_LB223 Weightmans

WEIGHTMANS

Weightmans’ Patrick Gaul (pictured) is as laid back and straightforward as managing partners come. In an unmistakable scouse

accent reminiscent of Ringo Starr, his answers are economical and precise. He doesn’t take himself too seriously and, in a trait quite rare among managing partners, is very low on hyperbole. When asked what has kept him in his current role for nearly a decade, his response is self-deprecating. ‘It’s not unduly onerous being the managing partner because there’s a good infrastructure here,’ he says. ‘Lots of people are doing bits of things that I unfairly take the credit for.’

A common belief is that managing partners are meant to be cheerleaders for their fi rms; aggressively talking up strategic plays and drawing attention to everything. But Gaul personifi es his fi rm: over the past ten years it has quietly grown into a top 50 national player without the fanfare that you might hear elsewhere.

Weightmans and Gaul have kept their feet on the ground and allowed us to get excited for them. LB crowned the fi rm National/Regional Firm of the Year at the 2012 Legal Business Awards in February. The reasons why are obvious.

PRETTY GOOD YEAR2011 was a watershed year for Weightmans. First the fi rm enhanced its national

infrastructure with the addition of 200 staff, which included 25 fee-earners and 13 partners, through its acquisition of Vizards Wyeth’s London insurance practice, which went live in April.

Then, following months of speculation, the fi rm penned a deal that saw it take over fellow North West fi rm Mace & Jones in May, adding 160 partners, fee-earners and support staff to the roster and signifi cantly boosting its offering in private client, employment and disputes. It has offi ces in Liverpool, Manchester and Knutsford.

The added quality paid off. In the 2011 edition of The Legal 500, Weightmans was recommended in 50 categories and improved its ranking in 23 tables.

The fi rm had always been a solid player in its local North West market, but in the past fi ve years it has made the diffi cult leap to become a national fi rm with top-notch healthcare and insurance practices: last year’s deals added bench strength in commercial practice areas while enhancing its status in established business lines.

Last summer it advised Cardpoint Services Limited, one of the UK’s largest independent cash machine operators, on its acquisition of OmniCash for an undisclosed sum. The fi rm was also shortlisted for Dispute Resolution Team of the Year at this year’s Legal Business Awards, for winning a landmark decision in the Supreme Court for London Authorities Mutual Ltd (LAML) and the London

After four years of consecutive revenue growth and two transformative mergers in 2011, Weightmans is our National/Regional Firm of the Year. However, there’s no chance of any of it going to the managing partner’s headMARK MCATEER

FEET ON THE GROUND

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64 Legal Business April 2012

Borough of Harrow, in a groundbreaking judicial review of the viability of a mutual insurance company for local authorities. The LAML case was debated in Parliament and resulted in primary legislation changes clarifying EU procurement law.

The mergers leave Weightmans with over 1,175 staff, 148 partners and projected revenues of up to £80m in 2012, which Gaul says the fi rm is on target to meet.

When asked how the mergers will secure the future of the fi rm, Gaul is unsurprisingly mischievous. ‘That question assumes that they do!’ he says, before adding that the acquisition of Mace & Jones has doubled the fi rm’s commercial business while giving it credibility in work that it never had before. As for the London deal, he adds that it both strengthens the fi rm’s position in insurance work and adds a few new clients as well as strengthening its position with its main client Zurich.

Revenues with Zurich increased by 20% year-on-year, while revenues from across the fi rm’s top 35 clients increased by £5.5m, up 12% on 2009/10. A year ago, the fi rm was reappointed to Royal Mail’s legal panel while some big-name players were surplus to requirements.

In local government work, where the fi rm is pre-eminent, appointments to three legal panels in Wales in August mean that Weightmans now acts for a total of 11 public sector consortia across England and Wales.

Not that the fi rm was faring too badly before the mergers. In 2010/11, revenue was up 4% to £58m, marking a fourth consecutive year of revenue growth, and a fi ve-year compound annual growth rate of 9%. It is the largest fi rm by revenue in the North peer group by some margin, with second placed Pannone posting a turnover of £47.5m. This will extend further when the fi rm posts its swollen revenues this year.

‘Apart from the mergers, the last few years have been about trying to make the most of business as usual,’ says Gaul. ‘I think the fi rm has been pretty stable through diffi cult market conditions.’

Speaking to LB for the LB100 report last summer, Gaul said: ‘We’re obviously very much hoping the merger investments will kick-start the business.’ Ten months into the current fi nancial year and Gaul can now happily report positive signs.

