Having achieved a steady rise in revenue over the past five years, can Eversheds Sutherland maintain its place in the top ten of the LB100?
‘I can’t think of a soundbite for the firm,’ dismisses one finance head at a peer firm when canvassed for his view on Eversheds Sutherland’s place in the market.
Notwithstanding this perceived absence of a pithy strapline, Eversheds has nevertheless pulled off another consecutive year of financial growth against the odds of the past few years’ unstable economic and political conditions, reporting an above average 9% uptick in revenue to £1.19bn for 2022/23, and climbing one position in the LB100 table to ninth place. Meanwhile, profit per equity partner (PEP) rose 8% from £1.2m to £1.29m.
Critics might argue that the rate of PEP growth has diminished significantly since last year’s 22% spike. However, given that the firm has bolstered its equity partner ranks by 20, from 242 to 262, the more muted PEP uptick is still relatively robust.
Of course, little can be surmised from just a year-on-year snapshot (especially in such a volatile economic environment), however a five-year track shows consistent – and steady – returns.
Eversheds has grown turnover 52% from the £782.2m it recorded in 2018, while PEP has ballooned by 57% compared with the £821k figure of five years ago.
As principal of legal management consultancy Jomati, and former managing partner of Clifford Chance, Tony Williams, summarises: ‘Eversheds seems to be, not knocking the lights out, but a story of steady progress.’
Why has the firm fared so well compared with many of its LB100 peers? Lee Ranson (pictured), Eversheds’ chief executive, does not hesitate: ‘We have had a very clear strategy for many years in creating a leading law firm. The type of work we are doing is becoming more complex and cross-jurisdictional, and our strategy allows us to appeal to clients outside the UK.’
Crediting much of the firm’s success to its £30m-plus investment in technology, Ranson explains: ‘Technology takes away boundaries which has played to our strategy. Our client base is doing cross-border work, which is our calling card. This has enabled us to attract and retain good people, as we have a strategy that people can get behind.’
Not big in the City
One recurring observation among the pundits interviewed for this piece is that Eversheds wins plaudits as a regional firm, rather than for being a big City contender.
‘I come across Eversheds quite a bit in our national practice,’ notes one practice head at a rival firm. ‘We see the firm as a very big player in its regional markets, but it is not a traditional City player.’
‘Eversheds is perceived as a strong firm in its local market, like Leeds and Birmingham,’ says one managing partner, echoing a similar sentiment. ‘When you move to the City the firm is seen as a tier down from what City firms would regard as top tier. It would be treated with less respect than the Magic Circle or the Silver Circle.’
That managing partner concedes that there is perhaps a degree of snobbishness at play among the naysayers: ‘Eversheds does excellent work but often doesn’t get the credit it deserves from the firms “above” them. That is a very London-centric view. The City is not a welcoming place for firms that are not City-only.’
Williams, however, suggests that Eversheds has moved beyond these outdated perceptions: ‘Eversheds has recently made a strong commitment to London by investing in and developing the London office.’
Addressing the firm’s reputation in London, Ranson rebuts: ‘A firm with our heritage always has this question raised against it – how strong is it in the capital? We have built a firm that best services client work in the UK and internationally. London plays a massively important part in that.
‘Our London office has 140 partners and 700 staff, which is a very sizeable operation. Revenue is about £192m, around 25% of firm-wide revenue. If you rank that against our peer group in London, you can see that we benchmark favourably.
‘London is a huge success story for us and plays a part in our wider strategy. Our ethos is always based on providing a leading and full-service offering. We do things that our competitors wouldn’t go anywhere near, rather than focusing just on the corporate space. The quality of the work being done by various elements of the London practice absolutely benchmarks against the best firms in London.’
Ranson points to a list of standout mandates that includes the corporate practice advising Shell on its sale of Shell Energy in the UK and Germany to Octopus Energy Group, and Lookers on its £465.4m recommended takeover.
The firm’s real estate practice advised international biopharma client GSK on the relocation of its global headquarters, one of the largest and highest value office lettings of the year in London.
Elsewhere, the litigation and dispute management practice advised HSBC on a claim brought by the liquidators of Antigua-based Stanford International Bank, and ‘the vehicle for one of the largest and most prolonged Ponzi schemes in history’, according to Judge Sir Geoffrey Vos. The case progressed to the Supreme Court where it was dismissed in HSBC’s favour.
A win-win situation?
As for Eversheds’ formal co-operation agreement with Chinese firm King & Wood Mallesons, the market is largely approving.
