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BOUTIQUES DiamondsDiamonds roughin the If you have the right tools, forming a boutique firm can give you a new lease of life, with -style profits

MARK MCATEER

Buried among the upper echelons of the UK If a single conclusion can be drawn from our legal services market are firms that defy con- most recent assistants’ survey (LB 179) and the ventional wisdom. They aren’t obsessed with slew of client service surveys and reports that size. They haven’t merged. They haven’t were circulating at the end of last year, it is that opened international offices. Instead, they clients and assistants are increasingly fed up have focused on specific industries, or sought with their law firms. Clients are tired of not get- to provide a specific type of service to clients. ting value for money from the services they feel They don’t try to do everything and will work they are paying through the nose for. with other firms on deals. They only hire from In CMS Cameron McKenna’s How much? sur- leading full-service firms in their field and vey, published in November 2007, one FTSE-250 usually keep the equity tight. In short, they’ve client comments: ‘It’s madness that you’re pay- stuck to what they’re good at. ing £90,000 for a newly qualified. It’s madness

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 that lawyers have to work develop a strong niche in pensions 2,000 billable hours.’ Another adds: work. ‘Before I was here, they car- ‘Inexperienced (or poorly super- ried out a review with a consultan- vised) associates, even though cy that said: “Go niche, go global or cheaper, are useless, as their go bust”,’ recalls Pittaway. ‘Those work has to be redone by more were the choices, and clearly going Using the Gemological Institute of experienced lawyers.’ global wasn’t an option.’ America’s standard for determining the Assistants aren’t happy with Although the firm was perform- clarity of diamonds, assessed by the their lot either. The big City firms ing well in all areas, pensions was number of inclusions (imperfections) in are losing 25% of them every year, by far the strongest suit at Sackers, the stone, we have run our loupe over and it’s been proven beyond rea- and because the market then was five leading boutiques, giving them a sonable doubt that throwing quite benign, it was fairly easy for rating based on their directory rankings, money at the problem just makes non-pensions specialists to move client base, lawyer satisfaction and the headache more expensive. on to other firms. financial performance. Junior partners are Summing up why he moved to also frustrated at not a boutique, Pittaway says that getting the rewards when he was at Nicholson for the work they Graham & Jones he had to pitch as GAMBLING bring in and not hav- a full-service firm, ‘with no corpo- ing an effective voice rate practice to speak of, so I was HARRIS HAGAN in a business that they getting the worst of both worlds’. Quality: The firm is rated as one of the part-own. Therein lies the key attraction of two top licensing and gaming firms in the But there is an the boutique model to specialist country, according to The Legal 500, and alternative for dissatis- partners in full-service firms: has a market-leading reputation for high- fied clients and disaf- being free of all conflicts and quality gambling and licensing work for fected partners and being independent specialists casinos and nightclubs. associates. Go com- means they can market their serv- pact and choose spe- ice much more vigorously and Clients: Aspinall’s Club Holdings Ltd, MGM cialist, targeted firms. bring work in, so it doesn’t matter MIRAGE Development Ltd, Royal Opera Boutique or niche law if the firm doesn’t have a corporate House, Stanley Casinos firms feel they can add team. You are free to choose who Gilbert: IP is ideal for the boutique model brilliance to flawed you work with and take conflicts Lawyer satisfaction: Formed in 2004 career prospects and out of the equation. You don’t have as a spin-out from (then clarity to opaque client service. to kowtow to anyone. Pinsent Curtis Biddle), the firm has At boutique firms there are attracted other high-profile recruits, HIDDEN GEMS often no departments, no formal most notably Elizabeth Southorn, the Sacker & Partners is perhaps the targets and no financial rivalry. former head of licensing at Richards trophy illustration of a niche firm The advantage of this as a business Butler. (see box, page 58). This pensions model is that when you’re promot- boutique stormed into the Legal ing the firm, everyone under- Finances: Three partners share the Business 100 in 2007, posting a stands the market, who the clients equity. Founding partner Julian Harris profit margin of 54% and an eye- are, and what the right message is, said that the first year, after being an watering PEP of £867,000. That’s so there’s little confusion. equity partner at Pinsents, was tough. more than , Lovells, John Hagan, a former senior But the firm has turned a profit every SJ Berwin and practically every associate at Pinsent Masons (then year, and Harris says that he is now firm outside of the Magic Circle. Pinsent Curtis Biddle), left with for- better off than he would have been This figure isn’t skewed by a mer Pinsents equity partner Julian had he stayed at Pinsents, and certainly minority of partners holding all Harris to form a highly successful better off than he was in his final year the equity either: 27% of the firm’s licensing and gaming boutique, there. lawyers are equity partners, one of Harris Hagan, in 2004. He is in no the highest ratios of any firm in doubt that the freedom to make Verdict: Very slightly included (VS1) the top 100. quick decisions is an attraction A very good-quality firm, with excellent In 1996 Ian Pittaway brought both personally and commercially. market position and a solid, if his well-respected pensions team at ‘Many partners at large firms can unspectacular, revenue stream. Nicholson Graham & Jones (now become frustrated by the tortuous part of K&L Gates) over to Sackers, decision-making processes in play,’ which had already begun to he says. ‘One of the big conferences

