Profile: Travers Smith

While many firms have been going all out to expand and grow rapidly, with international mergers high on their priority list, City law firm Travers Smith’s approach has been markedly different. Tina Lofthouse talks to managing partner Chris Carroll as he takes up his third term at the helm.

With a long and illustrious history stretching back over two centuries – indeed, one of its partners drafted the constitution for the first Stock Exchange – Travers Smith is a City stalwart that is valued by clients for its high-quality, partner-led service, and is known in the industry for its resolutely stubborn attitude to retaining its independence.

The firm would be a prime candidate for an international merger – 40 per cent of its work involves complex cross-border advice – and, as a highly successful London law firm, it is in itself an attractive proposition for firms looking for a merger partner. But despite approaches from many firms, merger is not on the cards.

Travers Smith believes its independence is at the heart of its success. It can attract high-calibre recruits looking for challenging and interesting work without the culture of a vast international firm. The firm places great emphasis on collegiality, strong morale and an informal atmosphere – all qualities that work to keep retention rates high – and by staying independent it never has to compromise that culture.

So the firm believes that merger is desirable from neither a cultural, nor a business perspective. Travers Smith’s international needs are catered for by ‘best friend’ arrangements with several firms in each jurisdiction. It has worked well for the firm – although one of the priorities for Chris Carroll as he starts his third term as managing partner is to erase a few misconceptions about what ‘being international’ actually means.

“It is thought that if you don’t have foreign offices you are a domestic practice doing domestic work, but in reality all City firms are international and the only thing differentiating them is how they deal with that international workload,” he says. “The debate ebbs and flows on the one-stop shop as compared to the best-friend model but for us the latter is by far the most effective. If you have your own overseas office, unless it is the same size, breadth and depth as your London office, it can’t hope to match the same quality output you produce in London.”

Challenges of changing landscapes

But the firm’s strategy relies on there being a number of high-quality independent law firms in each jurisdiction – and they need close relationships with at least two because of conflicts of interest. Travers Smith has to react if the number of independent firms starts to drop in a certain place. When the firm saw that all the best independent law firms in Berlin were being snapped up by rivals, it needed to act and decided to open its own office out there.

“We didn’t want to merge so what we did was to plant a flag in the sand as a defensive move. We were prepared to build on this if the requirement presented itself but were always going to retreat if we could possibly do so,” explains Carroll.

The churn stopped, the remaining firms didn’t shift their position as Travers Smith had feared, and people fell out of the merged firms to set up independently. The landscape had changed again, and Travers Smith, in common with Lovells and Clifford Chance, decided to close its Berlin operations.

Carroll adds: “You either have a big office or nothing at all, and we were reluctant to have a major presence as we reckoned you’d need at least five partners to have anything credible and to get the gearing right you’d need another 15 to 20 lawyers – but we’d only have enough work to keep them busy ten per cent of the time.” Although they might have been able to make up the rest from the domestic market, it would have been dilutive for the firm, Carroll believes. Travers Smith does have another overseas office in Paris, but that functions as a liaison office, advising French clients and law firms on all aspects of English corporate and commercial law.

The firm’s best-friend arrangements are not just confined to Europe, however. In recent months, the firm has been scoping out potential contacts in India and China in response to client needs. Such visits are vital for cementing the kind of close working relationships that are needed with a best-friend network. “The India trip has thrown up a couple of instructions already and we’re seen as an alternative to what they perceive to be unbelievably expensive magic-circle type firms,” says Carroll.

But he also stresses that it is not the prospect of referrals that is important when you’re choosing who to work with, but getting the job done properly. “I think some firms do ‘sweetheart’ deals with firms of second-rate quality in the hope they will get work back. We don’t care about that – our aim is to keep the client happy, and serviced by the best possible lawyers.”

Travers Smith has a team of five who spend a good deal of time deepening relationships with foreign firms and ensuring that there is a joint approach on areas such as due-diligence reports, liability issues, and working out how you deliver in a way British clients are used to. “What we don’t want from our foreign lawyers is reams of advice that end with ‘on the one hand, the answer might be this, on the other it might be that’. UK clients aren’t interested in the academic theory, they just want an answer.”

In practice, the firm’s strategy is working for its clients.
A survey at the end of last year garnered very positive feedback, with praise in terms of technical capability and response times; its non-arrogant approach; and its commercial ‘nous’ among other factors. It is this client respect and the firm’s financial momentum that helped Travers Smith win UK Law Firm of the Year at the 2006 Chambers Global Awards in November.

Riding the waves of M&A

In Carroll’s six years as managing partner, the firm’s revenue and average profits per equity partner (PEP) figures have both grown by around 50 per cent. The firm’s turnover is now over £68m and its PEP stands at around £705,000. But Carroll is modest: “It ought to grow by 50 per cent over six years. We’ve managed to get the top-line turnover going up and the overheads line going up less steeply so we’re squeezing more out of our human capital, and we’re in very buoyant market conditions so we should be doing well.”

