When Kensington Swan glided into the Abu Dhabi market in 2009, commentators gleefully found a new use for the phrase “swanning about”. But as chairman Clayton Kimpton tells ALB’s Renu Prasad, the firm is confident that the venture will earn its crust.

Clayton Kimpton is speaking off the record.  But if he has any salacious industry gossip to share, he’s not letting on. “I don’t like scuttlebutt - firms talking about each other. I avoid it, particularly seeing as  we’re on the receiving end of so much of it ourselves,” he declares.

Indeed, Kensington Swan is one of those firms that people like to talk about, perhaps because of its notably eventful recent history. In 2000, the firm entered a short lived merger with accounting firm KPMG, an arrangement which terminated in 2003. In 2009 it opened an office in Abu Dhabi, a decision which came as a shock to local rivals. New Zealand firms, after all, are almost completely absent even from nearby Asia and here was one of their own venturing across the world into the Middle East – into Abu Dhabi, of all places. What’s going on at Kensington Swan? That was the question of the day as Kiwi lawyers peered curiously out of the windows of their Shortland St offices down at Viaduct Harbour.
Kimpton is used to scepticism. “When we demerged from KPMG, a lot of people thought we would disappear,” he says. “They’ve been saying that since 2003 – well it hasn’t happened yet and we have no plans to let that happen. We will have growth this year, we are ahead of budget at this point so far - we’re really pleased we’ve exceeded that.” But is the Abu Dhabi office turning a profit? “You don’t go into a venture like that expecting it will pay its own way immediately,” says Kimpton. “We’ve put very clear parameters around performance and result and if it doesn’t meet those we will review whether the idea’s a good idea. I’m sure it will be a significant contributor to revenue, but  you don’t expect to make money from a new market overnight. So if you’re asking whether it’s paying its way now, I would say it’s doing what we planned it to do.”

The firm is also pleased with progress back at home. A renewed focus on key areas and bringing tender specialists on board has seen the firm improve its tender success rate from 17% to 58%.

“We’ve got the expertise that clients are wanting - we’re not going to tender for something we’ve got no expertise in,” says Kimpton. “Chapman Tripp used to be the sole advisor to the NZ Transport Agency - we’re now on there with Buddle Findlay. We’ve just been appointed to the panel of Auckland Transport, a very significant council controlled organisation  and we’ve also been appointed to the ANZ AMP panel. We quietly get on and do our bit.”

Accountants and CEOs

Kimpton says that while the multi-disciplinary professional services firm was an interesting experiment, its time has largely passed. “The ability to be multi-disciplinary on a global scale is no longer possible,” he says. “In New Zealand, legislation doesn’t allow it and it’s the same in the US.” The KPMG Legal era coincided with the introduction of the Sarbanes–Oxley Act in the US.

“Conflicts and the looming difficulties with Sarbanes–Oxley meant it impossible to carry on,” says Kimpton. “However, we didn’t pull out because the law changed – it hadn’t at that stage – but because it just was not working for us. The level of conflict was too great, the difficulty in working in a multi-disciplinary firm were too great. I can see a multi-disciplinary practice working informally or formally within a rural or provincial area but in terms of the large scale law firms, global firms – they will be separate.” 

Kensington Swan did until recently have one accountant in its ranks in the form of CEO Chris Heilbronn, who has now left to become a business consultant. The firm took the opportunity to revise its management structure following his departure and has opted against appointing a new CEO. Instead, construction & infrastructure specialist Paul Buetow has been appointed as managing partner, assisted by a COO on operational matters.

This is another example of a firm returning to a managing partner model – Chapman Tripp and Minter Ellison Australia are other examples – and Kimpton says that the concept does seem to carry more weight with clients. “I don’t subscribe to the idea that lawyers are special or different,” he says. “However, clients expect to have a conversation about their problem and it carries an extra amount of credibility if the managing partner is also a lawyer. They’ve been there, done that and had experience in way that an engineer being head of an engineering company would have the same credibility. They might not be practicing every day, but they understand what clients are doing and what their needs are. It’s a people game at the end of the day.”

Finding more of the right people will be part of the growth strategy for the immediate future. The firm started 2011 with 30 partners and hopes to make another five appointments this year and has a longer term goal of reaching about 40 partners – although Kimpton points out that this is dependent on revenues justifying such an expansion. Corporate, property and environment specialists are particularly high on the hit list. “That reflects the growth in our client base in those areas and reflects where we see the market as heading, particularly in the infrastructure space where we have a strong capability,” he says. “It’s growing fast and we want to make sure we’re populating that with partners.” Kimpton acknowledges that Kensington Swan is not the only firm actively recruiting at the moment. “We’re finding that some of our people are being tapped on the shoulder at moment,” he says. “We’re doing the same [to others].”

Building capacity in-house
Kimpton says that the New Zealand in-house profession , like its Australian counterpart, seems to be building more capacity in-house. “The market has changed – I don’t know whether it’s because of the GFC or whether it’s a coincidence, but it has changed,” he says. “Clients have become more intelligent about how they spend money and where they can get in-house counsel in who can do the same work for less than they pay firms, I guess it makes sense.”

Kimpton says his impression is that the in-house profession has been through similar cycles in the past, where in-house teams have been on the larger side. “It’s been done before – whether it will cycle through again remains to be seen,” he says.  But there is a new factor at play this time – an emphasis on building specialisation in-house.  “I think in-house counsel are no longer generalists - they have teams of specialists; for example specialists in employment law or even litigation and they’re very good lawyers,” he observes.

The result is that law firms may need to skew their offering towards a more specialist level.  “Clients are looking for more specialist high level strategic advice, rather than the “bulk” work that would feed down to teams,” says Kimpton. “They’re looking for partner level and senior lawyer input.” The implication is that law firms may need to lower their leverage, but Kimpton says that this argument has its limitations. “Leverage is still very important,” he says. “There are only so many hours in a day. If you’re going to be a specialist firm that just gives strategic advice, your charge out rates are going to be quite high to make any money out of that.”