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on IP. The founding partners report satisfaction with the positive start, and Penny Gilbert comments that they are ‘definitely enjoying life in a boutique firm’.

POWELL GILBERT Finances: No figures have been published yet. These former Quality: The firm was a new entry into the third tier for IP in the 2007 partners would have earned more than the average PEP at their old edition of The Legal 500, ranked only behind Bird & Bird, Bristows, firm (£243,000), and with reduced overheads one would expect to see Herbert Smith and . Partners Simon Ayrton, Zoë Butler, a significantly higher PEP than this. litigation, a staple for the Penny Gilbert, Tim Powell and Alex Wilson have long been recognised as firm, can generate huge fees as cases require a great deal of evidence IP experts. and can run for a long time, making it among the most lucrative types of litigation. Partners expect their take-home profits to be Clients: It represented Yeda in the House of Lords in its long-running comfortably more than average PEP at their old firm. battle with Sanofi Aventis and ImClone over the cancer drug Erbitux, worth about $400m in sales each year. Other clients include Monsanto Verdict: Very slightly included (VS2) and Human Genome Sciences. It’s still early days for this boutique, so it’s hard to tell just how prof- itable the practice will be. There is no doubting the quality of the work Lawyer satisfaction: As it was only formed a year ago, it’s too early to handled already and the pedigree of the personnel. At the moment, say. Partners defected from IP specialist Bristows to focus exclusively they’re just happy to be doing their own thing.

need to concentrate on what we ‘I thought I could do it better,’ ‘It’s not hard to convince saw as the core of the business. he says. ‘I think there are major When it came to it, the only way to deficiencies in the full-service your client that you’re a really achieve that was to split off model, which are countered by and form a new firm that wouldn’t the small-firm set-up because true specialist when your be diluted in any way.’ you’re very responsive and you’re directly accountable; your busi- entire practice is devoted INSTANT ATTRACTION ness depends on your clients in a It’s this accountability and added way that it doesn’t in a big firm.’ to that area.’ responsibility that is a major lure Onside Law is a sport, fashion for dissatisfied senior associates at and entertainment boutique John Hagan, Harris Hagan full-service firms. Fed up with formed in 2005 by former associ- being a cog in the machine, wait- ates from and ing for the partnership light to Nabarro. Clients include Justin for our business is in Las Vegas, shine upon them, some have taken Rose, Sony Ericsson, Betfair and and Julian and I can sit in a room the plunge and moved out. And Storm Model Mangagement. Simon and decide when we want to go against expectations, they are tak- Thorp, one of the firm’s three and whether we want to become ing home profits that compare founding partners, says hands-on sponsors in five minutes. At larger favourably to the City mid-market management is a major attraction firms you might have to prepare a and national full-service firms. for the would-be legal entrepre- paper on it or make a submission Toby Starr, co-founder of the neur. ‘If you’re a junior partner or to a relevant committee.’ commercial boutique Starr & even a mid-ranking partner at a For the five partners that spun- Partners, trained at City firm, you’re only one of many off from Bristows in 2007 to form before moving to Debevoise & or perhaps even one of several hun- IP boutique Powell Gilbert, the Plimpton for, he admits, ‘the dred,’ he says. ‘So even though you motivation to strike out on their money’. But, like so many associ- are an owner in that business, you own boiled down to a fundamental ates, he quickly realised that it was- would query how much say you difference of opinion on strategy. n’t the be-all and end-all, which is would have in the direction of it.’ Tim Powell, one of the founding why he set up his own firm with Starr gets the hands-on thrill partners, says: ‘We felt there was a private equity specialist Lisa Booth. of running his own firm, and 

