They have won the big clients and are doing the big deals, but how do they solve the problem of luring the lawyers back up north? Helen Mooney reports
Corporate transactions that are generated out of, and served by, the busy legal hubs of Manchester and Leeds are becoming more lucrative and more frequent. Partners at the cities’ law firms, both single-site and national, have been congratulating themselves that they were brave enough to take a gamble five or so years ago and ramp up their regional offices in order to cater for an increasingly strong, confident and expansionist regional client base.
Not only are the manufacturing, retail, food and real estate sectors growing their northern roots but in recent years, there have been noticeable deals won by national and regional law firms from clients that would have traditionally chosen the magic circle as their advisers of choice. Choosing anything less than a magic circle firm was historically seen as downgrading the importance and profile of the company. ‘We deserve a magic circle firm’ was the received wisdom.
Hammonds is a classic example of how this has changed. With offices in Leeds and Manchester, the firm has worked hard at picking up new clients in the past 12 months and has reaped the benefits. Manchester-based corporate partner Jane Haxby and her team has advised on six takeovers since January. These have included the £201m takeover of SurfControl and the £39.3m takeover by Babcock International of International Nuclear Solutions. “We are also winning clients from overseas companies with US parents and from Chinese companies as well. England is England to them, and they do not care that Manchester is outside London,” says Haxby. However, she adds that the firm’s Manchester and Leeds practices are also adding regional clients who now have the confidence to leave their City advisers.
“Five or six years ago, clients would not have felt confident to use regional practices. This is no longer an issue… there is real sense that we roll up our sleeves in Manchester and get on with the work.” Last month was a classic example of this, with the Hammonds team advising on one of the largest deals to hit the Yorkshire market — the landmark £783m management buy-out of housing company Keepmoat, which the firm staffed solely out of its Leeds office.
Reflecting a widely-held view in Manchester, Haxby is confident that corporate and M&A work will continue and predicts that insolvency and corporate recovery work will also increase in the coming 12 months as interest rates go up, especially in the retail sector.
Stephen Sly, managing partner of DLA Piper’s Sheffield office, agrees. In 2005, DLA Piper’s Yorkshire corporate team completed 80 deals worth £1.5bn; last year this rose to 120 deals worth £2.5bn. Sly says that by the end of August this year the practice had already completed 80 deals worth more than £2bn and he expects this trend to continue for the rest of the year.
“Deal flows are at record levels thanks to a number of factors,” says Sly. “There is a surprising number of businesses in the north that have historically looked to the magic circle for their expertise because there is a false assumption that such expertise did not exist in the regions, but this work is now gradually coming back,” he says. DLA Piper’s Sheffield practice picked up Eaga this year and advised on its £453m market float in June — one of the largest European flotations seen in recent years.
Not surprisingly, it is the northern hubs of national and international firms that are seeing the bulk of the big-ticket work.
Addleshaw Goddard’s Sean Lippell is more than pleased with the strength of the market in the north of England. Lippell led the deal for Bridgepoint Capital which bought Leeds-Bradford airport for £145m earlier this year, while DLA Piper advised the five local councils across the region that owned the airport. And Addleshaws’ northern offices are certainly having a good year, if turnover is anything to go by. Of the firm’s £176m turnover last year, £100m was generated out of Manchester and Leeds. With 450 lawyers across the two offices, Mark Jones, Addleshaws’ managing partner, says that the firm can source deals just as easily out of its northern offices as it can out of London.
Eversheds is also part of the pack sourcing deals in the north. The firm successfully advised on its £500m acquisition of British Airways’ BA Connect regional airline business in May.
Eversheds Manchester-based corporate partner Danny Hall says that the firm’s Manchester office is going from strength to strength, picking up seven new listed clients this year. “We are getting bigger and bigger and are seeing deals that would not have been done here five years ago,” he says. Eversheds’ northern practices, which include Newcastle, Leeds and Manchester, have been “incredibly busy” according to Hall. Not only have they acquired airline Flybe as a new client but have also acquired Volex and Cardpoint as new clients since the turn of the year, and Hall is confident the work will continue. He expects to see more refinancing work, as well as more venture capital fund. He also predicts increasing work for the firm’s financial services team — a traditional strength among Leeds’ law firms. Hammonds’ Haxby agrees and says that the firm has also seen a growth in both private finance initiative and banking work as well as property refinancing, which she expects to continue well into 2008.
