Continental Breakfast is back—now with added breakfast. In a new series of columns, American Lawyer chief European correspondent Chris Johnson will meet with senior figures in the legal world at their favorite breakfast joints to chew over the industry’s tastiest talking points. This week’s installment sees him meet the U.K. legal market’s longest-serving management figure, Clyde & Co senior partner Michael Payton, at his morning restaurant of choice, One Lombard Street. On the menu: a career spanning five decades and the future of insurance law practice.
It has always struck me as odd the way in which most U.K. law firms are managed. Unlike their American peers, where figures like Orrick’s Ralph Baxter and Latham’s Bob Dell have steered their respective ships for two decades or more, U.K. firm leaders are often limited to much shorter terms. So, three or six or perhaps even eight years after a partner has been plucked from fee-earning and dropped into an entirely unfamiliar role, and just when they’re starting to get the hang of this management malarkey, they’re forced to step aside and let someone else have a go. It just doesn’t make sense.
There are, of course, exceptions to every rule. In this case, none is more pronounced than Clyde & Co senior partner Michael Payton, 68. Having first come into the role in 1984, aged just 39, he is comfortably the longest-serving current management figure of any major U.K. law firm.
Clyde recently announced that, after almost 30 years in charge, Payton will finally stand down when his current five-year term ends this October. The news came as a surprise—to me, at least. During a meeting in late 2011, Payton told me that he hoped to continue in the job for at least another term. As we meet for breakfast on a sunny spring morning, I get the distinct impression that he took some convincing to relinquish the reins.
“We all felt it was time for me to step aside and let the next generation come through,” he says, having greeted me with a firm handshake. And then, almost as much for his own benefit: “I was 100 percent in agreement with that.”
We’re meeting at One Lombard Street: a long-standing favorite not only of Payton’s but of bankers and businessmen throughout London, due to its prime location in the very heart of the city’s financial district. Mansion House—the official residence of the Lord Mayor of London—is just next door; the Bank of England directly opposite. The building itself is a former Grade II–listed bank, dating back to 1776.
The grand main restaurant doesn’t open until lunch, so we take a table in the adjoining brasserie. A large, open dining area flows around a circular bar that is crowned by a spectacular glass cupola dome, which must measure 20 feet in diameter and floods the space with natural light. Although quiet when I first arrived at 8:15 a.m., the room has filled up quickly and is now positively buzzing. We’re surrounded by pinstriped suits and Rolexes. Almost every table is adorned with a copy of the Financial Times or The Wall Street Journal. I overhear a nearby group discussing a pitch they are due to deliver after breakfast.
A waiter scuttles over with a notepad and looks at us expectantly. Payton, clearly a regular, doesn’t even look at the menu before ordering a grilled kipper—hold the tomato, lemon, and parsley—and brown toast.
“It’s a curious idea that tomato might go with kippers,” he says with a sigh and a shake of the head. “There must be someone whose job it is to put a tomato on each dish that leaves the kitchen, regardless of what else is on it.”
I’m not convinced by the idea of kippers so early in the morning, even without tomato, so I browse the menu options under a section titled ‘How do you like your eggs in the morning…’—presumably in reference to Dean Martin and Helen O’Connell’s classic duet of the same name. I resist the temptation to quote the lyrics and tell the waiter “I like mine with a kiss," and instead order them scrambled, with smoked salmon and chives. We both ask for coffee—black.
Payton has been working as a lawyer for a scarcely believable 48 years. Having left school at 16, he articled (the old English term for a training contract) at a small, two-partner firm in North Yorkshire called Hunt & Wrigley. The partners focused solely on residential real estate work—the senior partner acting for the gentry; the other partner for the local farmers and shopkeepers—and left Payton and two other junior lawyers to do everything else, from divorce and county court work to criminal proceedings. While Payton describes the varied workload as “about the best training you could get,” he soon realized—perhaps while hitching a ride to work on a milk van, as he used to do each day—that he would have to move to London in order to satisfy his ambitions.