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 financially it hasn’t been too someone more junior. Transactions shabby either. Starr & Partners are over-engineered in terms of ‘There was a lack of acts for clients such as Tesco and lawyering; there are too many peo- Novartis on corporate finance, liti- ple on them and their relevance is involvement in the gation and employment matters, not obvious to the client, but is providing, according to Starr: rather a way of making money.’ marketing process at ‘partner-led advice at boardroom The attraction for clients is obvious. Where you don’t need Lovells. A boutique bodies, why pay for them? And there’s further proof out there that practice allows you the corporate finance boutique can work very well. Just ask to get involved from , which many describe as an ‘über-boutique’. The top to bottom.’ firm has for years been mostly involved in the biggest deals (usu- Julien Rutler, RLS ally private equity-related), such as last year’s £6bn Saga-AA merger. With an average of £933,000 going to 15 equity partners, it underlines that being small is no hindrance to big money. Starr does not pretend that his outfit is in the same league as Starr: small firms are very responsive

level’. Four years on and it has four partners (two more having signed up from City/US firms in ). While Starr is reluctant to publish financial details, PEP stands at a level that would hold its own MEDIA among a sizeable chunk of the firms occupying the LB100, and WIGGIN would make a few partners at full- Quality: According to The Legal 500, the firm is top-ranked for broadcasting and digital service London or national firms carriage work and film and TV work in London and the South West, and highly rated for pub- somewhat jealous. lishing and music work. It is also widely acknowledged as the leading firm in the country for Thorp says: ‘We’re coming up handling the full range of services for key broadcasting clients. to the end of our third year, and our overall profitability is certain- Clients: BT, Channel 4, Five, Fox Searchlight, ITV, Manchester United FC ly commensurate with being a senior associate or salaried partner Lawyer satisfaction: With just 13 partners, the purse is held quite tightly. The firm was hit by at a leading City firm. Even if I had the departure of high-biller Mike Turner, who left to become chief executive at Nobok, so at remained at Clifford Chance, I least he didn’t go to a rival firm. The firm’s excellent work and the chance to spend half the would have been a salaried partner week in the Georgian splendour of Cheltenham is a key attraction to lawyers at rival firms, at best by this stage of my career.’ evidenced by the 2007 hire of David Quli from Bird & Bird. In equity stakes, the firm is defi- nately comparable to partners at Finances: With PEP at around £400,000, a Wiggin equity partner picks up a little less on the mid-level firms and has future average than at rival technology firms or Bird & Bird, but it is still doing well for growth potential. handling interesting and focused work. Starr thinks that a boutique model can work even in corporate Verdict: Very slightly included (VS1) finance because of how some major Not the most profitable outfit for a City partner, but there’s no denying the quality of the firms run deals these days. ‘My par- work in an open and pleasant environment. The client base speaks for itself. ticular concern was that at big firms the client is led through the door by a partner and handed over to

