Legal

INTERVIEW: Overlaps Between Corporate, Private Client Work Drove UK Law Firm Merger

Tom Burroughes, Group Editor, London, 17 November 2014

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Charles Russell Speechlys, the recently-merged UK law firm, is an example of how the affairs of high net worth clients straddle both corporate and private client work, a fact that played a big part in this union.

While the wealth management sector hears with almost weary familiarity the refrain that there is a “wave of consolidation” coming, there may be something of a flurry of such marriages and takeovers going on in the legal arena.

It had been a trend in the past for some big firms to spin off private client arms because it was felt that the juiciest income could be made by focusing on corporate work, for example. Some law firms do not do private client work, at least not as a distinct business offering. (For example, "private client" is not a category of offering from Linklaters or Freshfields, although some of the work that such firms do may touch on what might be regarded as private client work.) About 20 years ago, it might have appeared the case that private client work was as unsexy and low-profile as private banking, but that has changed.

These days private client law is seen once again as a stable source of earnings. And it makes sense, the argument goes, to have private client expertise mingling with the corporate stuff. The division is increasingly artificial and unworkable, so it is said.

That there is a bit of M&A going on is undeniable, although as law firms have their quirks, broad generalisations about trends can be hard to make. One of the bigger deals of late was the coming together of Speechly Bircham and Charles Russell under the new moniker of Charles Russell Speechlys. It offers a blend of private wealth and corporate advice under the same roof, a mixture, the firm has told this publication, that high net worth clients with business issues require. Separately, a few weeks ago Berkeley Law, a law firm created in 2010 and which has focused on issues such as HNW immigration, was taken over by Irwin Mitchell, a legal services outfit.  

In general terms, the biggest UK law firms appear to be in good shape, so no wonder the benefits of scale and cross-selling are sought. PricewaterhouseCoopers has said in its annual check on the sector that the number of UK firms increasing UK fee income is higher than any time since 2008: 70 per cent (2013: 43 per cent) of all firms increased UK fee income above inflation.

WealthBriefing recently met with James Carter, managing partner, and Christopher Page, senior partner, of Charles Russell Speechlys. The enlarged firm says that it will have the largest private client team in the UK: some 170 partners, a total of 500 lawyers and revenues of £135 million.

Page told this publication of how there are “overlaps” in corporate/private client services provided by the firms and that it made sense from the client’s perspective for the approach to be truly integrated, given how so many HNW clients had interests in both fields. “Most of our clients are running a substantial business and run on a scale where there are jurisdictional interests as well,” he said, speaking at his firm’s offices off New Fetter Lane.

Private client - definitions
At the core of the argument about how the “overlap” can show up is the fact that “private wealth” in a law firm’s area of business does not always equate to the standard meaning of “private client,” Page said.

His now-colleague, Carter, agreed and said that the “legal market has been moving for some time [in the direction of more integrated firms]”.

Asked if the firm might eventually develop an Asia presence, Carter said “yes, but I can not confirm when nor what form that would take”.

Are there other examples the firm could give about how corporate/private client interests co-mingle more than they might have done in the past?

“The family office sector is one example. A family office will often combine a private office and an investment office, and in the case of the latter they will often be more significant than many investment managers – both in terms of the funds under management and the range of investment assets they look after,” Carter said. “Family office professionals are very much working in that area where personal and business interests overlap, adding value by ensuring that both are adequately protected.  All professionals working in that areas, including the lawyers, need to deliver an integrated approach,” he said.

“There was a time when corporate advisors could largely ignore the ultimate ownership of the assets, and private client advisers did not need to understand how a client’s wealth had been built up and was being managed. With increasing transparency and scrutiny by tax authorities, that approach does not work anymore,” Carter continued.      

There are other firms, big gorillas such as Baker & McKenzie and Withers – that provide a whole range of institutional/private client services under one roof; Charles Russell Speechlys may not – yet – be quite in that bracket but has taken quite a step, and it has a significant global footprint, although not yet in Asia. (There is a network of offices in European and Middle East wealth management centres, as well as relationships in the US, Africa and Caribbean.)

It is possible, Carter said, that law firms that have offloaded private client practices in the past may reconsider but this would not always be easy. “Private wealth requires a certain approach, which is inconsistent with the procurement-led legal services market. You may be able to buy back legal talent in the private client sector, but it is much harder to buy in the clients, many of whom put loyalty and long term relationships with their advisers high on their list of priorities,” he said.    

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