Last-mover advantage

Going your own way can pay off big time - just ask The Lawyer’s European Firm of the Year, Noerr

The tidal wave of internationalisation has swamped many an independent firm in the past few years. But some firms are navigating their way through the flood better than others and one that has built a particularly strong ship is Germany’s Noerr.

The firm has outperformed many of its rivals on a number of metrics. It is now the eighth-largest firm in Germany based on domestic revenue when the big international players are included, and the ninth-largest firm in Europe on a global revenue basis.

As an LLP the firm is making determined efforts to innovate and improve staff engagement, all the while focusing on key practice areas and offices where it sees the chance for growth. Merger is not on the cards - ongoing success is.

Home advantage

Noerr has admittedly benefited from Europe’s best market in recent years.

Germany’s position as Europe’s strongest economy remains unchallenged, with economic growth of 3 per cent in the past year, and the firm has made the most of a market that is far more buoyant than most of its neighbours.

Domestic turnover at Noerr rose by 9.3 per cent between 2010 and 2011, and co-managing partner Tobias Bürgers reports that the firm is on budget to produce further growth this year. Global turnover - including Noerr’s offices in Central and Eastern Europe (CEE) - rose by 14.3 per cent, according to the firm’s LLP accounts.

Although global turnover and profit fell between 2009 and 2010, Noerr’s German revenues remained solid and, in 2011, profit for the whole firm soared by 25.8 per cent, with a profit margin of 37 per cent.

In the past five years, according to data compiled by German legal magazine JuVe, Noerr’s growth outstripped all its domestic and international rivals in Germany. The firm now seems to be well-positioned for the future. In a merger-maniacal world (see The Lawyer, 29 October) staying solo is often seen as a lack of direction. But Noerr has confounded all the usual assumptions about the fragility of the independent firm model. So what can UK firms learn from an organisation that has embraced last-mover advantage?

A solid base

It was not always the case that Noerr, which until the end of 2009 was branded Noerr Stiefenhofer Lutz, was playing at the top level in Germany. The firm developed its reputation over its first three decades as a local player. Many still think of Noerr primarily as an adviser to Germany’s mid-market, the Mittelstand. Indeed, much of the firm’s success could be attributed to this solid client base of smaller, entrepreneurial businesses.

“They’re one of very few firms that have been far less affected than most by the financial crisis simply because they’re not only doing that type of work,” says one German recruiter. “They’re as loyal now to their middle-strength clients as they always were.”

But Bürgers says there is more to Noerr than the Mittelstand. He argues that Noerr now acts for half the DAX 30, with clients including Deutsche Bank - particularly for litigation - Daimler and Siemens, as well as retaining a loyal following among its traditional client base including entrepeneurs, small and medium-sized enterprises and private clients.

Noerr’s place in this year’s M&A table is far stronger by volume than value, according to Thomson Reuters data. The firm has advised on 23 deals involving a German target - sometimes for the target and sometimes for the acquirer - but in total these added up to just under $2bn ($1.3bn). While the volume table sees the firm in fifth place, it lags the leaders a long way by value. The German M&A market remains dominated by Freshfields Bruckhaus Deringer and Hengeler Mueller on the value front and by CMS Hasche Sigle on the volume side.

Bürgers is nevertheless confident that the firm can compete with the leaders on a broader scale.

“Our diversity in the client base is maybe broader than the other firms,” he suggests. “This may have been helpful in the crisis.”

Bürgers and fellow managing partner Dieter Schenk, who has led the firm for 15 years and will shortly stand down and be replaced by corporate partner Alexander Ritvay, say the breadth of Noerr’s practice is its greatest strength.

“What we’ve built up over the years is a stable practice,” Bürgers says, adding that the firm has focused on developing an “integrated services practice”.

“We don’t focus only on corporate and finance, although that forms the biggest part of our revenue, but we’ve also emphasised and developed carefully other practice areas such as media, IT and IP, litigation, labour and employment law, regulatory, tax, commercial and - last but not least - real estate,” Bürgers adds.

Noerr has, explains Bürgers, focused more on creating cross-practice groups in recent years. The firm’s restructuring practice is an example, he notes; it has developed through collaboration between M&A, tax and employment lawyers providing advice to companies in difficulty in every area.

Structural engineering

The main catalyst for this focus was the firm’s 2009 conversion to a UK LLP, becoming one of only a few non-UK firms to adopt the structure. Apart from Salans, which has a much larger UK presence (and which next year will be subsumed into the much larger Dentons), Noerr is the only Continental firm of any size to convert to the structure.

