Legal Business

DWF flags Covid-19’s ‘material impact’ on profit and increased debt as Keystone declines dividend

DWF flags Covid-19’s ‘material impact’ on profit and increased debt as Keystone declines dividend

The UK’s largest listed law firm, DWF, expects the fallout from the Covid-19 pandemic to have a material impact on its profit and has entered talks with its lenders to extend its £80m credit facility and relax certain covenants.

DWF provided a trading update to the London Stock Exchange today (27 March), setting out the board’s expectation that revenue for the year to 30 April 2020 would be below previous expectations. The final quarter of each financial year is typically the most important to its financial performance, the firm said, which coincided with the coronavirus outbreak.

The firm said organic revenue growth for the year is now expected to be ‘high single-digit’ and total growth between 15% and 20%. The lower revenue and level of investment during the year – including more than £50m spent on acquisitions in Spain and a managed services business  – is therefore expected to have a ‘material impact’ on profit.

Insurance and international work were expected to deliver most of the revenue growth this year, driven by international despite some issues in a number of locations due to Covid-19. Insurance is now trading ahead of management’s expectations, while litigation is also said to be less affected by the economy.

Net debt is now also expected to be higher than anticipated this year, given the lower profits and with slower collections in the current business environment. DWF has a revolving credit facility with HSBC, NatWest and Lloyds of £80m and currently expects to operate within its limits, but has entered ongoing discussions with its lenders.

‘The board believes it prudent to seek additional contingency facilities from its lenders to ensure that the group has increased headroom for working capital purposes and a relaxation of certain covenants for a period of time,’ the update said. ‘While the current environment is unprecedented, the board is confident that the group is well placed to continue to provide best service to its clients and benefit from future opportunities when the business environment normalises.’

Meanwhile, fellow listed law firm Keystone has followed Gateley, Knights and Ince in similarly providing a trading update to the market. The firm said it believed its model – in which its lawyers work remotely anyway and their fees amount to about 75% of the revenue they generate – meant it was in a strong position to deal with the impacts of Covid-19.

The firm, which operates on a financial year to 31 January 2020, said it was currently unable to assess any impact for the next financial year but would not be recommending a final dividend for this year given the uncertainty.

Hamish.mcnicol@legalbusiness.co.uk

 

Legal Business

DWF continues global expansion with £14.2m managed services play

DWF continues global expansion with £14.2m managed services play

DWF has continued its expansionist strategy following last year’s initial public offering (IPO), dipping into its war chest to acquire managed services company Mindcrest in a £14.2m deal announced today (29 January).

Chicago-based Mindcrest offers managed services across contract management, compliance, legal analytics, litigation and investigations for international corporates. The majority of the business’s staff are based in Pune, India, where it has operated for over 15 years, but smaller offices are spread across Chicago, New York and London. The business has expected sales of £9.2m for the 2019 financial year.

‘It’s about growth and our stated strategy of building a global managed services business,’ DWF CEO of managed services Mark Qualter told Legal Business. ‘It also de-risks it for us, as Mindcrest is a proven business and serves our global operations. The geography works for us, as we can serve the US, Europe and down into Australia.’

DWF also anticipates the acquisition will allow the firm to pursue new revenue streams and achieve cost savings of up to £2.9m for the 2022 financial year, with the business’s Pune office providing an established low-cost legal services and outsourcing location. The deal is structured so DWF will pay £1.8m in cash and £6.5m in shares which will be payable upon completion, while £5.9m will be exchanged in deferred cash. When finalised, DWF will have offices in 33 locations with an overall headcount of around 4,200.

The move is the latest in a string of post-IPO plays by the firm. In December, DWF announced the acquisition of 40-partner Spanish law firm Rousaud Costas Duran in a £42.5m deal, the firm’s largest to date. The announcement came alongside DWF’s half-year results, with revenue for the six months to 31 October growing 10% to £146.8m, of which organic growth was said to be 7%.

The firm’s first splash came earlier in May of last year, when it acquired K&L Gates’s 11-partner Warsaw office. Later in October it also brought its post-float sales pitch to Germany after opening its fourth base in the country in Düsseldorf.

