Empty pockets

To say that the past 12 months have been transformative for the global legal services market would be an understatement. A market that saw double-digit revenue growth for five years running spectacularly ground to a halt in growth terms last year. Revenues were broadly flat, profits were shot. And, worryingly, the transformation is not finished yet – the current financial year is likely to be even worse.

Many of the key macro indicators are pointing in the wrong direction, headcount and costs are rising while demand and revenues are falling. Having a diverse and global business has proved to be no hedge against a global recession. In fact, had the downturn specifically been planned to unravel the business model of a successful global law firm, it could hardly have done a better job – striking first at the practices that drove boom-time growth, such as M&A and leveraged finance; then at business in their home markets; and finally at business around the world.

There have been some huge changes. For the first time in ten years, Clifford Chance is not the biggest firm in the world by revenue. In fact, it is not even in the top five – having been overtaken by both Linklaters and Freshfields Bruckhaus Deringer, among others. These two firms have also moved into a different league in profitability terms. Perhaps even more astonishing though is the emergence of DLA Piper, which now ranks as the world’s biggest-billing firm using last year’s exchange rates. When the notion of global law firms really took off a decade or so ago, none of DLA’s constituent parts was even in the top 50, let alone near its summit. It may be that exchange rate fluctuations and differing year ends have had a more dramatic effect this year than in previous years, but that shouldn’t obscure the fact that there are already some clear winners and losers emerging from this downturn.

When LB spoke to Sir Nigel Knowles, DLA Piper’s co-chief executive, as the firm approached its December 2008 year end, he was in an ebullient mood. The downturn, Knowles said, would result in a world in which there were fewer clients for fewer global firms. Working out who these clients are and what they want is the aim of every firm in our tables. It is also the subject of this report. We have asked clients what they want from their international law firms; we have looked at how some clients are changing; and, in this feature, we have explained how law firms are adapting to these changes.

This is the Global 100, part 1: the world’s top 50 firms by revenue. Part 2 – the second 50 firms – will appear in the next issue.

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