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Dickson Minto or the global elite, have given young and experienced but does highlight that it’s possible SERVICES TO LAW FIRMS lawyers a chance to plough their to make money on a par with many The independence of boutique law firms is par- own furrow and be highly success- full-service firms without the ticularly attractive to full-service firms, not ful, but while profits put some full- bureaucracy. ‘To an extent boutique only as a trusted option for referring conflicted service firms to shame, they are firms are actually high-end outfits clients, but also as a provider of legal advice to hardly at Magic Circle levels unless where you don’t have to deal with firms themselves. For some boutiques, the you’re at the top of the pile. The the crap: the whole office politics, process of targeting a client base from a message is clear: if you want to structuring and managing, and specific industry sector leads them to profes- make serious money, then you dealing with people in your own sional services firms, particularly law firms. have to offer something more firm,’ he comments. ‘They are basi- The most prominent example of this is Fox than first-class client service – a cally there to be what they should Williams, which derives a sizeable chunk of its USP is vital. be: client-service outfits.’ revenue from advising law firms on partner- For Dickson Minto, its USP is Another firm that has enjoyed ship issues, as does Fox, a spin-off boutique simple: unrivalled quality. There success with the small model and formed by the well-known partnership expert are very few experts in the private has similar levels of profitability to Ronnie Fox in 2006. Tim Powell and Penny equity market on a par with Starr & Partners is RLS Solicitors, a Gilbert, for example, were indebted to the Alistair Dickson or Bruce Minto. commercial property firm founded legal and personal advice given by Ronnie Fox Given that the competition are all by two former Lovells senior assis- in setting up their own firm, Powell Gilbert, at leading global firms or top US or tants with over seven years’ PQE at last year. London players, it is doubtful that the time. Given their legacy firm’s Toby Starr at Starr & Partners points out there could ever be a boutique reputation in the commercial prop- that law firms are a two-lane source of income. deals firm to challenge Dickson erty market, their credentials are ‘One is referrals from law firms in case of Minto. How could a small group of impeccable, and RLS’s unique sell- conflicts,’ he says. ‘The other is work for law corporate finance partners ever ing point is to offer clients a part- firms themselves. One case we handled compete at the top end of the mar- ner-led commercial property serv- recently was on an application for flexible ket? For another Dickson Minto to ice at half the rate of many of its working hours from a female employment form now, who would have to be in City rivals. The firm mainly servic- lawyer at a leading national firm.’ it? Probably the likes of Linklaters’ es occupier clients in significant Sacker & Partners’ services to law David Cheyne and Slaughter and property deals, including the firms department is a clear source May’s Nigel Boardman. Swiss government. of revenue, accounting for For Sackers, its success lies in the Explaining his reasons for set- around 10% of the firm’s fact that it is a true niche player: it ting it up, co-founder Julien Rutler income. The department found a place in the market that no says: ‘There was a lack of involve- advises around 20-30 other firm could fill. Twenty years ment in the marketing process at firms, mostly from ago, when pensions work was kick- Lovells. Influence and scope are the US. ing off, a typical model would have limited. We wanted to run our been a full-service firm acting for a own firm. A boutique practice company and its trustees. But when allows you to get involved from pension fund deficits emerged, top to bottom.’ Singling out his trustees’ interests were not always main competitors as mid-sized, the same as the company’s. With full-service firms, including Field major law firms reluctant to jeopar- Fisher Waterhouse, Finers dise their relationship with the Stephens Innocent and Beachcroft, corporates, the trustees came to Rutler argues: ‘We saw a gap in the Sackers and have kept on coming. market. You don’t need huge man- In 1996, the firm’s turnover was power on every deal, particularly £3m. This year, it is projected to be on mid-sized deals. When we were around £21m. ‘The inherent con- at Lovells we found that we were flict between companies and opposite very junior lawyers.’ trustees has worked to our advan- tage,’ Pittaway says. That’s putting DIMMED BRILLIANCE it mildly. He adds: ‘It may be that Lest anyone is kidding themselves there’s a rule that niche firms can that life at a boutique firm is one only grow better or survive in an bijou Mardi Gras, it’s worth area that is still developing itself. acknowledging the downside. Firms So it was easy for Sackers to such as RLS, Starr and Onside Law grow when pensions was on the 

