When Sebastian Prichard Jones officially replaced Charles Martin as Macfarlanes' senior partner last week it marked the culmination of a mammoth two-year handover process.

Even though private client partner Prichard Jones was elected in early 2018, the top-tier firm was determined to ensure continuity through such a major change.

Yet for many outsiders, this is still not enough.

The problem facing Macfarlanes, according to several ex-partners, rivals and recruiters, is that Prichard Jones' coronation marks more than just a management change. For them it heralds a new era in which, crucially, the highly profitable U.K. firm does not have as many big name partners ready to drive it forward.

Macfarlanes rubbishes such claims, pointing to its stellar reputation and a strong crop of junior partners as reasons why it will continue to be highly successful.

Filling the gaps

Although the leadership handover took place on May 1, some believe a more crucial date for the firm came 12 months earlier when M&A heavyweight Graham Gibb retired early from Macfarlanes.

Gibb was a key figure on several lucrative deals for the firm and was, according to other lawyers in the market, very popular among clients, particularly those in the U.S. who valued his experience.

In 2013, he had worked alongside outgoing senior partner Martin on Vodafone's $130 billion sale of its 45% stake in U.S. mobile operator Verizon Wireless in 2013, with the Macfarlanes team working closely with its U.S. relationship firm Wachtell, Lipton, Rosen & Katz.

The news of Gibb's retirement was so serious that it raised eyebrows at fellow independent U.K. stalwart Slaughter and May, according to two people with knowledge of the matter. They say Slaughters was concerned that without a go-to, experienced M&A partner on the Macfarlanes bench, the strong independent firm referral network both are part of — featuring the likes of elite Manhattan firm Wachtell — would suffer.

"Graham was certainly important to those relationships, but he wasn't the originator of them"

Martin, the senior partner at the time of the departure, dismisses the notion that Gibb's departure was so problematic. Although he was one of the firm's top billers, his relationships with top clients and U.S. firms were not exclusive, Martin says, and had been handed down from partner to partner over the years.

"Nearly all of our client relationships [across all practices] are very much multi-partnered. Graham was certainly important to those relationships, but he wasn't the originator of them."

Even so, the loss was exacerbated by the fact fellow M&A partner Charles Meek also retired last year.

Although Macfarlanes plays down the notion that Slaughters had concerns, one person close to the matter said that Martin did speak with "senior M&A lawyers and bankers" about hiring a senior public M&A partner to maintain the momentum in the practice, a key part of which involves working with U.S. firms.

And then six months after the Gibb news, management at Macfarlanes announced it was bringing in Ashurst senior corporate partner Robert Ogilvy-Watson as a big name veteran who could fill the gap left by Gibb and Meek.

"They just haven't got the next generation there"

Although widely respected as a big name, some remain sceptical about whether Ogilvy-Watson's appointment will solve the longer-term generational challenge facing the firm.

"They just haven't got the next generation there," says one corporate partner at a rival firm, predicting that "Macfarlanes are going to have problems".

Ogilvy-Watson's success at the firm so far is hard to measure. At the time of writing, his profile does not show any mandates he has worked on for the firm since his move from Ashurst, with the firm saying that it cannot comment on ongoing client matters.

Increased hiring

So could hiring more people be the solution?

Not according to Prichard-Jones, who, speaking ahead of his formal appointment, said aggressive lateral hiring was "not likely to be a feature" of his tenure.

"We will continue to look at them and standout candidates, but I am very keen to continue growing from within," he said.

And yet on the day of his appointment the firm announced another big-name hire, bringing in former Lord Chancellor and politician David Gauke back to the firm as its new head of public policy. The timing was almost ironic.

Other lateral hires over the past few years for the firm have included Eversheds Sutherland corporate crime and investigations head Neill Blundell in 2018, and Ropes & Gray special situations partner Peter Baldwin last year.

The firm had also planned on bringing in Charles Russell Speechlys head of private client property Ian Cooke, though the move fell through a few months later.

At a crossroads

That Prichard Jones is from the private client side of the business is significant, according to outsiders. They say the firm is "at a crossroads" regarding its corporate talent pipeline and is facing "a changing of the guard" across all levels of the business given the new senior partner change coincides with a wider generational shift.

Other important changes include the retirements of private equity partner Ian Martin and M&A partner John Dodsworth. Lawyers and recruiters across the market say that the firm's reputation among its peers was affiliated with the success of its big-name partners.

Prichard Jones will need to ensure Macfarlanes quickly "asserts its dominance in the [corporate] sector", says one ex-partner, who adds that while Prichard Jones is "switched on" and "engaging", they expect that his leadership will "shift the internal gravity" of the firm away from corporate.

"There was a real worry internally that it would be someone who wasn't an M&A partner."

Commenting on the senior partner election process, one ex-partner says: "There was a real worry internally that it would be someone who wasn't an M&A partner but there was no one suitable. There was a genuine worry that it would change the focus of the firm."

The corporate department contributed to roughly 43% of the firm's revenues last year, though the firm is also well known for its excellent reputation for private client and trusts and estates work.

Since 2010, the firm has made up 11 lawyers to partner in its corporate practice out of a total of 46 promotions. The bulk of corporate promotions came in 2019, when the firm made up three lawyers — all of whom were men.

However, a number of the corporate lawyers promoted during that time have since left Macfarlanes, including private equity partner Emmie Jones, who left the firm for White & Case in 2018; Nicholas Barclay, who left the firm last year for a general counsel position; and James Dawson, who came to Macfarlanes in 2012 but re-joined Addleshaws in 2018.

The next generation

Ex-partners and rivals believe that the solution is for Macfarlanes is two-fold: it needs to better market its homegrown lawyers' talents, and change its lateral-averse mentality by hiring well-known partners from other firms to fill gaps in the pipeline.

Prichard Jones favours the former, saying: "We are happy to make up partners, the drawbridge is not up on doing that and we're very happy to grow. My primary focus is taking that internal talent and allow it to develop over the next four or five years."

'I am very keen to continue growing from within'

And outgoing senior partner Martin insists that Macfarlanes' pipeline of talent is healthy and that the firm is "very well-positioned on the M&A side of things". He cites the talents of relatively junior corporate partners such as Richard Burrows, Harry Coghill and Jessica Adam, as well as new private equity head Alex Edmondson.

He also says that more familiar faces within the market, such as corporate co-heads Luke Powell and Howard Corney and private equity partner Stephen Drewitt, are performing well for the firm.

Partners at rival firms say that Burrows in particular is a viable talent, having co-led a Macfarlanes team advising on U.S. car parts manufacturer Dana on its $6.1 billion combination with FTSE 100 engineering business GKN alongside Gibb in 2018.

New private equity head Edmondson, meanwhile, is also popular with clients and has strengthened the firm's relationships with several key clients.

Martin adds: "Stepping down, I have no doubt that the best days of the firm and the corporate practice lie ahead of it."