Nobody likes talking about the R word. It’s possibly the only non-profanity that’s less popular with business than the B word. Deal-makers, bankers and accountants: no one likes to say that deal volumes are down. Lawyers possibly least of all. After all, financial services is a lofty confidence game and nobody wants to startle the horses.
In my experience, the first sign of an upcoming recession is: people writing stories about the first signs of an upcoming recession. (This is one of them, so you have been warned.)
And the second sign is that Linklaters does something out of the ordinary. Oh, and maybe Slaughters. Linklaters traditionally through saying and then doing, and Slaughters through doing.
What happened in the last recession?
Linklaters has taken a first mover stance on the last two recessions. It acts early and decisively.
In the 2008 recession, Linklaters famously hived off their CEE practice (and Kinstellar was launched – an anagram of its former mothership, no less).
Linklaters also took the McKinsey approach and said that would no longer act for clients who they’d been billing less than ££70k a year for. It chopped off its long tail. Sure, it makes sense now and it made theoretical sense then, but it was a brave move in challenging market conditions. They positioned themselves as a pure play premium brand, sent out work to loads of other firms who were happy to pick up clients billing up to £70k a year. They moved early, they were clear, the market understood their positioning (clients, their own people, the media, targets, everyone) and that meant that they didn’t need to waste time having conversations that were not going to go anywhere. Hence, a leaner, meaner more profitable machine.
Advantage Linklaters.
And so to Slaughters. Until the past few years, Slaughters has always been something of an enigma. The mystique that surrounds the firm is down, in no small part as it being (rightly, in my opinion) the only firm to refrain from becoming an LLP in the top 50. Add to that the fact that they never officially confirmed their financials, and had no press office function until relatively recently (although the one they do now have is excellent). And the fact that it is probably the best connected law firm in the UK. Constantly winning the kinds of mandates that any firm would want to win. Their strategy: do good work and stay close to clients, listen for opportunities. Obvious, hackneyed and hard to replicate. Any attempts to copy Slaughters’ strategy reminds me of that Bob Hope joke:
‘How do you become a millionaire? Well, you start will two million dollars…’
And – for me – the moment that Slaughters’ strategy shone most brightly was in October 2008. Gordon Brown’s government needed to save the banking sector as the bedrock/engine of the UK’s economic well-being and Slaughters accepted the mandate.
According to the profile of Slaughters’ partner Charles Randell in The Telegraph around that time:
“Over the course of 72 hours over one weekend, Mr Randell and a team of colleagues raced to recapitalise the Royal Bank of Scotland (RBS), Lloyds TSB and HBOS, while at the same time forming contingency plans for a raft of other City institutions.“
But I think it’s fair to say that Slaughters had not primarily been advising the Government or Treasury in the years leading up to that weekend. It had been advising corporates and banks like many other firms. (Although some firms favoured banks over corporates, Slaughters tended to act for both corporates and banks in their capacity as corporates (e.g. on Santander’s acquisition trail in 03/04). It’s very similar to Wachtell’s strategy of being *the* preeminent corporate law firm on the other side of the water.
But it was Slaughters’ ability to pivot and pick up the £33m mandate from the Government that stood out. It had, through Randell, continued to engage with Government even when that was unfashionable or thought of as unprofitable or a little odd.
Even 11 years down the line, one detail sticks out for me. One of the top of equity partners at Slaughters took the lead over that weekend on documentation management. That ability to do what needs to be done, to pivot, to get your ego out of the way and act: that is the sign of a genuinely world-class organisation.
As for that Hope joke, we don’t all start out with Slaughters’ and Linklaters’ advantage of already being among the best connected law firms in the UK. But we can ask ourselves the same challenging questions that they both do every time a recession is upon us:
- Is our firm recession ready?
- How would like to emerge from the recession?
- How can we gain market share?
- What is in our control that is not in keeping with our strategy? What is holding us back? How do we reposition it?
Are you recession ready?
Would you be ready to pivot and take the UK Government’s banking instruction (or an equivalent for your organisation)?
Would partner egos get in the way?
Would your management committees take six months to act?
How do you know it’s the right time to plan?
I wrote on Twitter last week that the early bird gets the worm, and the second mouse gets the cheese. But nobody wants to be the second bird or the first mouse. But this isn’t (necessarily) acting, it’s planning. Then, when the time is right, acting.
Why bother?
The clearer your strategy, the sharper your story, the more others will understand it and, as a result, work will come to you. You will emerge stronger from the next recession.
The more diverse and varied your mission, the more you’re just one of the masses. The more you’re at the vagaries of the market. The more your survival is down to hope and luck than good planning.
Some firms will go out of business this next two years because they have failed to sufficiently prepare for what happens next.
Big Four will continue to invade your territory and take your work, silently, until you notice too late. Some areas of law are pretty much only done by Big Four now. Fast forward a couple of years and this is only likely to have become even more the case.
The Brexit dividend for lawyers could be real or it could mask the real challenge: that deal volumes will decrease as a result of Brexit/recession/a Brexit-induced recession.
So, I’ll ask again…
Are you recession ready? Have you planned for what happens next? Have you run the scenarios? What did you learn? What have you changed as a result? Does everyone at the firm understand the plan?
Because planning for it will mean a better chance of emerging stronger on the other side.
And what’s the worst that could happen by planning now?
Precisely.
