Norton Rose is ready to expand in Asia on the back of its latest deal

There is light at the end of the economic night &ndash; of that Peter Martyr is fairly certain. But the CEO of NortonRose, the City law firm, wants to make sure we are not facing a false dawn before he gets too excited. As he puts it: &ldquo;The financial crisis has moved so quickly that it is extremely difficult to <br />read what is going on. However, there is quite a lot of activity in the City at the moment.&rdquo;<br /><br />The tall, lean Norton Rose lifer, who joined the firm in 1977, is lounging across two chairs in a smart meeting room on the ninth floor of the firm&rsquo;s More London headquarters. Located next to City Hall, it affords views not only of Canary Wharf but as far out as the Chiltern Hills to the north of the capital. The firm moved into the building &ndash; on the South Bank of the Thames &ndash; two years ago.<br /><br />Martyr continues: &ldquo;What we have to work out is whether this is a mini bubble? Will this initial recovery be damaged early next year if a consumer recovery does not follow? I think by next January or February we will have a clearer idea of this.&rdquo;<br /><br />So far Martyr &ndash; who is on his third stint as the partnership&rsquo;s chief executive after first being elected in 2002 &ndash; is pleased with the way the firm&rsquo;s sales have held up in relation to its rivals during the sharpest recession in decades.<br /><br />In June the partnership said its full year sales rose six per cent to &pound;314m, while its partner profits fell 17 per cent to &pound;517,000. The firm said the falls in partner profit are partly attributable to an eight per cent increase in the numbers of partners who joined the business, as well as office launches in Tokyo and Abu Dhabi over the last 12 months.<br /><br />However, the firm avoided cutting hundreds of jobs last year as larger rivals such as Linklaters and Allen &amp; Overy were forced to do. Instead, Norton Rose introduced a system of four-day weeks and sabbaticals of up to 12 weeks for some staff, which means the firm has not had to lay anyone off because of the downturn.&nbsp;&nbsp;&nbsp; <br /><br />Martyr adds that the firm&rsquo;s five key areas &ndash; financial services, IT, energy, transport and infrastructure &ndash; all held up well. <br /><br />This year the firm has also worked on more high profile, lucrative work such as HSBC&rsquo;s &pound;12.5bn rights issue in March, it has advised Iberia on its ongoing merger talks with British Airways, and took instruction from German power group RWE when in bought Dutch rival Essent for &euro;8.2bn (&pound;7.4bn) in January. However, the law firm&rsquo;s meat and drink is the more low profile corporate transactional work.<br /><br />Martyr says: &ldquo;The business has run fairly smoothly over the recession, and that is because we have a clear idea of what areas we should work in and what we can do well. These may not be the most profitable areas in boom times, as complex financial products have recently been, but our structure has allowed us to make deals and expand.&rdquo;<br /><br />The Norton Rose boss is talking about its June tie-up with Australia&rsquo;s eighth largest law firm Deacons Australia.<br /><br />The Australian firm approached Martyr in 2008 about a deal and after nine months of talks Deacons will change its name to Norton Rose in January, with Martyr as head of the enlarged group.<br /><br />Martyr said: &ldquo;We want to build our positions in Shanghai, Beijing and Tokyo. And it is difficult to do that from the other side of the world. But having a base over there gives us the opportunity to look closely at those markets.&rdquo;<br /><br />Once the deal goes through Norton Rose will be boosted from 1,100 lawyers and 247 partners across 24 offices worldwide and sales of &pound;314m, to 1,800 lawyers and over 400 partners working out of 30 offices with sales of &pound;420m.&nbsp;&nbsp; <br /><br />However, some critics said Norton Rose, instead of buying Deacons, should have bought the separate &ndash; but once related &ndash; firm called Deacons Hong Kong, which is one of the largest independent practices on the Chinese territory.<br /><br />But Martyr says that although Deacons Honk Kong is closer to mainland China than Deacons Australia, it does not share Norton Rose&rsquo;s plans to push further into China and other parts of Asia. <br /><br />Martyr says: &ldquo;We have a fundamentally different view to Deacons Hong Kong of the focus we want on Asia. That is why a deal with them did not make sense.