However, according to Qualter, further acquisitions in the managed services space are likely: ‘During our IPO process we talked about achieving global centres. We were looking at Pune, which we have now done, and Chicago, which we have now done. We were also looking at Australia which we are working on and central Europe which we’re looking at.’

thomas.alan@legalease.co.uk

Legal Business

‘International is the growth engine’: DWF eyes US after £42.5m Spanish acquisition

‘International is the growth engine’: DWF eyes US after £42.5m Spanish acquisition

DWF is looking to crack the US market with an acquisition which would likely surpass its £42.5m deal for a Spanish law firm announced today (11 December).

The firm, which became the UK’s sixth and largest law firm to list in March this year, announced the acquisition of 40-partner Rousaud Costas Duran (RCD) alongside its half-year results, adding 400 staff across offices in Madrid, Barcelona and Valencia. RCD reported revenue of €35.7m last year.

The deal is worth up to £42.5m, DWF’s largest acquisition, comprised of up to £19m in cash and the remainder in DWF shares. It cements a relationship of more than a year between the firms, which led to an exclusive association in June 2019.

DWF chief executive Andrew Leaitherland (pictured) told Legal Business Spain was one of the regions the firm identified in its prospectus for growth, alongside Poland – where the firm made a £3m acquisition of K&L Gates’ 11-partner Warsaw office in May – Canada, the US and the Netherlands. He said there was significant overlap between the two firms’ clients in real estate, financial services and insurance.

‘Spain will become more important going forward should Brexit go through,’ he commented. ‘Through the association we had the ability to get to know them and there’s a strong cultural alignment, they’re all about delivering legal services in a different way. It’s a very credible platform from which we can scale.’

DWF’s revenue for the six months to 31 October 2019 grew 10% to £146.8m, of which organic growth was said to be 7%. The firm’s international arm, which also saw an office opening in Düsseldorf and hires in Newcastle, Australia, grew 28% to £33m.

‘International continues to be the growth engine of the business,’ Leaitherland said. ‘RCD is a good illustration of how we’re going to go about that moving forward.’

He told Legal Business DWF had the ability to make larger acquisitions and would likely need to as it sought to enter the US market, where it has had a similar exclusive association with Los Angeles-based Wood, Smith, Henning & Berman since October 2018. The US has stricter restrictions on outside ownership of law firms but Leaitherland is confident the firm can find the right model, particularly having spent £20m on the IPO, including a large proportion on regulatory advice.

‘The US is unlikely to be a small deal because it’s such a big market. There’s opportunities in all of our target markets but needless to say, the US in particular is the largest litigation market in the world so it’s a market that we’d love to be in,’ he commented. ‘We’ve found structure to accommodate it in other territories and we’re confident we can do the same in the US.’

hamish.mcnicol@legalease.co.uk

Legal Business

Ashurst joins flexible lawyering bandwagon as DWF completes BT Law acquisition

Ashurst joins flexible lawyering bandwagon as DWF completes BT Law acquisition

Ashurst has teamed up with US-based law company Elevate and Cognia Law to offer clients flexible lawyering through the firm’s New Law umbrella Ashurst Advance.

The initiative launched today (8 November) and gives Ashurst access to Elevate and Cognia’s flexible lawyering pool, with the offering initially available in both the UK and Australia before being rolled out globally. The arrangement will also allow Ashurst’s clients to access particular expertise for secondees.

‘They needed flexible resource for client demand but didn’t want to build that platform themselves,’ Elevate president John Croft told Legal Business. ‘They are like us in that they have a UK and Australian presence, and we have John Kenton in Australia who helped create the flexible lawyering platform Orbit while he was at Corrs, so we were well-suited.’

Ashurst Advance is the firm’s New Law arm and generates more than £15m in revenue across Brisbane, Sydney, Glasgow and London. This year, Ashurst Advance became the fifth division of the firm alongside its four core legal lines, with project management and technology tool provider Ashurst Advance Delivery and corporate venture arm Ashurst Digital Ventures the two strands within the offering. The latest move builds on an existing arrangement Ashurst has with Cognia collaborating on managed legal services, in a partnership announced earlier this year.  Elevate, meanwhile, struck a flexible lawyering deal with Hogan Lovells in 2018.

