Marco Cillario assesses the background to RPC’s decision to abandon all-equity structure
At a November press event held by a top-25 UK law firm, Legal Business was struck by a sudden spike in the guests’ interest in RPC. The 76-partner firm has long been a respected insurance and litigation business, and solid mid-weight operator, but not generally a firm to cause too many ripples of interest among peers.
Drawing attention in this case is RPC’s announcement in November that it is launching a comprehensive shake-up of its partnership, ditching its all-equity structure to introduce fixed-share and salaried partners for the first time in its 100-year history.
It is a move the firm had floated previously as a means of allowing talented associates to make partner at an earlier stage, but the debate had never got far before, despite the loss of several prized senior associates that grew weary of waiting.
‘We have to start responding to the way in which our more junior staff look at the world,’ says RPC head of commercial Jeremy Drew. ‘They are very driven about their career and want to see they are moving forward. The old model of telling [people] “in 15 years you’ll have a partnership tag” is no longer working.’
Managing partner James Miller says he does not anticipate demoting any of the firm’s current partners and top-performing associates will still be able to jump straight into the equity, but the introduction of a three-tier partnership will give the firm much more flexibility with its talent.
It is an understandable move. Even the mighty Freshfields Bruckhaus Deringer has recently revived talk of bringing back salaried partners to allow for earlier promotions and all-equity structures are extremely difficult for most large law firms to make work.
RPC’s pitch to associates of combining better career prospects than larger City firms and a superior work-life balance to US rivals had become increasingly difficult to sustain. While there is no set promotion age, associates are generally made up well into their 30s. RPC’s partner headcount has hardly been growing in recent years amid mixed financial results and in 2018/19 it was down by nine to 74, underlining a lack of overall growth in recent years. Profit per equity partner currently sits at £441,000.
But the changes also signal deeper questions over the firm’s identity and direction. Margins are falling in its traditional insurance heartlands amid intense competition in a static market. Nor has RPC followed most of its competitors expanding internationally amid a globalising sector, its overseas offering is limited to two Asian branches in Hong Kong and Singapore.
Its foray into management consultancy had mixed fortunes. Launched in 2015, RPC Consulting took three years to turn a profit after receiving substantial investment from the partnership. In April 2018, the firm offloaded half of the insurance-focused business to the partners running it. The move to a 50/50 joint venture with Marriott Sinclair resulted in a 4% revenue drop to £108.6m in 2018/19, though some see the sale as a good deal for RPC with the business now turning a profit.
The real engine of the firm is increasingly its high-quality litigation practice, which as a whole accounts for nearly three quarters of its revenue and keeps busy 70% of its 340 lawyers. True, the firm is still on the panel of most large UK insurance groups and they provide a lot of contentious work – litigation is also the focus of the majority of its 200 insurance lawyers led by Simon Laird. But many of its top performers now sit outside the insurance practice, in the 140-strong commercial group.
Head of commercial disputes Tom Hibbert joined the firm from Reed Smith in 2009 and was a driving force in building a team now billing £30m, with revenue almost doubling in the last two years alone. Another key figure is Sports Direct go-to adviser Drew, who joined from Ashurst in 2006 and leads a team of 60 lawyers across technology, media, intellectual property and outsourcing, including Keith Mathieson, a regular to all main UK media groups for defamation claims. Hibbert and Drew wield huge influence internally through the RPC board.
‘The old model of telling people “in 15 years you’ll have a partnership tag” is no longer working.’
Jeremy Drew, RPC
Partly taking advantage of the retreat of US firms from Moscow in the post-sanction era, RPC has also built a lucrative Russian client base, including oligarch Oleg Deripaska, overseen among others by head of civil fraud Andy McGregor and senior partner Rupert Boswall. In September, the firm hired Russian-speaking partner Tatiana Minaeva from Jones Day.
As such, the sense is that two very different sides co-exist in the firm: an entrepreneurial and business-winning commercial group and an old-style insurance practice that relies on repeat work from its longstanding panel relationships.
The level of disconnection was underlined earlier this year when the insurance team secured its own sector-specific US partner in the shape of 21-office Chicago practice Hinshaw & Culbertson.
Partners reject suggestions that the two sides of the firm would be better off going their own ways, however, pointing to an increasing overlap between the two sides of the business and a reliable stream of regular work from panel relationships. The insurance practice also has proven business-winning partners, such as cyber security specialist Richard Breavington and litigator James Wickes. Says Laird of his group: ‘Do we have a slightly different model? Yes, but we have brilliant lawyers with brilliant work.’
Perhaps the wider question is just how expansive and ambitious RPC wants to be. Jonathan Watmough’s decade at the helm of the firm ended in part because of his desire to push for a more aggressive approach than the firm was ready to accept. The 2017 election of the more pragmatic Miller created a bridge between differing camps, but did little to resolve such strategic debates. The former insurance head Miller is expected to stand again unopposed in January for a second three-year term, providing continuity but arguably also kicking such decisions down the road. The real question regarding the surprise partnership overhaul is if it signals a more decisive chapter in the RPC story.