While Travers Smith is no one-trick pony, it is something of an ‘M&A machine’, according to Carroll, and last year the firm saw a great deal of activity, with a private equity transaction every week, an IPO every two weeks, and closing about three or four transactions a week. The firm is under no illusions, however. It sees that when the activity levels drop off, its financials will go down. “We’re not thinking we must forever make more and more money. We’ll ride the waves and have a rest for a year or two, then ride the next wave – and we believe we make more money that way than by trying to balance the practice.”

For Carroll, the challenge lies more in trying to project the brand of the firm. Although Travers Smith is well known in legal circles and among law students, Carroll admits work needs to be done in increasing client-awareness. “We’re very good at cultivating and retaining existing relationships but I think we’re too much of a well-kept secret at the moment and I’d like more people in the client world to be aware of our unique selling points. We need to start matching the business development and marketing machines that all our competitors have built up.”

Attracting top talent

Marketing may be an issue, but recruitment is not. While the rest of the industry is grappling with how to attract and retain talent, this is of less concern to Travers Smith. Its size and culture are proving appealing with those who seek high-quality work outside a big magic-circle firm.

Carroll argues that of ten top students at Downing College, Cambridge, for example, three will be of the mindset they want to work for a successful firm of a manageable size rather than a legal IBM. “If we can get two out of the ten, all the other firms have to share the remaining eight. It is quite easy for us, and we’re successful at that.” The firm also does well at assistant level with one of the highest retention rates in the City. Travers Smith is recruiting successfully from among the disaffected at the bigger firms. Key to the firm’s culture is the type of people they recruit. ‘Peacocks’, as Carroll calls them, need not apply. There’s no room for arrogance and there is a very flat hierarchical structure, which he says helps provide a more collegiate atmosphere.

Unusually, the firm doesn’t have billings targets. “People work hard here but they enjoy the company,” says Carroll. “And we don’t thrash them when there isn’t work to do by making them chase illusory billing targets. The proof is in the pudding – do they leave? No. I’m not complacent, but all-in-all it works quite well.”

Trying to be flexible

The firm has a policy for flexible working but, like many other law firms, finds it tough to implement in practice. Carroll points out that one of the biggest challenges law firms face is retaining women with families.

Carroll says there are certain things you can do on a bespoke level for individuals such as providing periods out for school holidays, for example, but for some departments regular time out would be impossible.

“The nature of the job just doesn’t fit in with any normal person’s life,” says Carroll. “We’re a transactional firm and you can’t say to a client that we’ll work on the transaction Monday to Wednesday, then we’ll have four days off. They might phone you on a Thursday and say they’re signing on a Monday, and you have to drop everything. If you have a family you can’t do that. You owe it to your family not to do that, so one parent can do it but not both. It’s a big issue that no one has solved.”

“At recruitment level there are more women than men,” he adds. And as you go up it is pretty much half and half and then it starts tailing off. At partnership level, you see five men for every woman. Is that our fault? I’m not sure it is. It’s just life. People are so glib about the issues.”

Striving for consensus

Having trained with the firm in the late 70s, Carroll qualified into the corporate department in 1980 and became a partner in 1986. He became managing partner in January 2001. He says that while some of a lawyer’s skills still apply, such as analytical and people skills, it is a different job requiring a greater amount of emotional intelligence, especially in a firm that strives for consensus on most major issues.

To some extent, he does miss the life of a lawyer: “The best bit was concluding a deal and having lots of grateful clients. In this role, there is no end to it – you carry the job around in your head the whole time. But it can be great fun and it is a challenge. I also really like these people, which makes a big difference.”

After what will be nine years as managing partner when he finishes this term, what next for Carroll? “I don’t have any specific plans. I might continue in some role in this firm or I might go off and do something not-for-profit. I certainly don’t want to retire – that would be very difficult and I would be bored stupid.”

Like many managing partners, he doesn’t see himself returning to fee-earning: “Once you’ve made people jump as high as you are making them jump, to then jump that high yourself would be difficult,” he adds.

As for the more immediate business of running the firm, the plan remains to grow organically, without compromising the culture. Carroll believes that the firm won’t even get to 70 partners for another three or four years and that would still make it the smallest firm in the City.

“We’re not trying to do what everyone else is trying to do. We’re trying to carve out enough high-premium London-centric work to satisfy the financial and intellectual aspirations of our partners. We’re not out to dominate the world. The challenge is to make sure we can chisel out that kind of work from the platform that we have.”

It is a plan that has stood them in good stead so far. “We’ve been advised for years that we have to merge but we’ve been quite stubborn on that. We’re in the top ten profitability-wise and we’re an enjoyable place to work. You can’t beat that. If we can keep it going, great. If we can’t, we might have to merge, and there are lots of people who would merge with us, but that would be no fun at all.”

Even if Carroll did have any appetite for merger, his partners certainly wouldn’t. “I couldn’t persuade my partners and I wouldn’t want to try. They work here for a reason. They all get offered huge amounts of money by other firms to go and work for them, but they stay, and they stay because they like it here. If they didn’t, we’d be in big trouble.”