March 13, 2012 6:00 AM
Continental Breakfast: Tony Angel's To-Do List and the Future of DLA Piper
Posted by Chris Johnson
To some, former Linklaters chief Tony Angel is the most successful law firm manager of a generation. During his ten-year tenure as managing partner of the Magic Circle firm, he transformed it from a London-based practice into a global, moneymaking powerhouse.
But Angel's critics at his old firm claim he went too far in his quest to make Linklaters more businesslike, and that by placing such a premium on profits and imposing a more tightly managed structure, he irrevocably damaged the historic firm’s culture.
The partners at DLA Piper will soon decide which assessment of Angel rings true for them. Last October, the firm announced that the 59-year old former tax attorney was coming out of retirement to become its new global cochairman and international senior partner. Angel, who will be making about $3 million a year for a three-year term, has been tasked with molding the global giant into a more streamlined, profitable and cohesive entity.
The hire, identified as one of the year's top moves in The American Lawyer's 2012 Lateral Report, was a typically bold and iconoclastic play by DLA. For a law firm to bring in a former managing partner from another firm to help run its business is rare. It was also a real coup: Angel would not have been short on suitors.
The question now is whether Angel, who retired from law firm management in early 2008, can pull off a repeat performance. A lot has changed in the legal marketplace since then, and DLA Piper is an entirely different proposition than Linklaters. The latter is a 174-year old blue-chip firm that retains a more centralized structure. DLA Piper, by contrast, is a sprawling, midmarket firm that grew through a tidal wave of combinations and still lacks full financial integration. (Like Baker & McKenzie and the recent batch of transatlantic mergers, the firm is organized as a Swiss verein—essentially a holding structure that lets participating entities maintain their existing forms.)
In many ways, that DLA was able to attract someone of Angel's caliber shows how far it has already come since its formative combination in 2005—particularly its U.S. arm, which current partners say is stronger and more profitable than its international sibling. Angel's hire was enthusiastically supported by DLA's North American partners, who are keen to see that performance matched by the firm's offices on the other side of the Atlantic.
"DLA has achieved a hell of a lot over the past ten years—the naysayers need to remember that—but they've got to a certain point in the market, and that progress has slowed," says former Clifford Chance managing partner Tony Williams, now head of law firm consultancy Jomati. "Tony will help push through that glass ceiling, but whether one person can do that remains to be seen. He certainly can't just wave a magic wand and make things change overnight."
Angel comes into the job with a strong resume. When he took control of Linklaters in 1998, it was already one of the top practices in London. When he left the firm ten years later, to take up a senior position at credit ratings agency Standard & Poor's, he had cemented its reputation as a world leader. (Linklaters's revenues increased by 385 percent and its partner profits by 167 percent during that time.)
Much of Angel's success at Linklaters was due to his ability to take concepts and practices from the business world and successfully transplant them within the confines of an organization that, like most law firms at the time, was fairly lightly managed. He pioneered a more rigorous and quantitative approach to performance management, narrowed the firm's practice to focus on doing more profitable work for fewer, larger clients, and established a new executive committee to help him implement his strategy—an operational template that would be mimicked by firms throughout London. (His "Clear Blue Water" strategy has since become a case study at Harvard Law School.)
Crucially for his new employers, Angel also has considerable experience in integrating businesses, having steered Linklaters through several mergers with its European alliance firms around the turn of the millennium. "Tony is a uniquely suitable partner for us in this respect—he's been there already," says global cochair Frank Burch. "He also has visibility and stature, not just in London but across Europe and Asia. He's businesslike and tough, but also thoughtful and imaginative."
Chief among Angel's goals at DLA: solving the firm's long-running integration issues; bolstering its underweight corporate and finance offerings in London, Paris, and Germany; strengthening its presence in Asia; and weeding out the legacy clients and practices that are unwanted remnants of the firm's merger-filled past.
DLA Piper was formed in 2005 by a merger between U.S.–based Piper Rudnick LLP and U.K.–based DLA LLP, just months after Piper Rudnick merged with California-focused Gray Cary Ware & Freidenrich LLP. DLA itself had been the result of mergers among several English firms, including Dibb Lupton Broomhead, Alsop Stevens, and Wilkinson Kimbers, while Piper Rudnick was the product of a 1999 merger between Baltimore's Piper & Marbury and Chicago’s Rudnick & Wolfe. Today, the firm's international practice is the cumulative result of a staggering 31 mergers, acquisitions and joint ventures—21 of which have taken place since 2000. Its vast network spans 76 offices in 31 countries, and its army of 4,200-lawyers makes it, by head count, the largest firm in the world. (Revenues of $1.96 billion in fiscal year 2011 were enough to place it third on last year's Global 100.)
Burch says that full integration—including an eventual sharing of profits, where possible—has always been the firm's intention from day one, but that progress was slowed because of the financial crisis. Angel explains, "When you're fighting to keep the firm functioning effectively in really bad market conditions, that's not the best time to devote huge amounts of senior management resource to something that is bound to be challenging."
Still, DLA had almost four full years to work on integration before the economic downturn began in earnest. "We probably get too much stick for this, but there's no doubt that we are still far too siloed," says one London-based partner, who spoke under the condition of anonymity and whose comments reflected those of several other partners interviewed. "After the merger, everything was about coming together to be one firm globally, but that slowly faded away. Management absolutely hates it when people label us a franchise, but in some respects it's a pretty accurate description."