‘The legal profession is becoming increasingly split between those who get it and those who do not,’ Croft added. ‘Forward thinking firms like Hogan Lovells and Ashurst are the ones we are working with.’

Meanwhile, listed firm DWF has completed the acquisition of BT’s alternative business structure, BT Law, following a five-year managed legal services deal struck between the two in July.

That deal, the firm’s first major post-IPO client and covering BT’s insurance and real estate work, sees 40 lawyers from BT’s in-house legal team of nearly 400 staff transfer to DWF by the end of this year. It also included the transfer of Sheffield-based BT Law, a business covering motor, employers’ liability and personal liability claims.

It is understood the acquisition of BT Law was for a nominal fee and does not involve any further employee transfers, instead covering a handful of clients moving from BT Law to DWF. No announcement was made to the London Stock Exchange.

A DWF spokesperson commented: ‘The acquisition follows our appointment in July as a strategic legal partner to BT. This is a natural step to take for both DWF and BT following our strategic partnership. It will ensure continuity of service for all of BT Law’s clients, many of whom are also existing DWF clients.’

A BT spokesperson added: ‘Following on from the appointment of DWF as a strategic legal partner earlier this year, we are continuing to transform and simplify the way we work across BT.  The acquisition of BT Law by DWF is an exciting step forward for both businesses, who will continue to deliver outstanding services.’

thomas.alan@legalease.co.uk

For more on the rise of New Law offerings within law firms, read this month’s cover feature: New Tricks (£)

Legal Business

DWF brings post-float sales pitch to Germany as it seals Düsseldorf deal

DWF brings post-float sales pitch to Germany as it seals Düsseldorf deal

DWF Europe chair Ulrich Jüngst aims to triple German lawyer headcount and launch in Frankfurt after opening the firm’s second international office since listing on the London Stock Exchange. DWF announced its fourth German base in Düsseldorf in October after taking over six-lawyer corporate boutique Marccus Partners.

While Marccus is not listed in any of the recognised legal directories for Germany, Jüngst described it as ‘a good fit with what we have’. ‘We want to cover the western regions in Germany and it’s much better to do that with integrated offices in Cologne and Düsseldorf,’ he told Legal Business.

Legal Business

International round-up: DWF recruits five partners for Düsseldorf as CMS expands in Africa

International round-up: DWF recruits five partners for Düsseldorf as CMS expands in Africa

DWF has made its second post-IPO international office opening, hiring a five-partner team in Germany, while CMS has added two firms in South Africa and Kenya to its network.

DWF said today (7 October) it was opening its fourth German office in Düsseldorf after recruiting the entire office of Marccus Partners, consisting of 10 staff – including five partners. Marccus – which is not listed in any of the recognised legal directories for Germany – specialises in company law, M&A, insolvency, banking and finance, real estate and tax. One of the hires, Norbert Knüppel, will be DWF’s executive partner of the new office.

The opening adds to DWF’s Berlin, Cologne and Munich offices and increases local headcount to more than 80 people. DWF Europe chair, Ulrich Jüngst, commented: ‘They are very highly regarded and will be an excellent addition to our German business, significantly strengthening our corporate practice domestically as well as our ability to advise on cross-border transactions throughout Europe. This move further builds our international footprint, demonstrating continued delivery on this key IPO objective.’

Knüppel added: ‘We were attracted to join DWF’s rapidly growing business with a strong reputation for innovation. It is investing in its national and global capabilities and we look forward to playing our part in DWF’s continued impressive expansion.’

The Düsseldorf opening is DWF’s second international office launch since the firm listed on the London Stock Exchange in March . In May, the firm expanded into Poland with a £3m acquisition of K&L Gates’ 11-partner Warsaw office.

The firm’s first full-year financial results since listing, reported in July, showed revenue rose 15% to £272m in the 2018/19 financial year, of which 12.5% was attributed to organic growth. But profit after tax fell 42% to £12.2m, impacted by the £20m cost of the IPO.

Also today, CMS added 20-lawyer RM Partners in Johannesburg and 35-strong Daly & Inamdar Advocates in Nairobi and Mombasa. The deals mean the firm has passed the 4,800-lawyer mark, counting 75 offices in 43 countries.

