North West – casualties and survivors

'To ensure continuity of service and minimum disruption to client matters, the partners have made arrangements for all of the client work to be transferred to other practices' '“ this is all that is left of 190-year-old Wirral firm, Lees Lloyd Whittley. The firm, set up in 1820, ceased trading on 18 September.

A month later, just as the ashes were cooling, another long-established local firm, The Kennedy Partnership, suddenly closed down.

The disappearance of the two firms has hit a very sensitive nerve locally, but it also holds lessons about overly confident expansion without a clear planning strategy.

Unless you are a niche practice, growing bigger is now regarded as an unavoidable process but the quickest route to 'big' '“ merging '“ has become a particularly rocky one.

While cultural differences remains cited as one of the most serious threats to a successful merger, local lawyers warn that the real danger is to merge too quickly, as a defensive move to changing market conditions.

John Chesworth, managing partner at five-partner firm Harrison Drury , in Preston, says mergers and consolidations can take place without enough thinking going into them, where firms are aware of the need to evolve but fail to truly adapt at the same time.

'You hear of a bunch of traditional high street firms getting together to achieve economies of scale but without a clear direction; this is unlikely to work long term,' he says. 'The market for generic high street services is being broken up, so if they carry on in the way they always have '“ maybe rationalise offices and get a new website, but don't offer anything noticeably different '“ this is not going to save them'.

With 27 partners, Napthens, also based in Preston, is a much larger operation, but chief executive Ian Leigh sounds the same warnings to firms stuck in their ways.

'Firms that are struggling or closing down are the more traditional ones, those that have not invested in succession, IT or brand expansion,' he says.

Should these firms be merging then? Leigh also has misgivings but says that the message has begun filtering through the market. 'More progressive firms are sitting on the fence rather than merging, picking up the right people on an individual basis,' he says.

Andrew Leaitherland, managing partner at 125-partner giant DWF, agrees. 'Firms are not looking to merge anymore; most have just battened down the hatches to see themselves through the recession,' he says.

Instead, Leaitherland continues, the star lawyers are leaving firms they are seeing as not progressive enough to join other practices with a more modern outlook.

For most firms, making lateral hires is now the more favoured approach, and it is seen as the foundation for growth in post-recession firms. And following the deep staff cuts made by some of the larger firms, the tables have sometimes turned in favour of their smaller rivals.

'Lawyers in larger firms have realised that job security there is not as good as they thought it would be, and no better than with

a solid smaller firm,' says John Chesworth, who has just recruited a commercial property lawyer from a large Liverpool practice.

Napthens' Ian Leigh agrees. He too says that there are 'lots of disaffected lawyers from city firms', and that firms the size of his are regarded more and more as a credible alternative.

Growth, it seems, is the way forward, but how big should your firm be?

Medium is the new small

'Big is not always best but bigger is better,' says David McCraith, managing partner at eight-partner Blackburn-based Haworth & Nuttall, who suggests that in future firms his size will probably be the norm.

But these firms will also have to consider a classic strategic issue: should they operate out of a single site or should they have a network of offices?

Following a series of mergers in the past decade, Haworth & Nuttall has inherited a number of offices across the region. The 200-year-old firm still sees itself as a community practice and has opted to keep the network, consolidating some duplicate offices where necessary.

Similarly, Napthens maintains a network of offices '“ though it has closed one branch in Bamber Bridge and will close another in Longridge next month. And Harrison Drury still runs a satellite office in Blackburn.

Meanwhile, in Liverpool, Morecrofts is committed to its three local branches; while up in Carlisle, 21-partner firm Burnetts is looking to expand its Newcastle outpost and even open a new branch in East Cumbria.

Further up the ladder, DWF intends to continue to grow its operation in Manchester and Liverpool, and to fund further growth in its London office '“ which has trebled in size in the past 12 months '“ and its Leeds office, which has grown 30 per cent over the same period.

But, in addition to structural evolution, law firms have also had to sharpen their sense of initiative and show greater flexibility.

At Harrison Drury, John Chesworth says the firm has increased its marketing effort, following up a lot more actively on its commercial contacts by offering free reviews of clients' business terms, for instance. It also brought in a new private client partner to beef up its service to business clients.