‘I think there’s much more interest in the fi rm now,’ he says. ‘Our profi le in the North West has been helped enormously by the

acquisition of Mace & Jones. There are signs that the fi rm has been busy; certainly, some parts of insurance have been extremely busy. I’m hoping we’ll have signifi cant growth in revenue – the mergers will account for some of that but I think the fi rm is having a growth spurt anyway.’

MARGIN FOR ERRORHowever, the fi nancial picture is not completely rosy. More than 1,000 staff means a lot of mouths to feed and the fi rm’s business model means many fee-earners are charging fi xed-fee or low rates. Revenue per lawyer (RPL) is low – just £145,000 – and erratic (see table, ‘Weightmans’ fi ve-year RPL v selected competitors’, above). As Gaul says with typical candour: ‘We have around 150 paralegals and they are never going to be banging out big fees. Very little of our work is done at premium

rates. Sixty per cent of our practice is insurance and apart from the professional indemnity and insurance work we do in London, it’s all relatively modestly priced.’

With a largely commoditised business and low RPL, profi t is hard to come by. The profi t margin is 15%; profi t per lawyer is just £21,000. And for a fi rm where just 35 of the 148 partners are equity, profi t per equity partner (PEP) is low, around £300,000 (the PEP fi gure of £246,000 recorded in the LB100 this year was refl ective of a signifi cant shift in equity partners between the start and end of the fi nancial year following the mergers). That said, the equity spread across the nine-point lockstep is generous – £176,000 to £353,000 – with 13 partners at the top of the equity. But in our ‘Behind the numbers: profi tability revealed’ table in the LB100 (see LB217, page 66), the fi rm ranked joint 89th. This puts it some way behind the fi rms that Gaul says are among Weightmans’ main competitors – DWF, Berrymans Lace Mawer, Hill Dickinson, DAC Beachcroft, Keoghs and Kennedys.

The margin is low compared to other fi rms but Gaul counters that by saying that Weightmans has plenty of well-paid fi xed-share partners and that the fi rm’s business model precludes high profi ts. ‘We don’t get rate increases regularly because quite a lot of the work is fi xed-fee. The mood of the market we’re in is very much about clients looking for value for money. A lot of the contracts we have are for large sums of money but for doing very large amounts of work,’ he says.

To a certain extent, this reality is refl ected in the margins of some of Weightmans’

WEIGHTMANS’ FIVE-YEAR RPL V SELECTED COMPETITORS

*Became DAC Beachcroft in 2011

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‘Some clients may not be happy if their providers are part-owned by someone they might not like.’Patrick Gaul, Weightmans

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April 2012 Legal Business 65

competitors: none of the insurance-based fi rms enjoy particularly high margins but most manage to squeeze out a higher profi t per lawyer, with DAC Beachcroft posting £34,000 (see table, ‘Weightmans’ fi ve-year PPL v selected competitors’, page 66).

Excuses aside, Gaul says that addressing profi tability is a key priority for the fi rm going forward. Again, he is candid about its position on this. ‘We need to better understand where we make profi t, so we can make more profi t without ripping our clients off,’ he states simply. He believes one way of doing this is by diversifying into more lucrative areas of work but admits that this isn’t easy, because even a lot of real estate is going fi xed-fee these days.

‘Some of our practice areas are £8-10m and some are £1-2m,’ he adds. ‘The ones

where we have real potential for signifi cant growth and increased market share are regulatory, professional conduct, construction and costs.’

However, he is not about to make any false promises. ‘The feeling is that increasing your profi t margin at the moment is pretty tough. We’ve just undertaken a big investment in the fi rm and part of the rationale for that is to try and improve profi t. But I wouldn’t have thought that is something that can be turned around quickly.’

Not that low profi tability has been a barrier to the fi rm hiring in the talent it needs. Recent laterals include real estate partner Steven Silver, who joined from The Co-operative Group, where he was deputy group counsel, in March. In February the fi rm announced that it had hired Laurence Pritchard, a competition u

‘People are underestimating the strength of the partnership model because we can go to the market and get people to invest in us.’Patrick Gaul, Weightmans


WEIGHTMANS

66 Legal Business April 2012

partner at rival DWF in Liverpool. Although the fi rm will continue to struggle to recruit in areas where it has little to offer, the way the fi rm has worked to improve its reputation and the brand over the past fi ve years means it hasn’t been a diffi cult sell.

HEAD ONGaul is characteristically direct on the other areas where the fi rm needs to improve, besides profi tability, pointing out that the fi rm is ‘fl aky on career structures’; ‘we need to be better at rewarding people who are really adding value’; and ‘there are not enough client partners thinking about what other services they could offer to clients’.