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 ground floor because we sort of grew with it and got lucky.’ This is a view echoed by John Hagan at Harris Hagan, who emerged as an expert in gaming and licensing law while at Pinsents. PENSIONS ‘We offer a genuine specialism,’ he says. ‘It’s not hard to convince your SACKER & PARTNERS client that you’re a true specialist Quality: Top ranked in The Legal 500 for pensions and pensions disputes, it is when your entire practice is devot- arguably the best pensions firm in the country. ed to that area. Because we’re spe- cialists and understand the busi- Clients: BBC, BT, Citigroup, GlaxoSmithKline, ITV, Law Society Pension Scheme ness better than anyone else, we can estimate accurately what a job Lawyer satisfaction: Equity is spread generously throughout the partnership, is going to cost, and therefore tailor with very few high-profile departures. Jane Kola left to become Wragge & Co’s our fixed fees accordingly. That’s pensions director in 2007. really attractive to clients.’ But carving a niche isn’t bullet- Finances: The profit margin is 54% and PEP is £876,000 – global elite levels. proof, especially when all your eggs are in one basket. Only time will Verdict: Internally flawless (IF) tell what effect the downturn in the There are no visible signs of imperfections. Its work is market-leading and private equity market will have on capable of weathering a downturn. The financial rewards are superb. Dickson Minto’s stellar financials. When asked in early autumn about the likely impact of the credit crunch on his firm’s business, Alistair Dickson said: ‘There will be less activity in the next 12 months. There could be pressure on firms ‘It was easy for Sackers to grow with big private equity teams.’ In addition to major City players feel- when pensions was on the ground ing the pinch, that could include his own firm, with private equity floor because we sort of grew accounting for around 70% of its London turnover. with it and got lucky.’

SMALL IS BEAUTIFUL Ian Pittaway, Sacker & Partners Ironically, it could be the smaller, less prestigious boutiques that are better geared to weathering the The other way to secure your- prefers to use full-service firms financial storm. ‘There’s plenty of self in a fickle market is to offer a because she likes the range of serv- pie out there,’ Starr says. ‘There are service that cuts both ways. ices available. ‘Boutique firms may people who will lose their market Unsurprisingly, Harris Hagan can offer cheaper rates, but if they share when there’s a downturn, do just that. ‘We’ve embedded have to go to other firms to get but there’s far more work than we ourselves so firmly in the gam- advice on certain areas, then by can do. A downturn will probably bling industry, and it will always the time they finish liaising make clients more price sensitive; have legal requirements,’ says you’ve won nothing on cost.’ they will start looking at what Hagan. ‘If a downturn comes, we’ll However, Clive Weston, head they’re getting for their money. move on to whatever the clients of pensions at Boots, disagrees. Those factors helped us in the dot- need next and react accordingly.’ Last year he instructed Sackers to com bust, and I think they will Offering a boutique service to advise on complex pension trustee help us in 2008 if things turn an industry may be one way of issues linked to its takeover by a down. And that just covers corpo- being countercyclical, but that’s Kohlberg Kravis Roberts & Co-led rate work; I think we’ll get lots no help if you aren’t offering consortium. Sackers worked more employment, banking and clients a genuinely bespoke serv- alongside Ashurst, which provid- commercial litigation at this stage ice. Carol Williams, company sec- ed the key corporate advice. ‘I in the cycle.’ retary of Northern Foods, says she don’t think it could have been