Napthens' partners are spending a lot more time with clients, making a conscious effort to understand their businesses more intimately and working to more focused business development plans.

At Burnetts, managing partner Tom Leach says the private client team has brought down from five to three years the frequency with which clients are reminded to review their wills. The firm also leverages its IFA arm to cross-sell its legal services. Its new office in East Cumbria will also aim to service new clients on the back of planned energy generation projects, ranging from specialist energy advice to planning and construction.

Meanwhile, Haworth & Nuttall has successfully started securing more corporate work via tenders, even beating larger Manchester-based rivals. Tendering for corporate work is also a process Napthens are looking into rolling out more systematically.

Meanwhile, Morecrofts' employment department, in keeping with other local firms offering employment advice, has reported a rise in redundancy advice '“ in particular compromise agreements '“ but more interestingly it is the increase of family work which shows that investing in a few well-chosen specialisms can pay off.

Godfrey Freeman, head of family at the 11-partner firm, has seen a substantial rise in care work after local authorities, initially reluctant to start cases after the rise in fees last year, eventually decided to bring proceedings.

Well known locally for its family legal aid practice, Morecrofts is also the natural referral firm for practices running mostly on a privately funded client base.

But even general matrimonial work has increased, according to Freeman, with instructions coming from further afield than they used to. This, he says, must be due in part to the firm's rates, which are still markedly lower than Manchester firms and lower than many of the local competitors.

Even then, though, the firm has had to be flexible in the way it takes instructions. 'There is a lot more unbundling work,' Freeman continues. 'Cases where we don't act through the whole case from beginning to end but where we advise on certain points along the way. We simply charge by the hour, which helps keep the costs down for the client.'

Service, service, service

So, if anything, North West firms that have survived the recession are coming out of it in healthier shape and with clearer strategies. And that's probably no bad thing considering what the near future has in store.

Because for all that local firms have kept a combative spirit, the imminent roll-out of the Clementi reforms is a black dot looming ever larger on the horizon. How do they reckon they will fight Tesco and other high street brands? 'Service, service, service,' is Tom Leach's first answer.

'We have to use what we have to differentiate ourselves,' says Burnetts' managing partner. 'We're not going to try and clone what they will be doing because they can do it more cost effectively. But we can tie this work with our commercial offering as a value add for our business clients.'

Harrison Drury's John Chesworth notes that some clients are already walking away from traditional high street firms because they feel these don't offer the kind of service they want.

'The new generation has grown up with the internet,' he says. 'There is no doubt that some services will be sourced primarily from the internet or through systems which only organisations with large investment capability will be able to address.'

Like Leach, Chesworth envisages that his firm's private client offering will be primarily a bolt-on service to commercial clients, but, even there, he admits some people will be happy to pay less for internet conveyancing and only consult a lawyer for technical advice.

Such comments display the growing awareness among lawyers of the real risk of Clementi, but they are not so surprising. What is changing is the realisation that Tesco law could even have an impact on business lawyers.

The commoditisation of legal services is already reaching into some areas of commercial law where document production can be automated. What keeps this area safe for lawyers for now is that most commercial transactions or disputes require the application of technical legal know-how. But, according to John Chesworth, even there law firms will have to start making the processes much more efficient and faster.

At Napthens, Ian Leigh is also considering how virtual offerings and communications can be expanded to areas beyond residential conveyancing. Like Leach and Chesworth, Leigh acknowledges that clients will turn to non-lawyers for some legal services and that it will force his firm to take a close look at its client base. He may even consider a separate business to cater for a particular client sub-set.

Such concerns are shared by large firms like DWF. 'Every firm does a bit of commoditisation, so we must maintain the best levels of service possible and compete via investment in technology and systems,' says Andrew Leaitherland. 'There is always a 'drift for less': as work gets easier so you must be ready and be ahead of your competitors.'

What is sure, for now, is that as firms are battling their way through the latter part of the recession only those that have accepted that they must consider more novel ways of addressing the challenges it has thrown at them will come out of it alive.

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