When Noerr became an LLP it dropped the ‘Stiefenhofer Lutz’, rebranding as plain Noerr. The move was all part of the firm’s efforts to make itself attractive to an international client base.

The structural and branding change came with a renewed focus on the firm’s departments and its international client base doing business in CEE.

“Being an international law firm we chose to convert because the LLP is the most common and familiar [structure] for clients all over the world,” Bürgers explains. “Clients appreciated the transformation and understood it easily, and within the partnership we could continue with most of the corporate governance and partnership governance we had.”

Schenk agrees that the conversion was more structural than cultural, but says it helped the firm focus on client service again.

Like many German firms Noerr provides not just legal advice but also tax, audit and consultancy advice. Bürgers does not see this aspect of the firm’s service as a separate offering, but as one that is integrated with the legal business.

Again, he points to Noerr’s restructuring team as an example of how this works. The lawyers in the department work closely with Noerr’s consultancy practice so companies being restructured can get the “full scope of support” they need from one place.

Focus group

However, Noerr has been focusing on three practice areas in particular in the past few years. In April 2011 it hired a team from Hogan Lovells to launch an IP office in Alicante, Spain, where the European Trademark Office is based.

Later that year Noerr picked up Freshfields real estate partners Alexander Goepfert and Christoph Brenzinger - a blow to the magic circle firm’s Düsseldorf office. The hires were part of a big push by Noerr to pick up more real estate investment work - a push that has paid off with instructions by private equity giants Blackstone and Lone Star among others.

“I’d say that there’s not a single major real estate transaction running in Germany right now that we’re not involved in,” Bürgers says.

All the finance laterals have been brought into Noerr’s Frankfurt office, which was historically underweight. Recruiters observing Noerr say the way the firm has hired has impressed them.

“They’ve gone great guns in building a banking and finance practice where they previously didn’t have one,” says one recruiter. “They’ve benefited immensely from the carnage that many law firms went through post-Lehman; they’ve picked up some high-quality people without having to hang a notice around their neck saying ‘we’re going to grow’.”

Indeed, Noerr has recruited from a range of top firms in Germany. As well as the two real estate partners, Freshfields has supplied another four senior lawyers to Noerr in the past two years - some senior associates or counsel brought in at the salaried level as well as Berlin regulatory partner Bärbel Sachs in January this year.

Noerr has also recruited from rivals Clifford Chance, Hengeler Mueller and Luther among others in the past three years. Bürgers says the firm is always happy to consider hiring senior associates or lawyers at a similar level as salaried partners provided they bring the right mix of experience and know-how. After a year or so the firm usually looks at promoting these partners into the equity.

Noting that the firm has carried out its recruitment “well and remarkably quietly”, the recruiter adds: “Banking and finance is a decent move into a market the firm didn’t have any presence or recognition in previously.”

At The Lawyer’s recent European awards the judges agreed with this assessment, with one noting that “they’ve transformed themselves”.

Bürgers says Noerr tends to use lateral hiring as a swift way of growing offices or practice areas where it sees the need. It is notable that Düsseldorf and Frankfurt have had by far the greatest number of lateral hires in recent years, while promotions are spread more evenly across offices. Munich, Noerr’s largest and oldest base, has seen the bulk of promotions.

The legal entrepreneurs

The past couple of years has seen a significant emphasis by Noerr on developing its younger lawyers. Bürgers is keen to stress that lateral hiring or merger is not the firm’s preferred method of growth - indeed, Noerr has never carried out a significant merger in its history.

Instead, the firm is trying to find ways to encourage younger lawyers to stay at the firm and become “legal entrepreneurs”, says Bürgers.

“Whenever you can promote one who has started his career with Noerr to equity partner this is a really good step,” he adds. “It shows people within the firm that there’s a career path for them.”

Bürgers admits that ensuring this as the firm has grown has been challenging.

“The bigger you are and the more offices you have, the more you have to do to create a good atmosphere within your firm,” he says.

In the past two years Noerr has been emphasising culture, soft skills and work-life balance through its ‘Noerr 2.15’ programme, which centres around four core values. Excellence, trust, passion and team spirit are now monitored at every level within the firm.

Noerr 2.15 links into the firm’s training programme, ‘Noerr Campus’, and the firm also ran a culture day in the autumn to survey how the values are working in practice. Flexible and part-time working is now also an integral part of the way the firm operates.

None of this is particularly unusual viewed from an Anglo-Saxon perspective, of course, but from a European perspective the moves are more innovative.

Bürgers thinks the various initiatives have improved the firm’s attractiveness to young lawyers, pointing to a recent example of three associates who left Noerr to become judges or take up government roles only to return within a year saying they preferred the working environment at the firm.