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done better if it had been handled at the core of their business. If you by one firm,’ he recalls. ‘We felt are a waste management special- that by going down that route ist, then there is an industry there we had best of breed in both probably wanting your services. cases. From my perspective as a The same is true for aviation or oil client, the way in which Sackers and gas. But if you’re a property and Ashurst worked together lawyer or a corporate lawyer, then was seamless.’ there are so many other firms PRIVATE EQUITY In response to the argument competing, and it’s very hard to that boutique firms can offer more offer something unique.’ DICKSON MINTO senior lawyers, Williams is also Gilbert says the strength to Quality: The firm has an unconvinced. ‘I think it depends on set up on your own comes from outstanding reputation the nature of the relationship you knowing your market. ‘You have in private equity, ranked have with your ,’ she says. to be sure about your sector,’ she only behind Clifford ‘I have a rule, and I’m not afraid to explains. ‘Do you have everything Chance, Ashurst and Fresh- enforce it. If it takes a partner half the client needs in your unit? fields Bruckhaus Deringer an hour to do a job that would take Harris: it can be difficult to be unique How big do you have to be to in The Legal 500. It is two hours for an assistant, who service your client? Do you have one of just three premier would then have to get it checked and larger firms aren’t afraid to the confidence that your clients firms in for by a partner, I will have the partner refer work to us as we won’t try to will come to you in your new corporate work. doing it. I insist on small teams, cross-sell to other departments.’ standalone format?’ unless we’re talking about a However, lawyers are risk averse Clients: BC Partners, massive disposal or acquisition.’ UNIQUE PRACTICES at the best of times. If you’re not all Charterhouse, CVC For a client like Northern Foods, Why aren’t more specialised teams about the money, though, the cul- with a large in-house team and no at full-service firms seeking to tural change can be very rewarding. Lawyer satisfaction: You specialist requirements, the bou- spin-out and become self-suffi- ‘I don’t think what’s going to work have to be very, very good tique firm would only be attractive cient? A number of very strong in the current economic climate is to cut it here. Equity is in very rare, highly specific occa- teams stand out at full-service mid-level full-service firms saying: tightly held: 14% of the sions. Chris Arnull, associate gen- firms that could quite easily lend “We’re big enough to do big deals”,’ firm is made up of equity eral counsel at KPMG, says: ‘In themselves to the boutique model. Starr says. ‘Clients want more than partners, and usually only pitching to large clients with con- Take, for example, CMS Cameron that. I think the model for these one partner is made up siderable in-house resources, bou- McKenna’s and Denton Wilde firms is “forever expansion”, to just each year. Quite a few tique firms have to offer something Sapte’s first-rate advice to energy- get bigger and bigger. Their sole former Dickson Minto quite unique. In more mainstream sector clients. The firms’ strength attraction is having bodies to put lawyers pop up at Magic areas, it must be difficult for niche in regulatory matters means that on jobs. That isn’t going to compete Circle firms. firms to get over the brand or the practice does not depend on with the likes of Slaughter and resources issues.’ corporate work for companies in May, and it isn’t going to compete Finances: The profit margin The smaller and more spe- that sector. Could those teams run with us because clients get fed up is 45% and PEP is £933,000. cialised the market, the easier it is themselves as ‘energy boutiques’? with two-year qualifieds that can’t Some partners take home to be successful as a boutique. The answer is perhaps not, as ener- do the work being their only point more than their Magic Circle Powell Gilbert, for example, offers gy is a sector where global cover- of contact.’ counterparts. clients specific ability in IP litiga- age and corporate expertise is For the senior lawyer thinking tion, and this is only matched by a important. But for, say, the com- of going it alone, the choice is sim- Verdict: Very very slightly handful of other firms, most of puter games team at Osborne ple. Either offer something very included (VVS1) which are full-service. Penny Clarke, the aviation team at DLA unique and focused or have a mar- It has sensational work Gilbert, Tim Powell and their fel- Piper and the educational institu- ket reputation so strong that and unbeatable financial low partners have first-class repu- tions team at Eversheds, there’s clients will bite your hand off for returns – if you make it to tations. Like Harris Hagan, they possibly a case for breaking free. your services. Then wait for the the top. Question marks had a skill set that could move Offering something different is financial rewards that go with it. hang over 2008 profits away from a larger firm quite easi- key though. ‘All of our clients have If you’re an associate or salaried because of a downturn in ly. ‘IP lends itself to the boutique other firms they go to for corpo- partner wanting to be more than private equity markets, but model,’ Gilbert says. ‘We can act rate and property work,’ says just a number, then there are dif- an excellent Scottish for major clients and offer a self- Julian Harris at Harris Hagan. ‘On ferent kinds of rewards to be practice will offset losses. sufficient service that doesn’t work that requires big teams, it’s unearthed. But if you can convince require huge teams and many more difficult to use a firm such as clients how precious you are, you support services. This allows ours. But what we handle is key to will always be worth paying for. LB major clients to instruct us direct, gaming companies’ existences; it’s [email protected]

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