Editors' Blog

Herbies’ finance push: poor start, improving middle…

Posted 25/07/2008 by Alex Novarese

Hopes, it has to be said, weren’t high when Herbert Smith starting making noises about building a serious finance practice three years back. The investment needed is considerable, the competition now well established, and you could argue the firm had missed the boat by a good five years.

And, even leaving aside the considerable challenge, it was by no means an essential move for the firm. With a top-tier litigation team and highly credible M&A and property practices, Herbert Smith had no burning need to build a self-standing banking team. There are plenty of corporate-driven firms in the City that have had no problem maintaining an upward trajectory with only cursory banking capability. But it was obvious that Herbert Smith had never been able to reconcile itself with that reality, an insecurity which used to manifest itself in the firm habitually talking up its meagre banking credentials.

But put all that baggage to one side and, as can be seen from Legal Week’s recent analysis of the firm’s progress, the finance drive could have gone a lot worse.

Investment has been sustained, 83% revenue growth at in three years is more than respectable, and profitability - which once substantially lagged the firm-wide average - has been considerably improved. Hiring, with the recruitment of partners like Denton Wilde Sapte’s leverage finance duo Chris Fanner and Ian Yeo and Norton Rose projects specialist Andrew Newbery, has looked well judged and has come at just the right pace to keep the team growing without compromising on quality.

The culture of the team looks right as well. As finance head Jason Fox observes, given the scale of the challenge there was no point shipping in technical wizards with little thirst to build business. The general feeling is that Herbert Smith has built a team with an energetic and entrepreneurial feel, but not to the extent that it chafes against the culture of the rest of the firm.

Obviously, it’s still early days and this project is far from complete. The 20% of firm-wide revenue target for finance is a good five years from being met. Based on the firm’s current overall growth, it’s unlikely it will ever be met, but there’s no pressing demand to build a £100m-plus finance practice to have a profitable practice that takes the firm where it needs to go. And though Herbert Smith has done a good job of getting on the right panels, it still needs to substantially upgrade the quality of mandates coming through the door.

Nonetheless, the firm has made a very credible start and, with the impact of the credit crunch not about to abate anytime soon, now is the perfect time to recruit senior talent for a firm ready to take a long-term view. The opportunity is Herbert Smith’s to take… or throw away.

alex.novarese@legalweek.com