CMS is the second international firm to expand in Africa in the space of a few weeks. Last month, Dentons announced it was merging with five firms in Angola, Morocco, Mozambique, Uganda and Zambia, adding 54 lawyers to its African footprint.

Hamish.mcnicol@legalbusiness.co.uk

Legal Business

‘Money well spent’: DWF revenue climbs 15% as £20m IPO cost weighs on profit

‘Money well spent’: DWF revenue climbs 15% as £20m IPO cost weighs on profit

DWF chief executive Andrew Leaitherland (pictured) says the £20m cost of its London Stock Exchange listing is ‘money well spent’ after the firm reported double-digit revenue growth and set out its ambitions for further expansion.

The firm said today [31 July] its revenue rose 15% to £272m in the 2018/19 financial year, of which 12.5% was attributable to organic growth. Earnings before interest, tax, depreciation and amortisation rose 9% to £33.6m, but profit after tax fell 42% to £12.2m, impacted by the cost of March’s IPO.

The international and Connected Services businesses provided the thrust, up from relatively small bases by 79% and 23% respectively, for revenue of £54m and £18.5m. The firm grew from 26 international partners in 2017 to 96 in 2018, expanding heavily in Australia where it now has 28 principal lawyers (partner equivalents) and 150 staff.

Following this financial period, the firm also made a £3m law firm acquisition in Poland, with its sights now set on further markets including the USA, Canada, Hong Kong, Spain and the Netherlands.

Leaitherland told an analysts’ call the IPO process – which took more than a year – had been one of the longest years of his life because he had been restricted from M&A activity over that time. The shackles were now off, however, telling Legal Business he would be focusing on acquisition opportunities predominantly internationally and for the Connected Services business, with some possible deals in the UK.

The firm has paid down £19m of debt during the financial year to sit at £35.3m, with Leaitherland saying the firm had about £55m of headroom in its core facilities it could deploy for acquisitions.

‘We obviously kept conversations progressing and alive during the IPO but looking back, you cannot underestimate just how much time was consumed in terms of getting through that process,’ he told Legal Business. ‘We can just get cracking. I’ll be very focused in terms of M&A opportunities and capitalising on the pipeline that we’ve already got.’

That time-consuming process was also revealed today to have cost about £20m, of which £12.6m impacted the firm’s profit with the remainder funded by reserves. Leaitherland said a lot of that cost was attributable to regulatory advice it obtained engaging with regulators in different jurisdictions on how the listed law firm structure can operate in other countries.

‘I don’t think I’ve ever done a transaction where [the cost has] come in as I expected it to be, an IPO has unexpected twists and turns and unexpected complications,’ he told Legal Business. ‘We listed on the main market of the London Stock Exchange, that’s not a cheap process.’

But he added: ‘The regulatory advice has future-proofed the structure, it’s money well spent. We’ve got a pretty good idea of what we can do where and how.’

Leaitherland also highlighted the opportunity he sees for DWF’s Managed Services business. Earlier this month this division landed the firm its first major post-IPO client win after securing a five-year managed legal services mandate for BT’s insurance and real estate work, seeing up to 40 lawyers from BT’s in-house legal team transfer to DWF by the end of this year.

DWF was chosen ahead of 25 other providers, with Leaitherland saying he was restricted from commenting on the value of the deal but suggesting it had moved DWF from being a top ten provider of legal services to BT, to a top three. Managed services is now led by former RBS head of artificial intelligence for the bank’s commercial and private banking business, Mark St John Qualter, after Anup Kollanethu left the firm after less than a year in June.

‘There’s more to do, we have a really strong pipeline in terms of potential contracts in that space,’ Leaitherland said. ‘[The BT deal has] definitely stimulated interest and given confidence to people that that’s how things can be done.’

hamish.mcnicol@legalease.co.uk

Legal Business

‘An incredible opportunity’: DWF flexes New Law arm with BT managed services contract

‘An incredible opportunity’: DWF flexes New Law arm with BT managed services contract

DWF has landed its first major post-IPO client win after securing a five-year managed legal services mandate for BT’s insurance and real estate work.

Up to 40 lawyers from BT’s in-house legal team of nearly 400 staff could transfer from BT to DWF by the end of this year as part of the deal, which saw DWF chosen ahead of 25 other providers following a year-long process.

