With the disputes market evolving and clients becoming more discerning, it has been a phenomenal ten years for boutique law firms focused on litigation. The pressure on generalist, mid-market dispute teams has played towards this dynamic, leaving true contentious specialists increasingly going head-to-head with the traditional London elite.
A glance at the financial results of some of the main litigation specialists – Stewarts, Signature Litigation and Quinn Emanuel Urquhart & Sullivan – shows dramatic increases in revenue amid a string of major cases.
But with the post-banking crisis malaise providing the ideal conditions to turn boutiques into a major part of the City disputes ecosystem, the question remains of whether the wide array of disputes specialists can hope to sustain this success.
Clive Zietman, head of commercial litigation at Stewarts, says ‘boutique’ is becoming a problematic word. Stewarts – styled as the UK’s largest disputes-led law firm – has amassed over 50 partners, and now covers a wide range of contentious and private client work.
Despite the firm’s dramatic headcount growth in recent years, Zietman argues the firm will remain a specialist shop. ‘Clients increasingly want horses for courses, whether that’s a one-stop-shop like Allen & Overy or a specialist firm like us. The firms that are really feeling it are those in the middle – the ones that are merging like Olswang and Nabarro. What is the unique selling point of Olswang?’
It is hard to fault Zietman’s assessment. Stewarts was a standout performer in last year’s Legal Business 100 (LB100) with turnover climbing 25% to £77.9m and profit per equity partner rising 19% to £1.9m. That meant revenue grew 123% over the space of five years and, as a result, the firm moved into the top half of the LB100 for the first time.
In 2018 Stewarts will have the culmination of its long-fought Tesco trial, in which it is representing over 125 institutional funds, which claim to have lost money as a result of the supermarket giant overstating its profits by £263m in October 2014. Further, Stewarts is keen to grow its ‘satellite’ practices, such as tax, arbitration and probates, all of which are in their infancy.
And on the subject of selling points, Zietman is bullish about what makes Stewarts stand out: ‘There’s a maturing on the part of corporate clients. They will test the market on experience, price, specialism and whether fees can be arranged on a contingency basis. They also want to know who understands funding. The big firms do not understand funding. They have a reticence because they are so used to the dogma of hourly-based billing. They make enough money as it is so they don’t see the need to entertain it.’
‘The firms that are really feeling it are those in the middle – the ones that are merging like Olswang and Nabarro. What is the unique selling point of Olswang?’
Clive Zietman, Stewarts
While there has been more consolidation in the mid-market in the last three years, there is little sign of dispute specialists looking to combine, despite an abortive discussion early last year between two of the most high-profile brands, Stewarts and Enyo Law.
Without a tie-up, the prospects for Enyo have aroused much discussion among peers. Formed by ex-Addleshaw Goddard partners Simon Twigden, Pietro Marino and Michael Green in 2010, Enyo was among the first of the litigation boutiques to really capture the professional imagination in London. Success was found in its initial years, picking up high-profile work such as acting for Russian oligarch Boris Berezovsky.
However, 2017 was relatively quiet, given the dramatic growth the firm had achieved in previous years. Outside of the launches of tax and insolvency practices instigated by hiring partners Fiona Walkinshaw and Louise Bell, from Deloitte and Olswang respectively, Enyo had a lower profile in domestic disputes. This was in part due to an increased focus on international clients and arbitration.
Enyo’s most recent LLP accounts for the 2016/17 financial year, filed in January, saw revenue slightly dip from £20.8m to £20.4m. Operating profit was down from £12.5m to £12.1m, but the firm’s highest-earning member received £3.5m, up on last year’s £3m remuneration. The key issues facing the firm over the next five years will be how it handles succession as highly-regarded figures like Twigden and Marino look to hand over to the next generation, and the tantalising possibility of a US tie-up must be considered.
A class apart
Quinn, of course, has become a category unto itself. The iconoclastic US disputes giant is far larger than any UK-bred peer and the firm has been singularly successful in recent years, including becoming one of the world’s most profitable law firms.
Quinn partner Ted Greeno argues that the calibre of the firm’s work is also a class apart. He asserts: ‘Very rarely do we see the other boutiques. We sit in a unique space in the market because we are competing at the top level internationally with the other top firms but only in one area.’
A marker of Quinn’s success, the firm posted a remarkable set of London financials in January, with revenues rising by a striking 61% to £71.9m.
A newer entrant gaining attention is Joseph Hage Aaronson (JHA). Established in March 2013, the tax and litigation specialist’s primary selling point is its prominent integration of barristers and solicitors on client-facing matters. At present, the firm can boast the services of Daniel Margolin QC and Tom Beazley QC, who are expected to collaborate with solicitors and be present from the very first client meeting.
‘Very rarely do we see the other boutiques. We sit in a unique space in the market.’
Ted Greeno, Quinn Emanuel Urquhart & Sullivan
The firm has seen its headcount expand considerably since its inception, growing from ten staff to around 100 now. Of those 100, 50 are fee-earners and 13 are partners. Partner Michael Anderson says: ‘We don’t see Enyo or Stewarts as competitors; they do things slightly different. Nearly all of our work is high value and most of our clients are international. A lot of our work also has some kind of political context to it.’
JHA saw its revenues grow a robust 13% to £24.5m in the 2016/17 financial year, off the back of some marquee international cases. Among the larger mandates, the likes of which Anderson cited, was acting for OJSC Rosneft, the Russian energy firm battling sanctions imposed after Russia’s annexation of Crimea.
Growth has been similarly dramatic at Signature. The firm capped off a run of high-profile mandates to record a 16% uptick in revenue for the 2016/17 financial year. Among the cases was The Royal Bank of Scotland (RBS) group action, in which the firm represented thousands of investors in a £4bn rights-issue dispute. Under Signature’s profit-sharing scheme, 21% of profits were paid out to staff.
Signature partner Graham Huntley, who led for the firm on the RBS case, comments: ‘We take the benefits of our simplicity and efficiency to offer clients lower-charging models. It would also have been a great shame if we hadn’t taken the opportunity of a blank sheet of paper to create a whole new economic and management model for law firms, which is what we did six years ago.’
Overall, boutiques occupy a clear place in the market that is increasingly inhospitable to generalists. The challenge ahead will be to work out how best to manage their growth and the inevitable governance challenges they will face, as they mature and initial founders take a step back.
But Zietman is predictably bullish about the position he and his peers have carved. ‘We won’t see a lot of firms rushing to move into our space. It takes a leap of faith to set up your own firm.’