One particularly tough challenge is leveraging off the mass of commercial lawyers acquired through the mergers to build a corporate offering in the North West that can compete seriously in the next three years. Gaul says that the main local competitor is probably Brabners Chaffe Street but even benchmarking against that fi rm is ambitious, with Brabners having a top-tier, nine-partner corporate practice in Liverpool and regarded to be much stronger than Weightmans in Manchester.

But Weightmans knows that it has to strive for a competitive edge, after fi nding its own recent efforts to reach a fi ghting weight eclipsed by other rivals in the insurance arena. From the mega-mergers that formed Clyde & Co and DAC Beachcroft at the top end, to the takeover of Russell Jones & Walker by Slater & Gordon, and Irwin Mitchell preparing to become an alternative business structure

(ABS), Weightmans fi nds itself at the eye of the storm.

But Gaul remains phlegmatic about developments, particularly as far as ABS and taking external capital is concerned. Although the fi rm is keeping an eye on developments, it will not be suckered in to any lemming-like reaction. Gaul believes that until the Legal Services Act kicked off in January, many people thought that it would be a case of wait-and-see and there wouldn’t be too much activity for quite some time. Now those people are being quite surprised by the level of activity that is being mooted.

‘Some of our competitors have been saying that they will be doing big things, raising big money, which will raise the stakes in some of our markets,’ he says. ‘We have to make sure we remain competitive. To be honest though, although law fi rms are doing lots of things, it’s not actually clear what clients think about all this stuff. Some clients may not be happy if their providers are part-owned by someone they might not like. I think a lot of people are saying that capital is necessarily a good thing but capital can quite easily turn into debt.’

Nonetheless, he concedes that the size and shape of Weightmans will probably have to change again soon, with law fi rms evolving along corporate lines. The problem, he feels, is that partnerships comprise lots of owner-managers, partners who can legitimately say they own the fi rm. Therefore, it will need outside infl uence from corporates to catalyse the movement of law fi rms into more commercial structures.

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‘Apart from the mergers, the last few years have been about trying to make the most of business as usual.’Patrick Gaul, Weightmans


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April 2012 Legal Business 67

But he remains a fan of the partnership model and warns that corporate models are not necessarily the Holy Grail. ‘My own view is that the partnership model has fl exibility and that brings out the best in people who are quite clever and want to be quite creative,’ he says. ‘I slightly fear that by putting partners into corporate boxes, you might stifl e the creativity. I think people are underestimating the strength of the partnership model because suddenly we can go to the market and get people to invest in us.’

NEXT CHAPTERGaul became managing partner of Weightmans in 2003 and although he

won’t take the credit for it, the fi rm has doubled in size during that time. He took the role because he felt he had something to offer, some ideas that could improve things in certain ways. Re-elected unopposed for a third three-year term in 2010, Gaul sums up his tenure thus: ‘The fi rm has done OK and no-one has come along and said: “we need to get rid of you”.’

There’s been a solid and consistent management team for quite some time at Weightmans – senior partner Ian Evans is coming up to 12 years in his post. And it’s clear that as the years have gone by, Gaul’s appetite for management has increased and he’s enjoying it more. ‘The fi rst couple of years

it was nuts and bolts stuff about how we could get the fi nances better but in recent years it’s been a lot more creative. That’s the really enjoyable part.’ He confesses to fi nding parts of the job ‘a bit boring’ – particularly budgets, business plans, management accounts each month and board minutes.

‘I’m fi ne with the meetings, I just don’t like the minutes, the follow up actions. I just like talking to people really. I enjoy seeing things come together, seeing things succeed. Understanding the organisation, trying different things and seeing how they come off. I’m quite a good ideas person, I like seeing if my ideas will work.’

Weightmans has undoubtedly come together, particularly in the last fi ve years. And with longevity comes experience. Gaul says that with time you get better at running a fi rm. Over time, you can see who will come into the organisation and work, and you get better at spotting how certain things will go down in the fi rm. ‘I think people recognise that and continue to trust me to do it,’ he adds.

For him, the standout achievement of his tenure is not securing the mergers, the awards or building the fi rm’s national reputation in core practice areas. It’s what he describes as ‘preserving the integrity and humanity of the fi rm’.

‘I think it’s a really good place with really good people and I think there’s a very strong culture which is fundamentally decent,’ he concludes.

All well and good but it certainly helps the culture to have commercial success underpinning it. And Weightmans has that in abundance. LB

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‘Our profi le in the North West has been helped enormously by the acquisition of Mace & Jones.’Patrick Gaul, Weightmans


_LB223 Weightmans

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