When Legal Business last took a deep dive into the firm’s then ‘unrivalled financial success’ in 2016, the entrepreneurial reputation of the Mishcon brand took centre stage. For this, the then managing partner Kevin Gold (pictured) and marketing maverick Elliot Moss were largely credited. ‘Mishcon has continually broken from the pack, often in a colourful style that made legal glamour brands like Olswang look about as edgy as Linklaters,’ LB proclaimed in the feature.
At the time, the firm had broken from the pack to pursue high-profile litigation over transactional work. With an enviable list of instructions that included the divorce and estate of Princess Diana, Mishcon was then representing a group claim spearheaded by businesswoman Gina Miller challenging the triggering of the article 50 notice to leave the EU. The firm regularly attracted plaudits for taking on David versus Goliath cases and creating an innovative, collaborative environment. Nearly six years ago, Gold mused: ‘Mishcon is like being at uni but you get paid for it.’
Unhindered by this jocular approach, the firm matched its cool reputation with hefty financial success worthy of respect among the City elite. In our 2016 LB100 report, Mishcon sat at 31st place having added 11% to its top line, increasing revenue 104% on a five-year track from £65m in 2011 to £132.7m in 2016.
Fast forward to now and the firm appears to be making headlines for all the wrong reasons. A record-breaking Solicitors Regulation Authority (SRA) fine of £232,500 for ‘serious breaches’ of money-laundering rules, its controversial response to representing Russian clients following the invasion of Ukraine, to say nothing of a shelved IPO that has so far cost £12m.
What has become of the slick and enterprising firm that was once the industry’s darling?
A most rare vision
Despite these PR reversals, Mishcon’s financial trajectory has stood firm. Since 2017, it has added 52% to its top line of £151.9m bolstering revenue to £230.7m for 2021/22. While a far cry from its five-year progress to 2016, this hardly signals a troubled firm.
Detractors may point to its drop in profit per equity partner (PEP), which has fallen 5% since 2017 from £1.1m to £1.05m this year – but this too can be contextualised amid a 43% rise in equity partner numbers in that time to 57 – compared to 40 five years ago.
The majority of Mishcon’s turnover still comes from the UK (95%), after an ill-fated foray in the US saw it close its Manhattan office after ten years in 2020. According to Gold, who is now chair of the firm having stepped down as managing partner in April 2020, this is in line with a grand plan that will continue Mishcon’s drive to grow while ploughing its own furrow. That strategy, as he puts it, is to ‘grow the McKinsey of law’ by leveraging the Mishcon brand and adding consultancy businesses to complement its legal services, instead of following the crowd of multinational firms.
‘While Mishcon is an excellent law firm, should they have listed? Absolutely not. It’s like launching a ship. No matter how good the ship is, it would still have been going into very choppy waters.’
Rob Shooter, Fieldfisher
Despite its domestic focus, the firm has made strides in Asia over the past two years with the launch of a Singapore office in May 2020 and an association with Karas LLP in Hong Kong, finalised in November 2021. The two offices contributed more than £10m (5%) in turnover in 2021/22. Acknowledging the contradiction, Gold is quick to explain the complementary nature of its businesses in Asia focusing largely on private client disputes, in contrast to the contingency patent specialism of the former New York practice.
While Mishcon’s consultancy-driven growth is not unique, with most City firms now recognising the value of providing additional non-legal services, Mishcon has been bold in launching ancillary businesses. In tech, examples include data and blockchain-focused MDRxTech and MDR Taylor Vinters, a business combination to provide legal and consultancy services to innovators and entrepreneurs. The firm also launched a litigation finance arm in combination with Harbour in September 2021.
On the ubiquitous question of ESG, sustainability consultancy Mishcon Purpose in August hired Paul Clements-Hunt, the responsible investing trailblazer who is credited with coining the acronym. His reasons for joining the practice show the potential of its model to continue the firm’s entrepreneurial brand: ‘I really liked the culture right out of the gate. I felt that it is a really entrepreneurial model, that Mishcon de Reya creates interesting companies, spins them off under the MDR brand, whether it’s the tech company or the cyber company.’
To list, or not to list
Clearly, the centrepiece of Gold’s approach has been the intended listing on the public markets. Announced in 2019, the pitch had it that the capital raised would enable the firm-turned-professional services company to further branch out into non-legal services.
Gold expounds on the rationale: ‘Law firms are traditionally undercapitalised businesses. It works on partners’ capital. You go in, you pay your tax, you take it out and you earn lots of money along the pathway, but there isn’t the kind of technical capital in the business to grow other kinds of businesses. The idea of going to the capital markets was to strengthen the capital base of the firm in order to expand into other areas.’
Sensible enough on paper, if not for the obstacles. The listing on the London Stock Exchange was shelved ‘for the foreseeable future’ in June as a result of adverse market conditions. Having cost the firm almost £12m, the U-turn has been viewed as an embarrassing misfire by many, though Gold argues that the plan fell victim to factors beyond the firm’s control: ‘The markets were coming into incredibly turbulent times and we pulled out just before the war in Ukraine, but you could just smell what was happening in the world and the capital markets.’
Fieldfisher managing partner Rob Shooter echoes this sentiment: ‘While Mishcon is an excellent law firm, should they have listed? Absolutely not. It’s like launching a ship. No matter how good the ship is, it would still have been going into very choppy waters.’
Then there were the predictable partner losses. Between November 2021 and January 2022 the firm lost 13 partners, including six disputes partners to Greenberg Traurig, though Gold sees this as an inevitable risk: ‘What would have been worse is to lock people into something that they didn’t want or to have discontent in the partnership. For something that big and so radical, you need everyone with you marching in the same direction.’
