Life for a financial services-heavy law firm competing with larger rivals was always going to be challenging after the banking crisis, but Simmons & Simmons suffered more than most as it wrestled with abortive merger talks, plunging turnover and strategic discord.
This makes its revival in the last two years all the more welcome. Following a torrid 2012/13, with memories still fresh from its divisive merger bid with Mayer Brown, the firm was left with revenues £40m below its boom-time peak in 2008 but its previous high has finally been passed with an 8% rise in revenues this year and profits per equity partner (PEP) up 17% to £649,000, making its performance one of the strongest in the UK top 25 this year and by far the best by a ‘chasing pack’ firm.
This was driven by a standout performance from its funds practice as the Alternative Investment Fund Managers Directive (AIFMD) became effective across Europe. Simmons’ core finance practice also had a strong year, with the 241-partner firm winning a greater amount of asset finance and securities work. Aside from robust growth, Simmons reports that profitability is benefiting from the 2012 launch of its office in Bristol, created to handle work more cost-effectively and now home to 100 staff. Simmons’ profit margin was up from 28% in 2013/14 to 33%.
The firm’s expansive form comes after a period of investment in the last two years, including its funds-driven launch in Luxembourg and an aggressive hiring strategy that has seen it recruit 39 partners. This has already assisted Simmons in securing a spot on BP’s legal panel and bringing in more work from international finance groups like Macquarie, Société Générale and Deutsche Bank.
The hallmarks of Simmons’ revival have been a tougher line on costs and performance (a dozen partners were managed out in 2012 in the firm’s third partnership restructuring in a decade), combined with targeted investment focused on regulation and finance at the expense of its general corporate practice. The pairing of senior partner Colin Passmore and managing partner Jeremy Hoyland (pictured) is also regarded to have been an effective mix and ushered in more rigour.
LB: Where did the growth come from?
Jeremy Hoyland: ‘Slightly unanticipated was that most of the growth came in the UK. Market conditions helped, in particular on the finance side, and those that are generally in the UK have done better than those that are geographically dispersed. Because we have a bigger proportion of our business in finance than most other firms, it’s been tough in the financial crisis years but we saw a good return to form last year in transactional activity.’
Do you expect to see a slowdown in financial litigation and regulatory work?
‘Logically you feel that there has to be a slowdown as you can’t keep up the pace of regulatory change that there has been. We’re not seeing it yet, and there’s still new regulation coming down the pipeline that we’re preparing for such as MIFID II and the Senior Manager Regime.
We keep waiting to see whether there’s an end to the financial markets litigation and the contentious regulatory work but those businesses remain very strong and have driven a lot of our contentious practice for a number of years.’
How do you hope to follow up 2014/15?
‘We’re ambitious and we still have some catching up to do in terms of profitability. We have also made investments in the past two years which we will be looking to see a better return on, such as the offices we’ve opened in Luxembourg, Germany and Singapore.’
How much exposure do you want to Europe?
‘We would like to increase the proportion of our revenue generated in the eurozone. Clearly the eurozone has been through a rough period but we’re underweight in Germany and that’s a key market. Our Munich office is just two years old and we’re still actively looking for growth there. The funds practice is very integrated with the network and [has] had some success with our banking clients carrying out a lot of transactions. What’s more difficult is the corporates where we have German clients in Germany and English clients in England and trying to cross-sell those is a work in progress.’
What financial targets have you set the firm?
‘Some Magic Circle firms are around double the size of us in London alone so I don’t think there’s a bar in size that we’re anywhere close to. We expect to deliver results which are at least as good as peer firms, such as Ashurst, which has been more profitable than us for a long time. There is no reason why we should be any less profitable than our peers. We are seeking to catch up. ’
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