With pacey revenue growth over the last five years, gunnercooke looks to be a poster child for operating under the fee-sharing model. Is the firm really cooking with gas or will it struggle to keep market share as economic pressures mount?
Now celebrating its second year in the LB100 main table, having risen five places on last year to 73rd place, gunnercooke is also notable for the fact that its revenue has more than doubled in a five-year timeframe. ‘The firm has been successful,’ notes one managing partner. ‘It appeals to individuals who are attuned to looking out for their own particular interests,’ he notes, referring to the firm’s less traditional fee-sharing model.
The firm reports revenue of £59.2m for the 2022/23 financial year, a 23% leap – the third highest revenue growth in the LB100 this year from the £48m turnover it reported the previous year. And it is co-founder Darryl Cooke’s stated ambition to bolster revenue by a further 18% to hit £70m by the end of the 2023 calendar year.
Cooke credits the firm’s revenue-sharing model as the backbone of its success, along with its strategic plays in partner recruitment. ‘All law firms are driven by PEP and we’re not driven by that. You’re a lawyer and a business person. Our lawyers have the freedom to work when and how they want and 95% of our lawyers earn more than they did previously, and 100% would say they are happier,’ he asserts.
Founded in 2010 by Cooke and Sarah Goulbourne (pictured), the firm prides itself on this alternative business model. Goulbourne recalls that 13 years ago, there were just a handful of firms using this fee-sharing model. Fast forward to now, there are more than 65 fee-sharing firms across the UK. She says: ‘There are thousands of lawyers working in this way now, some of them focusing on niche areas, and some of them are a full-service corporate law firm like us.’
Eat what you kill
Clarifying how the fee-sharing model operates, Cooke says: ‘We remunerate differently and that’s the driver of everything.’ Before setting up gunnercooke, he had been head of private equity at DLA Piper and, before that, at Addleshaw Goddard. Cooke points to the contrast with traditional law firms that rely on compensating lawyers through salaries and bonuses linked to caseloads, performance and position. ‘I hate the term in the City, “beasting”, where [firms] just get as much as they can out of their lawyers. It’s immoral, almost.’
Goulbourne describes the lawyers as essentially operating as self-employed individuals with their own mini-businesses. Under this model, when lawyers bring in clients and handle their work, they retain up to 70% of the fees they bill, a higher share than they would typically receive at a traditional firm, she says. The model is also tiered, with partners earning over a certain amount taking home a larger percentage of their earnings. ‘Not many other fee-sharing firms do that,’ she adds.
Cooke explains how this approach fosters flexibility in the firm’s culture, noting that he typically visits the office just twice a week. ‘People have the freedom to work when and how they want. They could take off every Friday if they wanted, which means that they have much more control over their lives.’
Despite market commentators conceding that there is space for a gunnercooke-type model, there is still some degree of scepticism. One managing partner at a top 50 firm, says: ‘It makes me think of a barristers’ chambers where you eat what you kill. The model has moved closer in some respects to the hybrid working world and there is clearly an attraction to the model. But I think the traditional law firm model with cultural benefits and advantages brought through teamwork and cohesion means there are other options out there.’ However, the firm holds the view that a traditional firm does not offer the same benefits as a fee-share model as partners have the opportunity to design their own practice. For example, choosing how they work, their clients and own targets.
‘I hate the term in the City, “beasting”, where firms just get as much as they can out of their lawyers. It’s immoral, almost.’ Darryl Cooke, gunnercooke
In a similar vein, Harper Macleod managing partner Martin Darroch comments: ‘The fee-sharing model is similar to an “eat-what-you-kill” environment. I would find a business environment of that nature (based on our approach) to throw up many risk and compliance challenges, from conflict of interest assessments, to the assessment of suitability to act.’ The firm hits back and responds that its lawyers are subject to the same regulatory duties as every other major law firm, and duties as regards to risks and compliance matters are taken very seriously. If a gunnercooke lawyer wishes to open a new client matter, they are required to submit a form to the compliance team who completes a full check, in respect of the client and all related parties, the firm says.
gunnercooke also runs a net promoter score (NPS) to judge each lawyer, rated on a scale ranging from -100 to +100. On the close of a particular matter, each client is sent a feedback survey and asked to provide a score. A score closer to +100 suggests a higher number of promoters. As of August 2023, the firm’s NPS stands at 91. ‘We encourage each lawyer to get a NPS score, and driving for quality is the differentiator,’ adds Cooke.
