Insurance and shipping specialist Hill Dickinson is in talks with fellow LB100 firm Keoghs to sell off part of its insurance business group.
Both firms – each based in the North West – confirmed they had held ‘high-level, preliminary discussions’ on the potential transfer of £23m worth of business, including 16 partners and more than 400 other staff but excluding Hill Dickinson’s marine and clinical negligence work.
Hill Dickinson chief operating officer Iain Johnston told Legal Business that the firm would now involve clients and staff over the next few weeks to get their views, with a vote from the partnership expected this month.
He added: ‘It has become increasingly apparent over the last one or two years that firms have to invest in technology, IT and workflow automation and leave the lawyers able to focus on the high-value bit of the [insurance] work. We have been investing significantly in IT, but we have had a good look at what is required over the next three-five years to take IT to the next level – we are talking about a multimillion-pound investment over a number of years.
‘A number of parts of our firms are growing very quickly and it has become clear that it would be better for our clients and people involved if we found a future for the insurance part of our business in a new home that is dedicated to just doing that.’
Hill Dickinson chief executive Peter Jackson (pictured) added that the sale would allow the firm ‘to focus our resource and efforts on areas of future strategic growth, including marine, commercial and health work’. Hill Dickinson would maintain ‘close relationships with Keoghs’ to service retained clients who require insurance related advice.
Keoghs chief executive John Whittle said talks were still at an early stage, adding: ‘Any deal would be fully in-tune with our vision of creating the pre-eminent legal services provider for the UK insurance industry, however it would be premature to comment further on the progression of such discussions until we have fully consulted with our clients and our people.’
The news comes after a challenging few years for Hill Dickinson financially, one of only two top 50 LB100 firms active in the insurance and shipping sector to experience negative revenue growth over the last five years, along with Ince & Co. But while Ince returned to growth in 2016/17, turnover at Liverpool-based Hill Dickinson was down 1% again to £101.7m and profit per equity partner (PEP) fell 9% to £274,000. Since 2011/12, revenue has fallen 8% and PEP 12%.
The sale of the insurance business would further reduce headcount at 150-partner Hill Dickinson, which lost a 24-strong casualty claims team to Kennedys in March after the loss of a panel position in Sheffield spelled the closure of its Yorkshire office.
Speaking with Legal Business about recent financial performance, Johnston said the economic outlook had significantly challenged the shipping sector.
‘The Baltic index has been at a record low for many years and there are many players in this market. The effect on shipping is not just less trade, but also a significant surge of building on cargo capacity over the past ten years. It means the market is overloaded with supply. One of the reasons why profits were down was because of our investment, particularly in hiring people and investing in particular areas. The return on that investment takes time to come through, but we expect a return this year.’
He added: ‘I would not say that the firm is struggling: part of the reduction in revenue is due to us withdrawing from part of business we saw not fitting, for example claimant work.’
He said the firm was working to a ‘pretty cautious budget’ for 2017/18, but as of July it was performing ‘slightly ahead of budget and ahead of last year’.