2013 legal review – sector hogs the limelight

IT’S been a dramatic year for the North West legal sector, and in Manchester in particular, the epicentre of the region’s corporate community.

There have unquestionably winners and losers as the market consolidated and also began to adapt to the demands of structural reform caused by tough competition on fees, weak transactional volumes and regulatory changes, particularly in legal aid funding and the clampdown on referral fees in the personal injury sector.

Unquestionably the biggest legal story of 2013 was the demise of commercial firm  Cobbetts, a 175-year-old Manchester institution dating back to the middle of the 19th Century, and by revenue the 62nd-largest in the UK.

TheBusinessDesk.com revealed on January 30 that the firm, which had offices in Leeds, Birmingham and London as well as Manchester, had filed a notice of intention to appoint an administrator. A day later DWF – which had been in merger talks with Cobbetts in late 2011 – announced a pre-pack acquisition for the bulk of the firms assets, securing 400 jobs.

Cobbetts’ difficulties stemmed from an onerous 20-year property lease taken on its 104,000sq ft  Manchester headquarters on Mosley Street and also from the slow recovery in two pre-recession pillars of strength – corporate finance and commercial property.

Its problems were not new – staff in its transactional groups were asked to move to a four-day working week in 2009, and there were several rounds of redundancies too.

Its financial position worsened during 2012 – a tax bill was paid late amid severe cashflow issues. KPMG was brought in by lender Lloyds in June after Cobbetts asked to defer capital repayments.

By September 2012, Cobbetts had to negotiate deferral arrangements with its landlords, HMRC and retiring members. Two months later KPMG – which would later become administrator – and the Solicitors Regulatory Authority were asked by Cobbetts’ management to draw up a contingency plan.

As trading conditions continued to be subdued and with a partners’ tax bill of £2.4m looming in February, the writing was on the wall for the firm.

The big winner out of Cobbetts’ demise was DWF – the region’s most acquisitive firm – which paid just under £4m for firm’s debts and work in progress.

DWF, led by managing partner and chief executive Andrew Leaitherland, had a stunning  2013. After adding Cobbetts and merging with four other firms, profits in the year to the  end of April rocketed 60% to £38.8m.

The firm now has 2,500 staff and offices in Manchester, Liverpool, Leeds, London, Birmingham, Newcastle and in Scotland and the South West too, and is one of the top 20 UK firms by fee income.

It attributes its success to strong operational and financial management and to high levels of customer service and care.

DWF was not the only active consolidator of 2013, as national firm Mills & Reeve swallowed-up Manchester practice George Davies in April and ambitious JMW bolted-on smaller Manchester practice Goodman Harvey in May.

Linder Myers continued to grow too, and after pre-pack deals for Rowlands Field
Cunningham and SNG Commericial in 2011 and 2012, strengthened its Lancashire presence in September with another rescue deal, this time for long-standing  firm Dickson Haslam.

Dickson Haslam was not the only Lancashire firm to run into trouble in 2013 as  Preston and Chorley-based firm Marsden Rawsthorn was sold to its partners in a pre-pack administration for £1.24m. 

Slater & Gordon, the listed Australian consumer law group. was the other major story of 2013 –  its recent and protracted acquisition of the majority of Pannone’s business – proving to be the icing on the cake of a very active year on the M&A front.

As well as the announced, but not completed £33m deal for Pannone, S&G has acquired Fentons, persona; injury specialist John Pickering & Co and Liverpool’s Goodmans Law. The firm entered the UK market when it acquired Russell Jones & Walker in 2012.

Post completion of Pannone – Slater & Gordon believes it will be the biggest firm in Manchester by number of staff, and the group is now looking for an office big enough to accomodate its team.

As ever in these corporate deals, there is a human cost. It is understood that up to 100 Pannone staff will be surplus to S&G’s needs, while around 30 Cobbetts administration staff lost their jobs as a consequence of the administration.

In management circles,  it was the end of an era at Addleshaw Goddard as Paul Lee, pictured, its leading light in the 1990s and early 2000s retired, while there were changes at the top at DLA Piper in both Manchester and Liverpool, and at Squire Sanders, where former Manchester office head Jane Haxby has landed a pan-European corporate role.

Irwin Mitchell’s Manchester commercial practice had a mixed year, adding a highly-experienced and well-regarded real estate team from DLA Piper, but losing several partners including litigator John Lord to Bristol firm TLT Solicitors – a new entry in the North West this year.

There was also a mid-year rebrand for North West firm Brabners, as it dropped the Chaffe Street part of its name.

2013 ended as it started with another Manchester insolvency as boutique firm EOS Law appointed administrators BDO, three years after it was set up by Simon Woolley,  the former Manchester office managing partner of DLA Piper.