"It is about time," says one former Lovells partner. "Too many people are not performing and too many people in niche areas are not generating the right levels of fees." On paper, it is not an obvious reaction to the news that a law firm is about to embark on arguably the toughest shake-down of its own ranks yet seen from a major London player.
Yet such comments neatly sum up the reaction, both inside and outside the firm, to Lovells’ plans this year to axe 25 partners.
One City finance partner at another leading firm even remarks: "In some ways it is a sign of strength when people actually do something about it."
Such attitudes reflect Lovells’ shifting, even ambiguous, position in the UK’s legal services market.
The past five years have seen Lovells execute a series of ambitious but lightly-managed international mergers, which hit the headlines while doing little to stem criticism that the firm’s London transactional engine room was simply treading water.
Although the firm chalked up decent financial results in 2002 and 2003, it has continued to slowly but steadily lose significant younger talent from its partner-ship, while showing little sign of cracking blue-chips outside its core group of mostly loyal clients.
An unpredictable senior partner election in 2003 and a hotly-contested vote for managing partner that last November installed David Harris were viewed as evidence of unease about the firm’s direction. The past two years have also brought criticism of the firm’s attitude to partner performance and growing talk of the need for deequitisations.
When it became clear that the first half of 2004-05 was well below expectations, showing a 6% fall in turnover compared to the first half of last year, for many the time for drastic action was long overdue.
And action is what is being delivered — in December the firm unveiled the strategy for removing around 25 partners from its ranks, nearly 10% of its global equity partnership.
The departures, which are expected to be achieved via a mixture of voluntary and enforced exits, are likely to take place between February and April, with corporate — taking the blame for the firm’s current under-performance — bearing the brunt of the cuts.
Practice stream leaders kicked off the review last autumn before the managing partner elections in November. The board — including senior partner John Young, current managing partner Lesley Mac-Donagh and Harris — then ratified the process.
Harris, at least, is relatively candid about why the firm has plumped for such radical action, presenting the move as a clear repositioning for a firm once regarded as one of London’s most ‘collegial’ partnerships.
He says: "This is a strategic measure with three main elements: tackling relative under-performance where necessary; realigning our practice in certain areas with the market; and regenerating our partnership to create space for new talent. Overall, the result will ensure that Lovells is in the right shape for the future."
Given the scale of Lovells’ international presence, it is little surprise that overseas offices are suffering their fair share of the impact. Between six and eight partners are expected to leave the Paris and Amsterdam arms. A similar number are expected to go in Germany, primarily in Frankfurt.
Here, a key issue is the need for corporate partners to specialise more to fit in with Lovells’ wider practice, an issue that has been of particular concern in the generalist German legal market.
One Lovells insider says: "It limits our ability to sell expertise in a given area to clients when there are generalist partners. It is like the ‘galacticos’ at Real Madrid. When they do not play in their proper positions they do not play as well."
It is also conceded that the firm’s Paris practice, the result of a 2001 merger with the French firm Simeon & Associes, still requires considerable work if it is to come up to expectations, although smaller practices in Italy and Eastern Europe have generally impressed.
Outside Europe, only Tokyo is being caught in the net with one partner leaving the two-partner office. There are "no current plans" to close it and the move to larger premises late last year would certainly be a strange one for a firm that wanted to leave Japan.
However, the modesty of the cuts in Asia is in part because a number of under-performers have already been dealt with during the past 12 months.
Still, it is clear that the cuts are as much — if not more — about reshaping the firm’s London deal machine, with around 10 equity partners in the firm’s City corporate and banking teams targeted.
Corporate head Hugh Nineham in London and German corporate partner Oliver Felsenstein — along with Harris, who remains finance head until he officially becomes managing partner in May — were instrumental in identifying which partners would go. In contrast, Lovells’ robust litigation and property practices remain untouched, as does its projects practice, which has remained a very consistent performer for the firm in recent years.
There are some efforts to paint the move as a response to current deal conditions — citing the need to focus on the corporate group’s strengths in retail financial institutions, energy and utilities and private equity.
But partners suggest that the cull has more to do with confronting cultural issues, namely under-performance and fears that business-winning younger lawyers will lose patience. With 15 partners being promoted in the past year, Lovells’ partnership will not be getting much smaller, but it will be getting younger.
In this context, the review also reflects a continued attachment to lockstep in London, while a more flexible stance is being considered for the international network.
One insider says: "The firm will be more rigorous in assessing and making sure partners contribute. There is a new approach in terms of culture."
Partners also stress the desire to deal with these issues in a one-off, sweeping measure — similar to Addleshaw Booth & Co’s 2002 part-nership cull. This is surprisingly audacious for a firm not known for meeting difficult issues head-on.
The experience of Addleshaws shows that such tactics can work, but the jury must be out on whether Lovells’ management has the mandate to truly galvanise the partnership behind such a potentially divisive restructuring.
Neither does the shake-up answer the question that has haunted the firm for years: does it want to take on the magic circle — which would probably require the tall order of a Freshfields Bruckhaus Deringer-style make-over with the investment banking community — or is it happy to excel in the upper mid-market?
But rivals should remember that Lovells has a history of being written off too quickly.
Certainly, by most measures, the firm must be regarded to have held its market position against obvious rivals such as Herbert Smith, Norton Rose and Ashurst in London, while performing more consistently abroad.
With a new leadership team and the turkeys getting as close to a vote for Christmas as any managing partner can ever expect, Lovells will not get a much better chance for its ‘big bang’ solution.