&rdquo;<br /><br />However, although Norton Rose and Deacons Australia will share work, they will not combine their revenue pools. Observers say this is because Norton Rose first wants to judge if Deacons will act as a drag on its existing partner profits.<br /><br />Martyr says: &ldquo;There is a currency risk in sharing revenue pools in a multi-currency business like ours. But it is also true that mergers can cause a lot of tension in professional services firms. It is never a good situation to get into when one set of partners feels it is paying for privilege of having another firm merge with it.&rdquo;<br /><br />Martyr knows what he is talking about, because Norton Rose has been here before. Between 2001 and 2003 the average profit per equity partner at the firm slumped from &pound;520,000 to &pound;390,000, as the international network it had hastily pulled together became a drag on its London partners who were at that time the engine of the firm. When Martyr was first elected in 2002 he says: &ldquo;I didn&rsquo;t like the look of where we were. We had a non-performing network that was expensive.&rdquo;<br /><br />In many ways, however, the start of Norton Rose&rsquo;s problems can be traced back to its Bishopsgate headquarters being bombed by the IRA in 1993, in one of its last UK campaigns. The office was empty and no one was hurt, but the blast affected the outlook of the firm. Martyr says: &ldquo;I don&rsquo;t want to make too much of this, but the bomb made the firm very internally focused as we renovated the building and tried to serve clients. This coincided with the rapid international expansion of City law firms into Europe.&rdquo;<br /><br />He says that by the time Norton Rose came late to the party in the late 1990s the firm &ldquo;rushed at it&rdquo;. It bought businesses in Germany that had little in common with the firm&rsquo;s core strengths, and saw mass defections from its Cologne office in 2004 as well as high profile walkouts from its Paris base. All the while its London partners, who accounted for the lion&rsquo;s share of the business, saw their take home pay shrink as they paid for the network&rsquo;s mistakes &ndash; and as City rivals powered ahead.<br /><br />Martyr was elected on a mandate to sort out the network. He cut loose troublesome offices, placated profitable ones, and made sure all offices could contribute to the firm&rsquo;s five key practice areas.<br /><br />Martyr says: &ldquo;It took two to three years to impose a structure on the group. As a result of unpicking the old structure we learnt a lot about what not to do when it comes to building a network.&rdquo;<br /><br />The changes Martyr introduced have seen fees and partner profits rise, with all parts of the network contributing something to profit. Martyr says that 10 years ago London accounted for around 90 per cent of the law firm&rsquo;s fees; currently it brings in 45 per cent of the partnership&rsquo;s sales.<br /><br />But now Martyr is concerned that the financial crisis has turned politics in the country against the City. He says: &ldquo;The City needs special treatment. <br />Over regulation and new taxes risk damaging the goose that lays the golden egg. Because it is the City that will play a large part in leading the rest of country out of recession.&rdquo;<br /><br />However, in general Martyr is raring to get at 2010. He has patched up a broken network during boom times; now the trick he must pull off is leading a larger, more diverse merged firm through a fragile economy. We shall soon see how he fares.<br /><strong><br />CV PETER MARTYR<br />Age:</strong> 55<br /><strong>Work</strong>: Joined the firm as a trainee in 1977; after qualifying he specialised in the shipping and energy sectors; made partner in 1985; joined managing committee in 1996; elected chief executive in 2002 and has been twice re-elected <br /><strong>Education:</strong> University of Wales; read law from 1973 to 1976<br /><strong>Family:</strong> Married with two children<br /><strong>Lives:</strong> Teddington, Middlesex<br /><strong>Hobbies:</strong> Music, skiing &ndash; favours Val d'Is&egrave;re. Has a collection of vintage cars, his favourite is the Westfield 11 kit car, <br />a replica of the 1958 Lotus 11 racing car.&nbsp; <br />