Defendant insurance law firm HF has handed employees free shares in the business as part of an ambitious growth plan that includes diversification, acquisition and maybe even a stock market listing.
All staff who have worked at the Manchester-headquartered firm for a year will receive shares, and they will be topped up annually.
The shares are forfeited if they leave but staff can try and sell their shares after five years if there is an internal market for them. HF, formerly known as Horwich Farrelly, currently has 650 staff working in eight offices across the UK and Ireland.
Chief executive Ronan McCann said broadening ownership was a vision he had had since a junior solicitor, when he noticed how staff at a client, Admiral Insurance, were “all so concerned about doing the right thing for that business to succeed” – more so than at other clients.
This was due to a share scheme, he discovered.
He continued that, 20 years later, he was finally in a position to do something about it. “There came a time when a number of our senior partners took opportunities to leave and as a result I was able to implement my vision.”
The first step was to incorporate the business, in June 2021, with around 70 senior staff handed shares at the time, expanding the equity ownership significantly.
Now, all eligible staff as of the start of this year will be allocated shares if they want them. He declined to say how much of the equity was reserved for staff. The shares are in addition to regular salary and bonuses. “It’s gone down tremendously well,” Mr McCann said.
He added that staff may receive annual dividends – although this is unlikely to happen in the next two to three years given the focus on growth – and would benefit too if there was a capital event, such as external investment, a sale or a stock market listing.
The aim, he stressed, was to put employees “front and centre”. He explained: “I lived in a partnership for over 20 years and one of the great challenges of that model is that it can be huge frustration for the staff when they see two or three partners benefiting from the success of the business, when it can’t be successful without them doing their part.”
Asked why HF had not adopted an employee ownership trust model like a small but growing number of law firms have, Mr McCann said: “We felt this would be the most successful model for our business. We give back to our staff what they deserve whilst also maintaining the control we need for the business to succeed.”
HF’s five-year strategy, which began last year, is to reach a turnover of £100m by 2027 – it was £45m last year and is on track to hit £50m this.
Mr McCann said this would be achieved by “merger, acquisition and organic growth – we’re talking to a number of different firms right now”.
Some 90% of HF’s business is currently insurance work, but the concentrated nature of that part of the legal market means the options to grow it through M&A are limited, although Mr McCann said he saw plenty of scope for organic growth.
This was particularly as HF remained focused for now on the UK and Ireland, while most of the big defendant insurance firms have gone global. He indicated that HF has international ambitions, but not until the five-year strategy was achieved.
“What I’m not doing right now is getting distracted by opening offices around the world.”
That meant much of the growth would come from diversifying and building on the 10% of the business that does corporate and commercial work. He predicted that side of the business would contribute £30-40m of the £100m business.
Mr McCann said all of HF’s management team had significant experience of acquisitions and he has also brought on board as a strategy adviser Andrew Leaitherland, the solicitor who built up DWF and took it public.
“The reason I brought Andrew in is that he has huge experience not only at growing DWF from £29m to £350m but he also went through a pretty rigorous process in the IPO.
“I’m not sure whether he would advocate that right now but there are a whole host of options. His learnings from that are of huge benefit to us. What our focus is on is getting to the place where we can have the options.”
He emphasised that he would in no way rule out a listing as one of them.