Berwin Leighton Paisner (BLP), Herbert Smith and Ashurst have seen their market reputation improve more in the last three years than any other ‘chasing pack’ firm, according to new Legal Week research.
The latest Legal Week/EJ Legal Big Question survey of leading City lawyers asked them to rank which two firms had made the most progress improving their market positions over the last three years, with respondents ranking BLP as the firm which has made the most progress.
The firm took almost a third (29.6%) of the votes, with respondents putting Ashurst in second place with 20.2%. The top 10 City firm narrowly beat Herbert Smith, which received just less than 18% of the vote.
Respondents placed Denton Wilde Sapte last, with just 2.5% of respondents voting it the most improved firm.
Ashurst and BLP also scored highly when readers were asked to name the two firms with the strongest current reputation, taking 24% and 11% of the vote respectively.
However, Herbert Smith stormed to the top, winning some 43% of votes as the strongest. Lovells also scored highly, winning around 12% of the vote. Dentons, Simmons & Simmons, CMS Cameron McKenna and SJ Berwin did not fare so well; each took less than 6% of respondents’ votes.
"Nobody can say exactly what a magic circle firm is, other than that it is a firm so anointed by the legal press."
"Outside capital will be attractive to senior partners, but not junior partners."
See partner comments below
Commenting on the firm’s score in the survey, Michael Walter, head of corporate at Herbert Smith, told Legal Week: “For a very long time we have been focused on quality. We have been rigorous in our approach and we have a disproportionate number of leading individuals in all practice areas.”
Neville Eisenberg, managing partner at BLP, commented: “Quality of people, quality of work and quality of clients are the premise of a law firm’s reputation. We have been engaged in long-term transformation positioning us as a full-service City firm. We have been working hard on support systems and have recruited partners from other firms.”
Respondents were also asked to comment on the likelihood of a ‘chasing pack’ firm moving up to be considered in the same class as the magic circle within the next 10 years.
The findings are likely to disappoint firms such as Ashurst and Herbert Smith, which have pushed to be classed as magic circle, with around half of all the 123 respondents saying the odds of any firm making the jump were either poor or non-existent. Just over 40% said prospects were ‘poor’, with only a quarter conceding that there was a ‘good’ or ‘very good’ chance that firms would move up.
Lovells senior partner John Young (pictured right) played down the significance of the findings, saying: “Magic circle is one concept that is very London-centric. The strength is in the international concept, and for most the magic circle concept is irrelevant.”
Eisenberg added: “People question whether or not it is necessarily better to be a magic circle firm. In order to do that, chasing pack firms would have to make radical decisions.”
However, with the possibility of outside funding through the Legal Services Act - set to come into effect in 2011 - it may become easier for firms to improve their market positioning.
More than half of all respondents said outside capital could enable chasing pack firms to become serious competitors to the magic circle. Just over 30% said the chances were ‘fair’, 20% said they were ‘high’ and a further 6.6% rated the odds as ‘very high’.
However, 42% said that the act would have little or no effect on the position of mid-tier law firms.
Herbert Smith finance partner Chris Fanner commented: “Allowing outside investment or floating would change the nature and the culture of any of the firms, and I am not sure that anyone would be willing to pay the price of outside investment in order to make that jump.”
What the partners said
"The concept of the magic circle is pure journospeak, which those firms who are told they are in it (sometimes including Herbert Smith) are keen to encourage. In fact the so-called magic circle firms are mostly quite different in terms of profitability, quality of lawyers, practice strengths and geographical presence. Nobody can say exactly what a magic circle firm is, other than that it is a firm so anointed by the legal press. I think clients pay about as much attention to the concept as they do to the directories - but the real advantage for those firms said to be in the magic circle is that it influences undergraduates. There is no doubt that firms outside the magic circle can achieve what for most partners is the aim: top quality work, a collegiate and friendly working environment and high profitability. They can do that by playing to their strengths and not going on strategic flights of vanity. There are a few small/medium firms (who are not even in the so-called 'chasing pack') that have done this."
"For the quality work there will always be factors which mean that the chasing pack has something to offer. The nationals are looking more at the next level down where they are a threat to the middle range work. At the top end the chasing pack can compete in some areas with the magic circle but no one firm can compete with them across the board."
"Outside capital will be attractive to senior partners, but not junior partners. Outside capital will not help the chasing pack unless it is very limited and focussed. Junior partners will not want to see funding which future profits have to discharge or at least will act as a drain on future profits. The chasing pack will be careful about outside investment as this could dilute their attractiveness compared to the magic circle. The leading national firms have an important place in the market, but whether they can support an expensive London office for a sustained investment period remains to be seen. They can do most of the work that the chasing pack can do, but once the City gets its teeth into a client, there is a lot of pressure to get London advisers from other London advisers such as banks."
"There will be furious merger activity in the next five years spurred by many factors, including outside capital. But the magic circle is entrenched and only the chasing pack will reshape. It is very likely that some of those chasing now will falter and merge from weakness. Some should urgently be doing it now."
"The questions assume that we'll still have law firms in their present state in five years' time. I question both whether this particular advisory model will survive and whether external shareholders will be prepared to countenance some of the behaviour currently rife in our owner-managed law firms. Why, for example, should a corporate have to marry its legal, accounting and tax adviser's work into a synthesized solution; why can't this be done (more efficiently, and arguably to a higher standard) by one professional services firm?"
Talkback: Is the magic circle sitting pretty? Does it even exist? Click here to have your say.
