2023 is only a few days old and one of the biggest news stories around is the rumoured merger talks between Sherman & Sterling and Hogan Lovells, a merger that would create the world’s 3rd largest law firm by revenue.
According to The Lawyer, “the newly-merged firm would have a combined annual revenue of $3.6bn and a London office generating more than £500m”. Asked about the rumoured talks, a Shearman & Sterling spokesperson said, “We continuously consider the various levers of growth that are accessible to us as part of our strategic planning process.”
This focus on growth as part of a law firm’s strategy has been one of the principal drivers behind the transformation of the legal market over the last 30 years, but is growth the be all and end all? Does big necessarily mean better? Or should we consider other metrics for success?
Before Christmas I came across an old copy of Chambers & Partners’ Directory from 1993/94 while getting the decorations out of the attic. It was fascinating to see just how much the majority of firms have grown in the last 30 years, how many have merged and how many names have disappeared.
Back in 1993/94 London was little more than an international outpost for the US law firms with only Simpson Thacher, Covington & Burling, Davis Polk, Jones Day and Cleary Gottlieb having 10 or more lawyers. The top 10 London firms looked like this:
|
|
Partners |
Assistants |
Total Solicitors |
|
Clifford Chance |
173 |
505 |
678 |
|
Linklaters & Paines |
112 |
327 |
439 |
|
Slaughter & May |
82 |
300 |
382 |
|
Allen & Overy |
94 |
284 |
378 |
|
Lovell White Durrant |
115 |
255 |
370 |
|
Freshfields |
99 |
260 |
359 |
|
Norton Rose |
94 |
265 |
359 |
|
Simmons & Simmons |
106 |
170 |
276 |
|
Herbert Smith |
85 |
181 |
266 |
|
Denton Hall Burgin & Warrens |
88 |
151 |
239 |
Fast forward 30 years, and while the names remain familiar, the majority of these top 10 firms have seen significant expansion, primarily internationally, and primarily through international merger with Dentons having catapulted itself from being a 90 partner UK firm with 13 additional international partners to being the largest firm in the world by headcount with over 11,000 lawyers in over 75 countries.
Beyond the top 10 it continues to be a tale of mergers, acquisitions, distressed purchases, the arrival of the US and the growth of the regional heavyweights.
- Cameron Markby Hewitt (11), McKenna & Co (12), Nabarro Nathanson (13) along with Simon Olswang & Co (98) now form CMS with Nabarros having also absorbed Turner Kenneth Brown (27) in 1995.
- Wilde Sapte (15) is now part of Dentons and Richards Butler (16) is now part of Reed Smith along with Warner Cranston (101)
- Frere Cholmeley Bischoff (18) splintered in 1998 when the private client and real estate teams formed Forsters and the rest of the firm joined regional behemoth, Eversheds, then the 2nd largest firm in the country with 445 lawyers who, 3 years earlier, had entered London through its merger with Jacques & Lewis (31).
- Theodore Goddard (19) merged in 2003 with Addleshaw Booth & Co, itself formed in 1997 through the merger of Leeds heavyweight, Booth & Co and Manchester heavyweight, Addleshaw Sons & Latham.
- Rowe & Maw (22) became the London office of Mayer Brown, Titmuss Sainer Webb (35) became the London office of Dechert, Gouldens (43) became the London office of Jones Day and Nicholson Graham & Jones (55) became the London office of K&L Gates.
- What is now Pinsent Masons is an amalgam of Pinsent & Co (Birmingham), Masons (London), Simpson Curtis (Leeds), Biddle & Co (London), L'Estrange & Brett (Northern Ireland) and McGrigors (Scotland).
- Penningtons Manches Cooper (45) is an amalgam of Manches (56), Walker Martineau (83), Dawson & Co (93), Wedlake Saint (117) and most recently Thomas Cooper.
- In the South East, three of the top 7 firms (Blake Lapthorn, Cole & Cole and Linnells) all form part of, what is now, Blake Morgan, along with Cardiff’s largest firm at the time, Morgan Bruce.
- In the South West, Lawrence Tucketts and Trump and Partners merged in 2000 to form TLT before arriving in London via the acquisition of Lawrence Jones (135) in 2005.
- Consolidation in the insurance sector saw Wansbroughs Willey Hargrave merge with Beachcroft Stanley (37) in 1999 before merging with Davis Arnold Cooper (32) in 2011 to form DAC Beachcroft. Davies Arnold Cooper having itself acquired Kingsford Stacey Blackwell in 2008 while only last year, Clyde & Co (20) who previously merged with Barlow Lyde & Gilbert (23) in 2011, merged with BLM, itself formed through the merger of the 3rd largest firm in the North-West at the time, Lace Mawer and London’s Berrymans (58). And breathe!!
