Had merger talks earlier this year with Miami-based Global 100 firm, Greenberg Traurig, been successful, Berwin Leighton Paisner (BLP) would now be part of a £1.1bn firm and a £5m fall in revenue would look like a drop in the ocean. As it is, BLP’s strategy is under scrutiny again with its recent revival looking short-lived.
Revenue fell 2% at BLP in 2015/16 to £254m, while profit per equity partner (PEP) was more positive with 4% growth to £687,000. This is in sharp contrast to the rapid growth of the previous financial year, when revenue rose 5% to hit a record £259m and PEP surged 22% to £661,000.
While the firm’s cornerstone real estate practice performed well, the firm’s banking and corporate practices struggled during Lisa Mayhew’s first year as managing partner. Nonetheless, the firm is more tightly managed financially than in the past, with BLP ending the year with a cash balance of £6m. This is despite seven-figure costs associated with the merger between freelance lawyer service Lawyers On Demand, which it majority owns, and Australasian counterpart AdventBalance.
With the firm’s second-largest office, Russia, still struggling with the effects of international sanctions – the firm has sought to hedge its business through expansion in Hong Kong. The first step was to bolt on arbitration boutique Haley & Co at the start of 2015 and the second saw the firm add asset-financing firm William KK Ho & Co in May this year.
While BLP is not alone in experiencing turbulence, with many of the chasing pack in the City hit by a slowdown in transactional activity, its performance does raise questions about its business with real estate practices expected to be hit hard by the fallout from Brexit.
A merger still appears the best method of maintaining BLP’s relevance and achieving its aim of becoming the world’s leading real estate practice. While the slowdown in the legal market and the widening gap between the elite firms and the chasing pack has created a feverish desire among law firm leaders to consolidate, BLP remains one of the few City firms small enough and profitable enough to pull off a merger with a respected US rival.
LB: How disappointed are you with the results?
Lisa Mayhew: To end the second year in a row with cash in the bank was particularly pleasing as it was the year we bought our stake in AdventBalance. Of course, we would rather that revenue wasn’t down, but in the environment we were operating in we were pretty pleased. The fact we had our second-most profitable year ever tells us we’ve been managing our costs and efficiencies.
What was up and what was down?
Mayhew: The corporate and the banking market was more challenged. Real estate in Germany and the UK was a growth story. Asset finance had a fantastic year while the real estate disputes team also had a cracking year.
Were the Greenberg Traurig talks a distraction?
Mayhew: Even though a large number of partners were involved in that discussion at the end, I don’t think it had an impact on revenue or caused a major distraction as for a long while we were pretty tight on the number of people involved. It was only towards the very end and it was only a few, short sharp weeks from when we announced it to when it was announced to be off.
How far away are you from achieving your goal of having the world’s leading real estate practice?
Mayhew: It’s a work in progress. It’s a priority but with good growth in London, Manchester, Germany and Asia we’ve done well. A lot of our investment last year was in other parts of the business.
What are your hopes for this year?
Mayhew: It’s going to be challenging. But we’re telling partners that we’re in robust shape, with a robust balance sheet and a well-hedged business given the varied investments we’ve made.
What are your ambitions for BLP?
Mayhew: The merger talks further fuelled the ambition in the firm. There were high levels of interest and excitement about a game-changing merger and delivering the strategy we have set ourselves. I was impressed with the ambition within the firm. That ambition is undiminished. It hasn’t put us off.