THIS WEEK Jonathan Scott takes up his five-year post as senior partner for venerable City law firm Herbert Smith, and many observers bet that somewhere on the desk of his fourth floor office at the practice’s Primrose Street headquarters there is an A4 sheet of paper with just two words on it – overseas expansion.
Under its distinguished outgoing senior partner David Gold, the firm – which employs 2,300 staff across 23 offices worldwide – opened up a number of outposts including Madrid and Saudi Arabia and enjoyed a threefold expansion in Moscow in just three years.
The question is made all the more current because this month City rival Lovells formally completes its merger with Washington firm Hogan Hartson, doubling its revenues to £1.2bn with average profits per Lovells equity partner at £586,000.
Herbert Smith – which last year posted sales up 5.2 per cent to £444m though (because of investment in new offices) its profits per equity partner fell 18.4 per cent to £845,000 – like Lovells is one of a handful of firms that hover just outside the City’s biggest Magic Circle practices like Allen & Overy and Linklaters.
During the last year or so Herbert Smith acted on the Yell refinancing, the EDF acquisition of British Energy, and on Bradford & Bingley’s rescue package.
Some industry watchers say Lovells’ move puts it in a position to challenge the biggest City and New York firms and Herbert Smith needs to come up with an aggressive US response of its own. However, others argue that because Hogan is only the 17th largest firm in the US, Lovells’ deal merely cements its place at the top of the group of firms just below the very biggest in the UK and America.
Scott – a short, trim and confident man who affects a modest air – takes the second view. Hunched over a table in a first floor meeting room he says: “I’m not worried about the Lovells tie-up. We benefit from strong referrals from US firms because we don’t compete directly with them.”
As an example he says he recently took a call from New York powerhouse Cravath, Swaine & Moore to handle the non-US anti trust side of the £2.7bn purchase of toolmaker Black and Decker by rival Stanley Works.
He says: “We get referrals from the US but know we can get more and we have to work at that. We benefit from not competing with City law firms in the US or with big US law firms head to head in that market, which is very crowded and very competitive.”
In Europe Herbert Smith is part of an alliance, of around eight years standing, with German firm Gleiss Lutz and Benelux counterpart Stibbe. For years Herbert Smith, the largest of the trio, has been trying to turn this alliance into a full-blown merger, but Gleiss Lutz has so far also baulked at this.
However, Scott says he is “not fixated with the structure of the alliance” as long as it works.
He adds: “I hope it will grow and develop. I don’t lie awake at night and worry about it. And I don’t think I will have failed if there is not a merger at the end of my five years in this job.”
Scott says he is fairly pleased with the geographical footprint of the firm and is interested in an “incremental strengthening of the practice” particularly in the energy and natural resource markets.
Those close to Scott say he is looking at opening offices in Qatar and Brazil, and wants to strengthen its Chinese and Indian business.
Scott is a Herbert Smith lifer who joined the firm from Cambridge in 1979. And although he has built up a reputation as one of the best competition lawyers in the country (during which time has regularly advised Rio Tinto, Time Warner and Lonmin, among others), he has also worked as a partner in the firm’s litigation and corporate units, which each contribute around 40 per cent of the practice’s sales.
This gave Scott a strong base from which to launch a campaign when he decided to run for the top job last summer.
He says: “I thought about it long and hard, and my view was it would be a privilege to lead this firm.”
After a two-month election process in the autumn Scott won, beating litigation partner Tim Parkes and Moscow office head Allen Hanen.
He says: “It’s an uncomfortable process to stand before your peers. Not sure how I would have felt about it if I hadn’t won. I’m happy with one five-year term so will not be a candidate next time.”
Scott’s vision is for a less self-conscious Herbert Smith.
He says: “I don’t want us to be preoccupied about the Magic Circle and other media tags. More important is getting recognition that in the City we are unique in our mix of contentious and non-contentious work, by that I mean litigation and transactional work, similar to the model used by the leading Wall Street law firms.”
He adds: “A lot of this recognition comes from confidence. We do what we do very well and we should get on with it. We shouldn’t try and be something we are not. Our current set up allows us to play with the big boys at the very top end of the market.”
Scott says he plans to lead the firm from the centre rather than from the front. Under Gold, the law firm was led by one of the best litigators in the City, but along with his quick mind he eventually earned a reputation as being argumentative and therefore not always the easiest person to work with. Scott calls Gold “mercurial.” He positions himself quite differently: “You have to build consensus here, and I’m quite good at building consensus quickly.”
Herbert Smith’s financial year closes this month, and Scott says “the second half of the year has been much better than the first.” He adds that outside Europe business is “very encouraging.” However, he expects a lengthy and slow period of recovery in the UK. His concern, like most in the City, is whether the Greek crisis will destabilise wider markets, and whether the UK deficit could yet trigger “a run on sterling”, both of which will slow the corporate spending that professional services firms depend on.
One wonders if there is not a second sheet of A4 paper on Scott’s desk which reads – Keep Calm and Carry on.
CV | JONATHAN SCOTT
Work: 1979-81: articles; 1988: Competition partner; 1989-94: head of Brussels office; 1997-2000: graduate recruitment partner; 1996-2007: head of the EU/competition practice; 2010: senior partner, elected for a five-year term
Education: St Catharine’s College, Cambridge, where he read law
Family: Married, with three children
Lives: Family home in Cambridge, recently bought a flat in London, and owns a cottage in Cornwall
Hobbies: “Just spending time with the family. I don’t see enough of them.”