In fairness, DLA has put procedures in place for its U.S. and international arms to share costs relating to joint initiatives, such as new office launches and even Angel's salary. The firm is also currently investigating proposals to convert its multitier U.K.–based partnership to the more unitary model it operates in North America. Co-CEO and managing partner Nigel Knowles also says that the number of clients retaining lawyers in more than one DLA practice or office—an analysis he carries out every 90 days—is increasing all the time. (The firm declined to provide specific figure, and also declined to disclose the percentage of its work that involves lawyers in more than one office or the amount of revenue generated through referrals between the U.S. and international partnerships.)
Perhaps the most significant step toward true integration came last spring, when the firm's U.S. and international arms adopted their first-ever joint strategy. The 100-page plan calls for partners on both sides of the Atlantic to target the same leading national and multinational corporations—such as Kraft Foods Inc. and Pfizer Inc., which currently retain DLA in a range of areas—and to act for this more select group of clients across a greater number of practice areas and geographies. Many clients will be dropped as a result.
"Some of our clients are too small to fit that model, so continuing to [represent] them doesn't make sense for them or us—even if the work is profitable," says Angel.
Doing more work for fewer clients is a strategy that has already been adopted to great success by Angel's former firm and the rest of the U.K. Magic Circle. (And, to a less international extent, the top Wall Street firms.) But Angel is keen to stress that DLA is not looking to become another Linklaters.
"Those firms have been incredibly effective at focusing on high-level work within a relatively narrow area, but even top corporations need a broader range of services than just capital markets and M&A," Angel says. "I don't think anyone has captured that space in the way that the elite firms now dominate their market, so we feel there's an incredible opportunity for us."
The financial crisis has forced many general counsel to reassess the way in which they retain external law firms. Growing pressure on legal budgets has placed a greater emphasis on efficiency, with clients increasingly looking to minimize the number of firms they use worldwide in an attempt to drive down costs. As a global and full-service practice, Angel feels DLA is well-placed to capitalize on this trend.
Angel also predicts that the firm will begin to challenge the major law firm players more regularly when it comes to premium transactional work. Knowles believes that it is already doing much better on this front, pointing to deals such as advising Banco Santander on its €2.9 billion ($3.8 billion) acquisition of Polish financial institution Bank Zachodni WBK in 2010, and its representation of an Asian consortium on the £5.8 billion ($9 billion) purchase of EDF’s U.K. electricity distribution assets the same year.
DLA is an increasingly common fixture among the upper echelons of the end-of-year deal rankings, racking up more than 347 M&A deals globally in 2011—more than any other firm, according to Mergermarket Limited. But the average size of those deals was just $167 million, and DLA did not work on any of the ten largest global M&A deals of the year, according to Mergermarket. Global competitor Baker & McKenzie, fourth in deal volume, had an average M&A deal size that at $330 million, was almost twice DLA's.
As DLA attempts to close the gap with its rivals, some partners—and potentially even offices—may find that their practices no longer meet the grade. "There will inevitably be areas of the business that doesn't fit, and there may well be instances where it's better for people to part company than trying to get oil and water to mix," says Angel. He insists it is "far too early" to say whether any regional bases are likely to close as a result, adding that "having offices in lower cost centers can turn out to be a significant advantage if you manage it right." But several current partners, who asked not to be named, say that some locations are under intense scrutiny.
The spotlight is most strongly focused, these partners say, on Central and Eastern Europe, which has seen other international firms withdraw from the market in recent years, as well as on DLA's extensive band of regional U.K. offices. Excluding London, the firm currently has five offices in other English cities and another two in Scotland. Burch says that the firm will continue to invest in its network where additional resources are needed, noting that several new jurisdictions—including Canada, South Korea, and Mexico—are currently being considered for future office launches.
When quizzed on Angel's arrival, two U.K.–based DLA partners say that some in the firm first questioned whether it really needed another highly paid but non-fee-earning manager. The pervading sentiment, though, is one of optimism and excitement. Because in Angel and Knowles, who was knighted by Queen Elizabeth II in 2009 for services to law, DLA now boasts two of the most celebrated law firm leaders in the U.K. market.
The pair have maintained a close professional relationship for more than a decade—it was during a routine breakfast meeting last April that the idea of Angel joining the firm came up— and the two men have neatly complementary strengths. While the charismatic Knowles has proved a skilled leader and a first-rate client manager, he has tended to rely on other individuals, such as U.K. managing director Andrew Darwin, to deal with the more hands-on elements of running the firm. The measured and meticulous Angel, on the other hand, is a stickler for the fine details of law firm procedure and governance.
"It's a bit like a jigsaw puzzle," Angel says of his new firm. "Some of the pieces are missing, some aren't quite the right shape and others probably shouldn't be in the box at all, but the important thing is that we've got an incredibly clear vision of what the finished picture should look like. It's my job to help put it all together."
In doing so, DLA may finally complete its transition from a collection of merged entities to an aligned business that’s more than just the sum of its parts.
A version of this article first appeared in Bar Talk, The American Lawyer, March 2012.
Chris Johnson is The American Lawyer's chief European correspondent. Reach him at firstname.lastname@example.org. Follow him on Twitter at @chris_t_johnson.