, Pinsents, Walker Morris - is continuing at the top end of the market, but they are facing some stiff opposition lower down.
There are also some particular niche areas of law where much smaller firms are matching, if not exceeding, the performance of the Big Six.
Addleshaw Goddard remain the "powerhouse of the market", a position reinforced by the merger in May 2003 between Addleshaw Booth and Theodore Goddard.
DLA's presence in Sheffield, the only one of the Big Six in the city, gives it a reach its rivals lack, particularly in corporate law, property and litigation, while Eversheds, with a newly-installed regional and national managing partner, is expected to continue its growth on both sides of the Pennines. Its commercial and public sector practices in particular are singled out for praise.
Hammonds has had a difficult year, with a number of partners leaving and rumours of financial worries. It's clearly a period of transition for the firm but the survey says its strong Yorkshire roots should sustain it through a quiet economy.
Nigel Kissack at Pinsents is praised for his steady stewardship of the firm through its expansion and despite some losses from the property team, its strength in the plc and higher-value local market continues unabated.
The only one of the Big Six not to have a national network of offices is Walker Morris, but that hasn't stopped it developing a first-rate national reputation, a reputation that continues to grow in areas such as PFI, corporate, property and dispute resolution.
Outside the top tier, where the large firms have traditionally split the corporate market between them, Legal 500 says that the legal market is more dynamic.
Irwin Mitchell, a well-established personal injury and clinical negligence firm with offices nationally, including branches in Sheffield and Leeds, is building a reputation for its corporate and commercial work.
Local firms such as Brooke North, Lupton Fawcett, Gordons, McCormicks, Keeble Hawson, Nelson and Co in Leeds, Rollits and Andrew Jackson in Hull and, although not strictly a local firm, Nabarro Nathanson in Sheffield, are all singled out for their strength in building successful practices in a difficult market and often in practice areas outside their traditional strengths.
The implication is that the focus of the Big Six on the top tier of corporate work, which they alone in the region can handle, is opening up opportunities for smaller firms to make advances in the lower level regional market.
These firms have also benefited as clients pay more attention to their legal spend and look for the same advice but at a lower cost.
The survey highlights niche areas of law which require focused, specialist expertise, not necessarily extensive manpower. Such areas represent opportunities for smaller firms to challenge their larger rivals.
Gordons - formerly Gordons Cranswick - for example, is winning plaudits for the strength of its corporate practice, but is also highly rated for its family team, as is Howells in Sheffield. Wilbraham & Co. continues to be one of the highest rated planning firms in the country. McCormicks has made sports law its own private fiefdom. Hempsons in Harrogate is one of only two firms in the city to receive a mention, which is for its healthcare practice, and Wrigleys' private client department is rated above all its much larger rivals
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