So, in 1967, aged 22, he headed south to the capital, and was recruited to join shipping and insurance specialist Clyde by then senior partner Maurice Hill. (Hill’s family was one of some standing within British society. His uncle, Sir Leonard Erskine Hill, was a renowned physiologist that devised the armlet method for measuring blood pressure and the use of decompression chambers to prevent bends in deep-sea divers. Another uncle, epidemiologist Sir Austin Bradford Hill, first established the connection between smoking and lung cancer. In total, no fewer than five members of the Hill family had been knighted throughout the generations.) Payton describes Hill as “a wonderful man and one of the great shipping lawyers of his generation," and says the pair quickly established a strong friendship—thanks in part to a shared love of horse racing. (Payton also rides, though “not so much now.") When Hill died in 1971, Payton took over his practice and became a partner.
The waiter returns with our food. “Ahh,” Payton exclaims as he is presented with his plate, a quartered lemon sitting guiltily next to the otherwise naked-as-requested kipper. “Only the lemon survived the instruction,” he tells the waiter, more with amusement than irritation. Erroneous white toast is quickly swapped for brown.
Payton says the legal market has changed beyond all recognition over the course of his career. He recalls one of his first meetings in London, at the offices of Hewitt Woollacott & Chown—a distant ancestor of pan-European firm CMS Legal.
“One of the partners had a coal fire in his office and someone whose sole job was to stoke it at regular intervals,” he says. “Things were quite different.”
Payton also remembers Dibb Lupton, which would ultimately evolve into global giant DLA Piper (it’s where the ‘D’ and the ‘L’ comes from), as a small Yorkshire firm that was doing “tolerably well."
“If you’d said back then that those guys would become the largest firm in the world, you’d be taken off to the sanatorium,” he adds. “The concept that a firm might have offices around the country, let alone the world, was laughable.”
The change at Clyde has been no less dramatic. When Payton first joined the firm in 1967, it had four partners, all based in London. Clyde now has more than 1,400 lawyers and 30 offices across six continents.
And despite Payton’s belief that the evolution of legal business has been hampered by lawyers’ “innate conservatism," his own firm has been an early and avid subscriber of globalization. Clyde was the first international firm to launch in both Hong Kong and the Middle East—it now boasts more than 160 lawyers on the ground in Abu Dhabi, Doha, Dubai, and Riyadh, more than any other international firm in the region—and also has well-established presences in India, Africa, and Latin America. Clyde’s Rio de Janeiro base has been running since 1988; its Caracas outpost for almost as long.
But the most significant step in the 78-year-old firm’s development came much more recently, when it completed an audacious merger with its historic rival, Barlow Lyde & Gilbert, in late 2011. (The merger was detailed in a profile feature by The American Lawyer.)
The deal remains the largest-ever merger between two U.K. law firms—bigger, even, than the 1987 formation of Clifford Chance, or the 2000 union that created Denton Wilde Sapte (now SNR Denton and, with its pending three-way combination with Canada’s Fraser Milner Casgrain and French firm Salans, soon to be ‘Dentons’).
Clyde is not the only insurance-focused firm to have undertaken a merger in recent years. Another, 230-partner DAC Beachcroft, itself created through the October 2011 combination of London-based Davies Arnold Cooper and Beachcroft, a national firm headquartered in the southwest of England, has completed four mergers and alliances in the past 12 months. (Click here for a feature from The American Lawyer‘s Winter 2013 Focus Europe supplement analyzing consolidation within the U.K. legal market.)
Payton says that the growing merger activity is being driven by consolidation within the insurance industry.
“At its height, Lloyds [the world’s largest insurance and reinsurance market] had several hundred syndicates—maybe even 1,000,” he explains. “Now there’s about 10 percent as many. You now have fewer and larger insurance companies and that consolidation is mirrored in the legal world.”
The process has placed a greater importance on developing institutional relationships with major insurers, Payton adds, who are becoming increasingly reliant on so-called panels—short lists of preferred law firms—in an attempt to increase efficiency and drive down procurement costs. But despite the continued consolidation and an increased sensitivity on fees, Payton sees a bright future for law firms practicing within the sector.