Another significant difference between then and now is law firm gearing.
Back in 1993, for example, Finers (66th in the list of the top 200 firms in London and now part of Howard Kennedy) had 31 partners and 7 assistant solicitors with the majority of other firms outside the top 40 having a partner/assistant ratio of 1:1 or less.
Farrer & Co, for example, had 35 partners and 34 assistants but now has 97 partners and 192 other solicitors with other firms showing a similar improvement in gearing including:
|
|
1993 |
2023 |
||
|
|
Partners |
Assistants |
Partners |
Assistants |
|
Bristows |
20 |
29 |
42 |
140 |
|
Lewis Silkin |
23 |
17 |
67 |
168 |
|
Macfarlanes |
43 |
62 |
96 |
319 |
|
Payne Hicks Beach |
17 |
15 |
26 |
75 |
|
Sacker & Partners |
10 |
5 |
19 |
43 |
|
Travers Smith |
35 |
60 |
95 |
325 |
The above firms have all been chosen for a reason as they also appear to tell a different story about the metrics for success. Silver Circle firms, Macfarlanes and Travers Smith, are amongst a handful of firms in the top 40 whose growth has been essentially organic by improving gearing but also sticking to a formula of excellence in core practice areas.
The same can be said of Bristows, Payne Hicks Beach and Sacker & Partners while Lewis Silkin is an interesting outlier. In 1993/94 Lewis Silkin was not known for employment law. Back then it had 4 employment partners and 2 assistants and didn’t get a mention in the Employment Law section of the Directory. The firm was organised along the disciplines of “property”, “corporate” and litigation”. Fast forward 30 years and it’s now about “Ideas. People. Possibilities” and it’s a Tier 1 employment practice where “employment is a central focus of our business, with over 170 lawyers in our team supporting our clients in managing their people”.
This drive for excellence in a specific field is echoed by the significant increase in the number of boutique/specialist law firms in the last 30 years. In 1993/94 Townleys was arguably the only specialist sports practice but now there is Northridge Law LLP, Onside Law LLP, Centerfield, Level and Morgan Sports to name a few.
Back then family teams were generally housed in full-service law firms, but now there’s a whole host of niche family firms leading the way, many set up by lawyers who spun out of larger firms.
While Stewarts, a firm founded in 1990 and not even mentioned in the 1993/94 directory, has led the way for conflict-free disputes practices and now boasts 188 lawyers including 81 partners and a “PEP [that has] soared 86% to £2.7 million, making its partners the highest paid in the U.K. market”.
What the above law firms have in common, is their ability to recognise opportunity and act open it.
As we head in 2023 and beyond, there’s little doubt that the legal market will continue to see significant change and it will be how law firms and lawyers adapt that matters.
The possibility of a Shearman & Sterling/Hogan Lovells merger would certainly be big news and on many levels it makes sense - accelerated growth, global coverage and economies of scale - but it only tells part of the story of an evolving marketplace.
Respected legal commentator, Richard Suskind, “predicts a world of online courts, AI-based global legal business, liberalized markets, commoditization and outsourcing [and] internet-based simulated practice” while the rise of the Alternative Law Services Providers and the fee-sharing firms is testament to a significant shift in the way many lawyers view their careers.
Growth will always be a key contributor to success. I applaud the likes of Freeths and TLT whose ambition has seen the former go from 34 lawyers in Nottingham to 527 lawyers across 12 offices and the latter rise from humble Bristol beginnings to 487 lawyers in 6 offices, a market leading renewables practice and two Law Firm of the Year gongs on the shelf! But equally, one only has to look at Slaughter and May to see that headcount growth is not a requirement for success. According to the 1993/94 Directory Slaughter and May had 97 partners and 500 assistants. The number today, according to the Law Society, is 100 partners and 452 assistants.
The truth is there is no magic formula for success not least because there is no universal measure for it. It feels like there is too much of a preoccupation with turnover and PEP. Big doesn’t mean better. Success can be found in so many places.
So, to all those lawyers out there who are trying to live up to someone else’s measure of success; working crazy hours in a job they don’t enjoy, I’d encourage you to get in touch.
To quote Albert Schweitzer - “Success is not the key to happiness. Happiness is the key to success.”
For a confidential discussion, please contact Iain Millard at Chadwick Nott.
(t) 0203 096 4547
(m) 0776 695 1998
(e) iainmillard@chadwicknott.co.uk