The agreement, which was announced this summer, means that KWM will exclusively refer all of its clients requiring legal advice in the UK, Europe, Middle East, Africa and South America to Eversheds, in return for all of Eversheds’ international clients in need of PRC legal counsel.
Many consider the agreement to be the perfect solution for a firm wanting to seize opportunity in the regulatory and politically hostile, yet lucrative, Chinese market.
‘It is incredibly clever,’ admits one managing partner, admiringly. ‘I’m kicking myself that we haven’t been able to pull that off.’
That managing partner elaborates: ‘It removes the need to put a lot of resources into Asia. Eversheds now has a huge Asia presence without giving a huge amount of resources to achieve that by itself. It is a win-win situation. If the firm had decided to do an integrated merger [with KWM], that could have gone wrong. The beauty is that, if it does go wrong, Eversheds doesn’t lose anything. It has no financial skin in the game.’
‘It should be a pretty good no-lose deal,’ agrees Williams. ‘Eversheds will have greater exposure to those markets without having to make any significant investments.’
However, there are clear challenges: ‘Sentiments towards China have cooled and the interest of US firms in China is significantly reduced,’ asserts one commentator. Indeed, one notable example of this is Dentons splitting from Dacheng, its China business, in August. ‘A lot of corporates and manufacturers post-Covid are looking at shorter supply chains, as when China shut down they couldn’t get their goods.
‘China is still the second-largest economy in the world though – you can’t write it off. But for inbound and outbound investment, that has cooled.’
Another City managing partner is also alive to the potential pitfalls: ‘Politically, China is a challenging market, but there are reasons to be there. The unique part of the deal is Eversheds’ ability to cherry pick who it wants out of the rest of the KWM network.
‘For Eversheds, this is a useful each-way bet. If there is activity to and from China – great. If not, then it isn’t costing anything.’
‘The co-operation agreement with KWM is certainly interesting and something to watch,’ observes a practice head. ‘KWM is a Chinese law firm. Any co-operation arrangement in that part of the world won’t be without its challenges, but it has enormous potential for Eversheds.’
Quality assurance
‘Eversheds is still in the Championships rather than the Premier League.’ Although this remark from one legal recruiter could be viewed as damning with faint praise, it is still none too disparaging.
And it is true that some snootiness in the market still remains about the firm’s Swiss Verein-style structure (although it is not a Verein but a ‘company limited by guarantee’, a close relative of the Verein), and unwieldy 3,549-lawyer headcount.
‘I may speak to a partner from Eversheds who might be feeling a bit disillusioned about being partner number 36 on a deal, when they could have their own practice,’ notes one managing partner. ‘We help our partners to be entrepreneurial in a way that Eversheds isn’t set up to do.’
Another managing partner shares a similar observation: ‘You can be a senior associate at Eversheds and just do the work for a partner, rather than having your own responsibilities.’
In response to this criticism, Ranson points to the fundamental variations in how firms of various sizes have to be run and structured: ‘There are differences between how small and large firms work. We are only 40 years old and we have achieved a lot during that period, much of which is due to our culture of entrepreneurialism. How do you ensure consistency as a larger firm? You have to have structures that are different from our smaller competitors.’
Another managing partner at a peer firm is more scathing: ‘Eversheds has lost its way a bit. There is a whole swathe of firms that have built an international platform by snapping up little firms all over the place.
‘There is an inherent internal disjunction between the international partners and some of the legacy partners. The offices compete with each other and they don’t have a consistent international team. There is a bit of a quality assurance issue.’
‘This is a comment that people can make about any firm with more than one office,’ Ranson counters. ‘You have to ensure that the way remuneration works and the culture of the firm makes people work collaboratively. We use client feedback to gauge this, which consistently tells us that our offices work well together and are a coherent, global team. That is the most important thing to us.’
As for belonging in the Championships rather than the Premier League, Ranson does not hold back: ‘We are a full-service firm carrying a range of work for mid-range to large corporates at a high quality. If that means some people see us as doing work below the Premier League, then that is a strategic decision on our part. That comment misjudges what clients consider as important. We deliver work to clients that is important to them – incredibly important.’
Despite its critics, Eversheds’ clear strategy has driven its consistent and sustainable financial growth over the years, much to the envy of many of its rivals in the LB100. Holding ninth place in the LB100, Eversheds is preceded only by the Magic Circle, as well as DLA Piper, Norton Rose, and CMS – no mean feat for a firm that isn’t considered a ‘traditional City player.’ Observers will be closely monitoring whether its China deal will translate into bolstered financials in next year’s LB100. LB