“World wealth and trade increases inexorably year on year, and there is now a greater degree of risk aversion,” he says. “If people and businesses have more assets that they want to preserve, demand for insurance increases, so it logically follows that a law firm focusing on the industry should have a good future.”
Clyde has certainly performed better than most during the recession. Helped by its broad international footprint and a practice that is much more heavily weighted toward litigation than is typical for an English firm—over 60 percent of its workload is contentious—Clyde has more than doubled its revenue since the crisis began in 2008. The firm broke into The American Lawyer‘s Global 100 list of the world’s largest firms by revenue in 2012, after its combination with BLG saw revenue leap by more than 35 percent to $460.5 million in the fiscal year ended April 30, 2012. It ranked 79th, just between Katten and Cadwalader.
Payton doesn’t anticipate a renewed interest in insurance work by the Magic Circle or other top corporate law firms, however.
“There’s a profitability issue,” he says. “The sort of rates you get in the insurance industry, about which I make no complaints, simply aren’t of interest [to larger corporate firms]. It’s amazing the hourly rates that firms on the other side of Bishopsgate can get away with charging.”
Payton says the situation is replicated in North America, which been an important component of Clyde’s practice long before it launched offices in New York and Los Angeles in 2006. Throughout the nineties, U.S. insurers began investing heavily in the London market—including in many of Clyde’s longest-standing clients. The firm also acted directly for a number of leading U.S. companies, such as property and casualty giant ACE Group, which has been Payton and Clyde’s biggest client globally for years.
Prior to 2006, Clyde’s lack of a U.S. presence meant that it had to refer significant volumes of work to American firms—some $10 million in annual revenues on average, Clyde CEO Peter Hasson told me in 2011. The main beneficiary was LeBoeuf, Lamb, Greene & MacRae. To show its gratitude, LeBoeuf gave Clyde a framed flag—half Stars and Stripes, half Union Jack—that hangs in the eighth-floor client reception area of Clyde’s London headquarters to this day. A small plaque underneath reads: "To our U.K. friends at Clyde & Co. From your U.S. friends at LeBoeuf." (Having seen the flag since Dewey & LeBoeuf’s sudden demise last year, it now feels more like a memorial than a gift.)
Clyde’s U.S. practice now boasts three offices and 120 lawyers, with additional bases in Montreal and Toronto added through a 2011 merger with Canadian insurance boutique Nicholl Paskell-Mede. Clyde’s U.S. revenue has increased by almost 90 percent in the past two years, passing $50 million for the first time in 2012. (The firm’s U.S. strategy has been overseen by Clyde management board member James Burns, who is replacing Payton as senior partner.)
“I thought for many years that there could be few things stupider than an English law firm going to America and competing with American firms in the most overlawyered market in the world,” he says. “But what we’ve found is that firms tend to be focused on the profitable corporate work and are turning their backs on the insurance industry. No one is really competing with us—they all have bigger fish to fry.” (Though hopefully not with tomato or lemon? “Yes, quite,” he laughs.)
Our plates are cleared and talk turns to Payton’s future plans. While he’s standing down as senior partner, he’s not retiring—far from it. Payton will take up a newly created role of chairman, though he isn’t entirely sure what that will actually entail (“resolving the unresolvable, being an ambassador to clients—that sort of thing”), and will also return to more active fee-earning.
He certainly doesn’t give the impression of a man ready to hang up his gloves. Standing comfortably over six feet tall, Payton is a vital and energetic figure, and exudes the sort of commanding presence that only comes with vast experience. He speaks with such passion and enthusiasm that I honestly wonder whether he’ll ever retire.
But, as he approaches his 69th birthday, surely the thought of calling it a day and taking things easy must occasionally cross his mind?
“No, absolutely not,” he says without a moment’s hesitation. “The merger [with BLG] is the largest thing we’ve ever done, and we’re only now beginning to understand the full benefits. I’m fascinated at being part of moving Clyde on to the next stage. There is a great deal still to be done.”
Breakfast for two came to £36.56 ($55), with service.
Chris Johnson is The American Lawyer’s chief European correspondent. Reach him at email@example.com. Follow him on Twitter at @chris_t_johnson.