Clearly, pushing ahead with listing amid the current volatility in the market would be ill-advised, but that is not to say that the whole idea is a non-starter. Until now, most of the firms to list on the public markets since such transactions were made legal under the Legal Services Act 2007 have either been alternative law firms like Keystone Law, or practices operating at the lower end of the market, such as Gateley. A firm of Mishcon’s standing taking the plunge would represent a step forward for the listed legal market, as Kindleworth’s James Hacking explains: ‘Until Mishcon started pursing the IPO agenda with vigour, the firms that had gone to market were primarily specialist in nature, platforms or aggregators. Mishcon made the larger, city firms take note and for a time were offering investors the chance to be part of a higher margin, corporate-focused law firm. Those investors will still have that appetite if and when Mishcon returns.’
Even if Mishcon’s attempt to float had not been beset by bad timing, there could be more fundamental objections. Many in the market view the concept of a listed law firm with scepticism. Hardly surprising, given the deep entrenchment of the partnership model. Gareth Price, global managing partner at Allen & Overy, exalts the more traditional system: ‘At the heart of a law firm, and particularly here, is the notion of guardianship. The responsibility of every partner to hand over the business in a better state than they found it. Once you disconnect ownership from the activity, that notion gets eviscerated. A full listing of a law firm is not just a cultural shift, it’s a brand-new business.
‘The law firm model is adaptable and a fabulous developer of people, and a great source of strength for the UK economy.’
The argument in favour of partnership would seem to get stronger at the deeper end of the market in which Mishcon operates. When it comes to complex work, clients may still prioritise personal relationships over brand loyalty, as RPC managing partner James Miller suggests: ‘Fundamentally, the legal profession is still a very personal business. Clients primarily choose their law firm based on the relationship they have with individual partners. Listing is impersonal and commoditises legal services, which is always going to be a problem.’
‘We have never taken a view which was starting to be the kind of little Britain nationalist view of the world. When we start talking about global Britain and we become more and more nationalist, it’s just oxymoronic.’
Kevin Gold, Mishcon de Reya
Some suggest that the true motivation was to allow the current generation of senior partners to ‘cash out’ at the expense of the next generation. It is a criticism of which Gold is well aware, and ready to rebut: ‘People are going to say that but it is actually rubbish because of the way we structured it at that time. We structured it with a very long, excessive lock in of seven years. Secondly, all of my senior partners would have made, and will make, more money by not IPOing, given the salary sacrifice they made for the capital they got. They might have made more money if the shares went crazy over the next seven years but the cuts they were taking were substantial.’
The question of whether Mishcon will come back to the capital markets still hangs in the air. Gold is certainly not ruling it out: ‘We’ve never said never but have put it on hold because underlying it is the mental philosophy that I’ve spoken about – impregnated growth, the core values and transforming into a legal services kind of consultancy.’
Given the advanced progress the firm made, few pundits would be surprised if the float was revisited. John Llewellyn-Lloyd, head of business and support services at Arden Partners, is among them: ‘I would expect them to [come back to the IPO plan], yes. Having said that, right now, we’ve got so many macroeconomic uncertainties. From a planning point of view, you definitely can’t say it’ll come back in six months or something like that. So really, like anybody running a business, you’ve got to almost run the business on the basis that you won’t list rather than you will.’
All’s well that ends well
Controversies are not limited to Mishcon’s financial strategy. The firm has also received negative press for its decision to work with clients of questionable repute, a notable departure from its previous form for taking on anti-establishment cases. A disputes partner at a rival firm scoffs: ‘Their client list at the moment is a real rogue’s gallery – let’s just say they’re doing well out of Russia.’
The decision to publicly oppose a broad brush approach to dropping Russian clients not impacted by sanctions is characteristic of Gold’s free-thinking approach. ‘Whether we were clever or not to say something, I just felt strongly. I come from apartheid South Africa and there were terrible things but there were always good people and bad people. We have never taken a view which was starting to be the kind of little Britain nationalist view of the world. When we start talking about global Britain and we become more and more nationalist, it’s just oxymoronic.’
Perhaps a convenient line for a firm with a strong roster of wealthy Russian clients, but should the firm ultimately list, its ethical decision making will come under scrutiny from shareholders, not just competitors and the press. Gold is confident of the firm’s ethical position though, perceiving his harshest critics to be those within the firm: ‘When you are sitting with people of the next generation, if you start doing shit, they are going to walk and they are going to make a fuss. I’m much more worried about that than what RollOnFriday or whoever else are going to say about me.’
Ultimately, looking at the firm’s progress so far fails to offer a true picture of what it is seeking to become. The spin off businesses are still nascent, while the mothballed IPO leaves the firm in a period of limbo. Macfarlanes senior partner, Sebastian Prichard Jones, is more generous: ‘What Mishcon has achieved since having Gold at the helm is really extraordinary. This was a firm that had a better name than market impact and they have changed that. Their entrepreneurialism, fresh thinking and ability to go into new areas, as well as the marketing that Elliot Moss does there, it is all very interesting. They, of all people, could have made an IPO work.’
Should the firm overcome the macroeconomic and existential challenges of such an ambitious strategy, its reputation as a pioneer will likely be restored. For the moment though, the prevailing market criticism – that Mishcon has needlessly abandoned a durable and respected brand – looms large.
For his part, Gold has his eye firmly on the long game: ‘look at the IPO process as the culmination of the historic ten-year vision that we’ve got, although we’re only seven years in. We will continue to lay the foundation of the next stage of growth of that legal services business but continue to focus on being the best in our key areas and to continue to grow those other businesses like Mishcon Purpose and other brands. They will become increasingly important and their growth trajectory will be steeper than the law firm in the short term.’ LB