The firm’s recent mandates include acting for Santander on the refinancing, acquisition and sale of the Blue-i Group, and advising Google regarding a £920m competition claim filed against it at the Competition Appeal Tribunal. It has also acted for actor Hugh Grant over phone hacking and privacy breaching claims against Rupert Murdoch’s News UK business.
Not just one model
Back in 2002, Keystone Law made waves by introducing the fee-sharing model. According to managing partner James Knight, the firm sees gunnercooke as a competitor for being in the commercial sector and having a similar size. However, he adds that competition in the legal industry ‘is not an exact science’. That said, when probed about key individuals at gunnercooke, none sprung to mind.
While Knight praises the benefits of the fee-sharing model, such as higher earnings and a more collaborative lawyer environment with reduced internal politics, he notes that the models operate differently and Keystone does not have a tiered system like gunnercooke. He says: ‘Some firms operate systems where if you reach a certain threshold then the percentage [of take-home fees] changes. For various reasons, including simplicity and overall fairness, we do not operate that system. We like to keep it straightforward and transparent.’
Discussing the strategy, Goulbourne notes: ‘We want to be the biggest and the best fee-sharing firm.’ However, it seems that the firm’s perception in the market still has some way to go.
One managing partner at a top 50 firm says: ‘I have heard of them but don’t know anything about them. One or two of our people have ended up there. I got the impression they are a barristers’ chamber with a brand on top of them.’
Unlocking Asia
The firm maintains 12 offices with half of them in the UK. The remaining half includes four offices in Germany, in Berlin, Düsseldorf, Hamburg, and Munich. Last year, the firm expanded its offering by establishing a Budapest office to strengthen its European presence and also ventured into the US through setting up a New York office. ‘Our focus for the moment is consolidating the US practice in New York,’ says Cooke.
He notes that the firm does take a closer look at the financial performance of each office, with London emerging as the firm’s top-performing location: ‘We also have lots of lawyers working overseas off the London platform and lots of lawyers in Israel, Spain and Italy,’ he adds.
Despite the recent focus on the US, Goulbourne says that the firm hopes to be making strides in Asia. ‘We must do Asia because we truly want to be global and you can’t ignore that part of the world.’
Back in 2021, the firm opened two offices in Scotland, in Edinburgh and Glasgow. However, Darroch says: ‘Representatives of gunnercooke were targeting many solicitors around Scotland (through LinkedIn), but it has not really had any impact on the Scottish market, with only eight solicitors currently registered with the Law Society of Scotland.’
Recruit from the top 25, or not
‘People will leave the bigger firms, and we’re an ideal spot for them to come to,’ says Cooke. He points out that the appeal of the model is all the more strong, given that PEP across the more traditional competitors has shown a slowdown this financial year, noting that the majority of Magic Circle firms have experienced a decline in PEP, and where there has been growth, it has been minimal.
The firm now boasts 418 lawyers, reflecting growth of 45% over the past five years, with lawyer headcount standing at 229 in 2018. gunnercooke has 336 partners, also showing nearly a 45% increase from the 185 partners it had five years ago. London is home to nearly 250 of the firm’s lawyers, with the largest concentration working in the corporate and real estate practice areas.
Notable hires include Noreen Weiss who joined to launch the firm’s New York practice as US chair. Cooke also says that the firm is actively pursuing talent from the top 25 law firms, and while this is evidenced by the recent additions of Katie Hawksworth from Eversheds Sutherland, as well as Matthew Harvey and Stephen Smoktunowicz from Gowling WLG within the past year, many of its new recruits are from firms outside the top 25.
The firm has also seen departures, some of which to firms with traditional partnership structures. In July, banking partner Michelle Wilkinson left to become a director at Freeths, while corporate restructuring partner Rebecca Holden moved to Shoosmiths in Leeds earlier this year, also as a director.
One managing partner notes: ‘It will be interesting to see how the gunnercooke fee-sharing model responds to a development, such as implementing an AI programme or acquiring a competitor, where a business wishes to draw down on all of its participants’ resources to make a significant investment.’
One managing partner at a top 50 firm, meanwhile, concludes on a more sceptical note: ‘I think there is a place for those sort of [fee-sharing] firms. Keystone is a good operation but there must be a limit to the amount of work that clients want to put into those kind of models. There is a finite amount you can deliver in that self-employed model.’ LB