Diversity is also now on Noerr’s agenda. The firm’s female partnership proportion is on the low side, with women making up just 12.2 per cent of the partnership in 2011 according to The Lawyer European 100 survey. But in April this year Noerr signed up to German chancellor Angela Merkel’s Diversity Charter, designed to promote diversity in business, and appointed

Berlin partner Astrid Frense as its diversity officer. This should improve the firm’s position in the diversity stakes, hopes Bürgers.

“We’d like to have more [female partners],” he says. “I’m sure we’ll be improving the ratio in the coming years. But we won’t do this for its own sake because we want to have the right candidates and colleagues working with us.”

Share premium

One thing that is firmly on Noerr’s agenda is to continue its efforts to improve and maintain its market share in Germany and across Europe. Bürgers believes the firm’s offices in the CEE region are a selling point that sets it apart from its rivals; Moscow in particular has had a couple of strong years, with turnover up by 15 per cent. He cites work for Daimler and Siemens investing in Russia as evidence of where the strategy is paying off.

Revenues from CEE represent approximately 20 per cent of global revenue and are still outweighed by the 80 per cent of turnover derived from Germany.

Meanwhile, Noerr’s London office moved into profitability in its second year, according to London office head Hans Radau, and is busy funnelling work through to Germany while keeping a team of 13 lawyers occupied. The size of the London office after a short time is proof that the investment has paid off.

While just like the rest of the world Noerr is doing an increasing amount of work with Asia, Bürgers says the firm has no plans to open an office in the region, although this is continually under review.

“If there’s the need and the opportunity we may be in a position to decide on this,” he adds.

The firm is the German member of independent network Lex Mundi, giving it a link to other independent firms around the world. In the UK Noerr works with firms including Addleshaw Goddard, Burges Salmon, Macfarlanes, Slaughter and May and Travers Smith.

Noerr’s managing partners believe the firm has a future as an independent, pan-European firm catering for internationally-focused clients. Its size means that only a really large Anglo-Saxon firm would now be able to carry out a successful merger, even if Noerr wanted to join forces with any of those that do not have a presence in Germany.

Primarily, Bürgers and Schenk want to ensure that Noerr continues to provide top-quality service to the businesses it advises.

“Our ambition is excellence and this is the most important strategic goal,” Bürgers emphasises.

It is hardly a unique goal, but with hands steady on the tiller, Noerr looks as though it is steering a good course.

Award-winning ways

Discussion was fierce around the judging table as The Lawyer’s European Awards panel tried to decide which firm, out of a stellar list from across the Continent, should win the top prize this year.

In the end the panel of senior private practice management figures and in-house counsel were satisfied they had made the right decision in naming Noerr the European Firm of the Year 2012.

One of the in-housers said Noerr had always been a “solid commercial firm”, but noted it had “really stepped up its game” recently.

“They’ve woken up from what, 15 years ago, was a pretty comfortable midfield position,” said the judge, with others agreeing that when it comes to client service, understanding of the market both domestically and internationally, and ambition, Noerr stands out.

Single minded

When most other German law firms were surrendering their independence to the Anglo-Saxons with surprising rapidity in the late 1990s and early noughties, Noerr was one of the few independents to hold out and back itself to succeed among all the new competition.

Its very reasonable gamble has paid off. There is clearly a market in Germany, and indeed throughout Europe, for high quality independent law firms. Although it is clear from the statistics that most of the biggest mandates now go to the German arms of Anglo-Saxon behemoths, there is clearly plenty of food to go round. For the numerous very successful Mittelstand companies which do not need, and are not attracted to, the international (and expensive) offerings of the larger firms, the attraction of German independents like Noerr remains strong.

Many of its clients are looking east for expansion and Noerr has taken steps to serve them by opening offices in Central and Eastern Europe, which on the face of it to has largely worked. It seems from the outside to be comfortable in its own skin, focused, energetic and self-confident. It also appears to be in the upper quartile of the top 100 independent European firms in terms offmancial performance.

A UK managing partner

View from the UK

Charles Martin, senior partner, Macfarlanes

Noerr has a clarity of vision and ambition, the results of which speak for themselves.

We have worked with them for over 20 years now, and they have multiplied in size, but in a disciplined way. Their strategic calls are smart, such as the small but cleverly positioned London office. The values we identified with all those years ago are still evident. They lose very few people so the DNA is constant. The quality of the people and of the client base has not been sacrificed on the altar of growth as can so easily happen.

Although we work closely with other firms, we remain good friends. Noerr’s fiercely independent approach means that we should be able to do so for many years to come.”

 

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