By some margin the strongest-performing Magic Circle firm for the 2015/16 year, Freshfields Bruckhaus Deringer posted 7% revenue growth from £1.245bn to £1.327bn and an 8% profit per equity partner (PEP) hike to £1.47m from £1.37m.
This performance is particularly impressive after a year of investment. The firm pushed hard on the development of its legal services hub in 2015, gaining the lease to its Manchester office in July last year. Rapidly scaled up, Freshfields’ Manchester staff will move into new premises double the size of the current office from early 2017, accommodating legal services staff as well as human resources, IT, marketing and business development, office management, document specialists and change management. Plans are already underway to open a second legal services hub in either the US or Canada to offer a 24-hour service to clients.
In a bid to boost profitability in a flat German market, the firm confirmed in December 2015 that it was closing its Cologne office, with the bulk of its staff transferring to the firm’s existing Düsseldorf outpost. Around 18 partners and between 50 and 60 associates moved to Düsseldorf to ‘create a larger and broader’ offering of more than 40 partners. Consolidation and cost-cutting across the network, with lawyer headcount down 2% last year, has helped boost the bottom line, with profit per lawyer increasing 10% to £271,000.
The firm’s involvement in significant work is the main factor behind top-line growth. Freshfields advised on 190 M&A deals worth $587.6bn in 2015, according to Dealogic’s global league table and the corporate team is representing Anheuser-Busch InBev in its takeover bid for SABMiller as well as winning the mandate to advise BG Group in its $53bn takeover by Royal Dutch Shell. It is also currently advising the London Stock Exchange (LSE) in its third attempt at a tie-up with Deutsche Börse, which would create an exchange with a combined value of about £21bn.
The firm’s four-strong management team suffered a blow in June, when executive partner Michael Lacovara quit to join Latham & Watkins after only six months in the job. The role will be absorbed by co-managing partners Chris Pugh and Stephan Eilers and senior partner Ed Braham. Lacovara was tasked with leading the launch of Freshfields’ legal services hub in either Canada or the US.
LB: How has the firm performed over the past financial year?
Chris Pugh: We’ve done some of the major transactions like AB InBev/SABMiller and Asian investments into Germany – outbound China’s been very strong. If you look at what our US team now looks like and what it provides by way of the opportunities it provides us compared to our competitors, it is clear our platform is beginning to work. Investigations and contentious regulatory work looks like it will remain a very strong part of our business. We’re in difficult times, but we’ve got something to offer in difficult times and that’s what clients recognise.
What impact will Brexit have on the firm?
Stephan Eilers: The firm is pretty perfectly where it should be. We have a strong London regulatory practice, strong European practice, strong German practice, so that’s something which will work for us.
Pugh: There’s a danger that you go into any situation feeling confident you can deal with whatever the markets throw at you and what your clients want in those markets. It is right to feel confident, but you have to stay close to your clients and understand their needs.
Any plans for a US merger?
Pugh: A US merger is not on the cards. It’s not a question that we ask ourselves.
Eilers: We’re strengthening in the US. We have capital markets and corporate capability there which is first class. Now [a merger] is really off the table.