Doing the splits

It has been six weeks since 19-partner north-east firm Jacksons announced that it is to split.

'Everyone is still smiling and no-one has yet said "what have we done?", 'reports managing partner Richard Clarke.

The split will create separate practices focusing on insurance and on commercial and private client work (see [2003] Gazette, 30 May, 6).

There have been several splits in recent weeks, both along practice area lines and branch offices going it alone.

On the practice area front, there is the well-publicised end of 44-partner City firm DJ Freeman, when a new partnership focusing on insurance and commercial litigation - called Kendall Freeman - was formed, with the property, technology and media departments hived off to Holborn-based firm Olswang.

Then in April, five-partner north London firm Bolt Burdon split into Bolt Burdon Claims - a personal injury, professional and clinical negligence practice - on the one hand, and Bolt Burdon, a commercial and private client practice, on the other.

On the branch office front, the firm of Armstrong Wood & Bridgman has opened in Keighley, Yorkshire, having formerly been the office of Bradford-based Gordons Cranswick, while the Eastbourne office of Brighton-based Wynne Baxter peeled off to form a limited liability partnership called Cornfield (see [2003] Gazette, 12 June, 8).

Are these individual cases that have simply come at the same time, or is it the start of a trend?

Mr Clarke has been managing partner of Jacksons, which has existed in one guise or another since 1876, for the past three years.

He will become the senior partner of the new insurance practice.

He says: 'In a perfect world, I suppose everyone would be like Clifford Chance - vast and able to service every type of work.

But I don't know how we more mortal souls can do that and I believe it is a great mistake to try and be all things to all men.

'There is no doubt that the fairly general firms that grew up in the 1980s and early 1990s have had to move on because the nature of business has changed.

I think more firms will split their practices because they are being a bit braver now and realise there is another way they can go.'

For Lynne Burdon, managing partner of Bolt Burdon, lawyers must be increasingly specialised.

'When I qualified in 1980, most people did everything but it is just not like that any more.

I think these sorts of splits will happen more and more.

'Our split came out of the abolition of legal aid for personal injury work.

With the work now based around conditional fee agreements, the working capital requirements are very, very high, unlike the commercial/private client side where you do a month's work and send the client a bill.

So we were finding it very difficult, if not impossible, to attract partners into the mixed practice.'

Kendall Freeman's turnover is expected to be about 18 million compared with slightly more than 30 million for the old DJ Freeman.

Kendall Freeman's managing partner, Laurence Harris, says: 'We came to the conclusion that we covered quite diverse businesses.

They all had strong investment needs but quite different characteristics, with very little crossover between them.

Since some areas consistently outperformed others and we couldn't invest in all of them, we decided it made sense to focus on those we ere best at and seek a home for the areas we were less good at.'

He identifies the current recessionary climate as one factor which may encourage firms to consider splitting.

'There are areas where smaller and medium-sized firms perform very strongly and have a strong reputation and brand name.

But in areas where there are shrinking markets, such as technology, inevitably there is a flight to the best-known names in the market and if that isn't you, you can lose market share.'

But just how complicated is the process? 'At one point, someone made a list of the things we had to do and it had 120 items on it,' Mr Harris recalls.

'There are a million things to think about.

We made the changes pretty quickly.

Once we had decided on the new name, we changed everything from our Web site, logo, headed notepaper, the signs outside the office down to the names on the spines of files and the pens and pencils in five weeks - and that was just one of many projects.'

The firm is staying in the DJ Freeman offices.

'We have some spare space but, fortunately, the lease on one of the buildings we occupy comes to an end this month.

However, we are also expanding and will soon be announcing how many trainees we will be keeping on in September.

When it came to jobs, Olswang took most but not all of the fee-earners [in the departments that moved across].

What has been more difficult has been the support side - which was too large for the new firm - and about 30 jobs went.'

That is an area Jacksons is still working on.

Mr Clarke says: 'We have about 135 staff.

The grey area is administration but it is not yet clear whether there will be any job losses.'

The firm currently has three offices.

Its headquarters is in Stockton-on-Tees, where the majority of the staff is based in a three-floor former call centre.

Both emerging firms will stay there but they are building in provisions so if either decides to move out, it is not held back.

The Leeds office will be used by the insurance practice and the Gateshead office by the new commercial/private client practice.

Mr Clarke says: 'During the 1990s, we tried to develop a practice which covered insurance, which accounts for just more than 50% of what we do, with commercial and private client work.

The firm has moved forward but we don't feel we have been able to fulfil our potential because we have been running two such different businesses.

'On the one hand, we are a regional practice with low overheads, able to handle bulk work for insurers.

That requires very few partners, lots of staff and a heavy investment in IT.

But, on the other hand, if we are seen as a predominantly insurance practice, it is difficult to attract and retain good commercial lawyers.'

The two new partnerships will start in September, with Jacksons remaining but in the background for administrative reasons.

Mr Clarke says: 'We want to have as little as possible in that.

It will deal with issues such as rent and maintenance and be paid for by each firm.' The firms plan to have separate accounts departments and financial directors but a common IT department, though the systems will be separated out between the two practices.

'I think the cost of the split is likely to be about 140,000,' Mr Clarke adds.

'While we will effectively be two smaller firms, they will have the same resources as they had before and the change is designed to be a platform for growth.'

Ms Burdon says she spent about two years mulling over the idea before working on it solidly for the six months leading to the split on 1 April.

She says: 'It hasn't really made a difference on the operational front.

We are in separate buildings anyway so no one moved desks.

The administrative staff went into the new service company, called Igloo.

We run both firms from one cash office and open the post together to avoid duplicating expenses - though some have to be duplicated, such as accountants' fees.

One of the most time-consuming things was splitting the accounts on the computer system.'

The two firms pay service charges based on the number of desks they occupy.

'One consideration will be the increased cost of professional indemnity insurance.

We haven't had our quote yet but we have been told to expect to pay more,' Ms Burdon adds.

The decision to split a firm is not taken lightly.

But as Mr Harris says: 'We were in the position where we needed to change.

People were nervous but then they were nervous of staying the same.

Sometimes you just have to embrace change because if you don't, you get eaten.'

Grania Langdon-Down is a freelance journalist