However, Pinsent Masons’ Nigel McLea, head of the firm’s Leeds office, is somewhat more cautionary — he says that sustaining the firm’s growth will be a challenge in the next 12 months. “We are 14% up on turnover compared with last year but we will have to watch the effects of international globalisation this year and how the economy and companies manage to sustain themselves,” he says. The firm’s Leeds practice has advised on a number of high-end deals so far this year including £202m acquisition of French roofing materials distributor Laviere by SIG.
The recruitment challenge
But what of recruiting and retaining good quality qualified lawyers to staff such deals? Stephen Hindmarsh — current president of the Manchester Law Society and a commercial property partner at the Manchester office of Hill Dickinson — is on a mission to lure lawyers to the city. Manchester’s Law Society, along with the Chamber of Commerce and other organisations with a stake in Manchester’s success, is planning to stage an event in London in April 2008, to highlight the benefits of living and working in the city.
‘My aim is to promote Manchester to lawyers in London; I want to show them that Manchester is a good place to work. Law firms here are not only getting the quality and size of deals that are attractive but Manchester’s second unique selling point is that it is a great environment in which to work and live,’ says Hindmarsh.
However, many firms concede that Manchester is still a difficult market in which to recruit lawyers, especially good quality two to five years’-qualified corporate assistants.
In June, Addleshaws was the first firm to set out its stall on newly-qualified (NQ) pay, raising its starting rate to £40,000 and, as one partner concedes, making itself “unpopular” along the way — at least among the managing partners of the region’s firms. Addleshaws’ move demanded a response from its northern rivals. Hammonds swiftly followed, matching Addleshaws’ rates. And although some firms have yet to announce their NQ rates, it is clear that firms are having to raise their rates significantly in order to attract the staff they need.
As one partner at a large northern practice admits: “There is an acute shortage of good commercial lawyers and the northern magic circle is very resource-constrained. We are lucky in that we can play the ‘we are bigger than you’ game among our peers to attract people. I know it is a crude and unsophisticated approach, but as money plays a part in the war for talent, we wanted to put ourselves ahead of the game.”
Further south, DLA Piper’s Sly is also candid. “There is a growing gap between London and the regions regarding pay at NQ level. London has become a market of its own, but for the people we have working in Sheffield, it is a lifestyle choice and the quality of work we are able to offer them is also key. The markets in the north are sophisticated and have a very long history — we are not a repository for low-value work.”
But while the big firms can afford to flex their muscles in the pay stakes to secure the best recruits, where does this leave the smaller firms fishing from the same pool? Lawrence Downey, managing partner at Liverpool’s Mace & Jones, admits it is tough. “Our experience is that it is increasingly tough to attract lawyers of the right quality. Liverpool is a particular problem — there is a small pool of talent and a number of firms all chasing relatively few people who are hard to come by. We offer interesting and challenging work and a balanced lifestyle — which everyone says they do, but not everyone does,” he says.
The situation is similar in the northeast, according to Stephen McNicol, managing partner at Newcastle firm Muckle. McNicol says that the firm’s biggest challenge in the next 12 months is to attract qualified lawyers to the region. “Our approach to recruitment is to keep our ear close to the ground, move in the right circles and have a high enough profile to attract people,” he explains.
Kevin Emsley, managing director of Leeds firm Lupton Fawcett, says that it is not easy to recruit, even in a city with a legal community the size of Leeds’, but, he adds, the firm’s selling point is that they offer “a different way of going about things”.
Emsley continues: “We have a great social life, we have a great reputation as an employer even down to buying everyone fruit to eat during the day and we have an attitude where we engage with our staff and involve everyone in making the firm a success,” he says.
Ensuring that the quality of instructions won by firms in Leeds and Manchester is an obvious way of raising the profile of working as a lawyer in the north — the record for the past year in this respect is good, and if the region’s dealmakers and managing partners are correct in their predictions, what remains of 2007 will also offer plenty of opportunities for the region’s lawyers to be involved in some interesting and high-profile deals.