The managed legal services contract means DWF will provide BT’s insurance and real estate legal services largely through its Managed Services arm, which recently appointed former RBS head of artificial intelligence for the bank’s commercial and private banking business, Mark St John Qualter, as chief executive. He took over from Anup Kollanethu, who left the firm after less than a year in June.

BT group general counsel (GC) Sabine Chalmers (pictured), who joined the telecommunications company just over a year ago, told Legal Business that she and her leadership team had assessed how BT’s legal function was providing services shortly after she arrived.

Following those conversations, BT decided there were two brackets of lawyers it needed: those that necessarily required company and industry expertise, such as regulatory and privacy lawyers, and others which would benefit from having exposure to a wider variety of clients, such as insurance claims and property.

That was coupled with what Chalmers saw as a greater ranger of legal service offerings in the market, and transformation within the legal industry which had seen firms develop their own New Law-style businesses.

The process identified 26 potential partners, but DWF was ultimately considered the best fit after Chalmers and her team spent a day with the firm recently.

‘It was a very rigorous process, we looked at not just the offerings, but how they were providing them in terms of culture and the work environment,’ she told Legal Business. ‘Law firms are going through a period of tremendous transformation, and the trend of offering managed services is only going in one direction. The folks that do it best will take a greater share.’

Qualter would not specify how big DWF’s managed services business was other than to say it was a large, and growing, team.

‘We’ve got other clients who do managed services with us but clearly a name such as BT is very important to us,’ he told Legal Business. ‘We’re proud to be selected as one of their strategic legal partners.’

Chalmers said that many GCs would also not have the investment budget required to invest in technology as some law firms and other offerings could. DWF explicitly identified investing in operations and infrastructure as a core objective of its £95m March stock exchange listing.

‘Our ambitions are very clear,’ Qualter said. ‘We are fully committed to developing this [managed services], it’s an incredible opportunity.’

hamish.mcnicol@legalease.co.uk

Legal Business

Revolving doors: Freshfields hire to leave DWF managed services role after less than a year

Revolving doors: Freshfields hire to leave DWF managed services role after less than a year

DWF’s New Law credentials have been dealt a blow as its managed services chief executive is set to leave the firm less than a year after his arrival in the first major exit since the firm completed its IPO in March.

Anup Kollanethu was initially hired from Freshfields Bruckhaus Deringer, where he led the Magic Circle firm’s Manchester office for over three years and established himself as a well-regarded chief of business operations.

But Kollanethu is now set to be replaced by Mark St John Qualter, who will assume the role of chief executive of DWF’s managed services division after joining from RBS. At RBS St John Qualter headed the artificial intelligence arm of the bank’s commercial and private banking business. Kollanethu will remain at DWF throughout the transition period.

Kollanethu arrived at DWF with a strong reputation, having overseen Freshfields’ combined legal and business services centre in Manchester. The hub opened as part of the firm’s 2015 shake-up which saw the mass relocation of support roles to the north of the country.

In March DWF completed its much-anticipated listing with a £95m IPO, becoming the UK’s largest listed law firm. Subsequently the firm made its first post-IPO splash with a £3m Warsaw office acquisition in May, bringing K&L Gates’ 11-partner team into the fold. The managed services division at DWF remains one of the fastest-growing areas of the firm’s business.

In a statement, DWF said: ‘Anup Kollanethu, the current CEO of managed services, has been instrumental in establishing DWF’s managed services offering. Anup has decided to leave DWF and we wish him every success with his future.’

thomas.alan@legalbusiness.co.uk

Legal Business

Australia pull continues as Dentons, DWF and LOD announce expansion

Australia pull continues as Dentons, DWF and LOD announce expansion

Described in some quarters as an overlawyered market for a country with a population of 25 million, Australia continues to attract investment from the international legal industry in all its shapes and forms. Global giant Dentons, recently-listed DWF and New Law outfit Lawyers On Demand (LOD) have all expanded their presence in the country.

Just over two years after entering Australia through a merger with national firm Gadens, Dentons has hit the 280-lawyer mark in the country after absorbing Adelaide-based Fisher Jeffries. ‘This completes our footprint across the major cities in Australia,’ regional chair and chief executive Doug Stipanicev told Legal Business.