The last decade emerged with the shockwaves of the banking crisis still making themselves felt on the profession. Having just made a series of job cuts in major markets the like of which had never been seen in the legal industry, the mood was infused by uncertainty, the brutal realities of austerity and the sudden emergence of more demanding clients.
There was little time for a serious debate about how the profession would evolve through the 2010s, a decade that went on to rob London’s legal elite of its reputation for causal dominance. It was also a period that attracted forecasts of dramatic change and modernisation in law that continually fell short of reality, despite the introduction of the Legal Services Act.
Most of what happened, happened to the profession thanks to wider economic forces, not its own agency. Major law firms became enthusiastic marketers of ‘innovation’ at the very moment they lost the knack for leadership and strategic thinking that had served them so well in previous years.
As we enter 2020, there is more time for reflection – and a sense that the plates beneath the industry are shifting still, even if the commercial legal industry remains a hugely profitable trade. The UK faces departure from the EU, an unthinkable event even when pundits were queuing up in the early 2010s to forecast the seemingly inevitable ‘Grexit’ that never came to pass. The City now faces its most uncertain future since the mid-1990s and the looming introduction of the euro.
To attempt to bring some clarity to the haze, the Legal Business team has examined a series of major issues that will define the industry through the coming decade, drawing on interviews and the trendlines as they stand to form assessments about how the profession will evolve through the next ten years.
What emerges are not wide-eyed claims of the reinvention of law, it is a sceptical view of an industry being shaped by contradictory forces and incentives and a profession that has lost sight of itself.
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The 2020s will finally resolve whether the Magic Circle face a demotion to second-string international players or can galvanise to remain global elite contenders.
The fate of the Magic Circle
Last-chance saloon
The stakes:
‘Will the firms that make up the Magic Circle today still exist in ten years? Of course they will,’ argues current Latham & Watkins partner David Walker, formerly of Clifford Chance (CC). ‘But what will be the significance of this grouping if other firms with large US practices dominate the global legal landscape?’
Quite. Between the mid-1980s and the banking crisis, the Magic Circle was one of corporate Britain’s most striking success stories. Defined by strong leadership, institutional agility and bold decision-making, the group radically refashioned itself for the post-Big Bang City and the era of Maastricht-infused globalisation and became utterly dominant at the top end of Europe’s legal market.
However, a far more troubled period since the banking crisis over a decade ago, defined by slower growth, uncertain US tactics and timid strategic vision, has raised the question of whether the term ‘Magic Circle’ will remain synonymous with topping the industry pecking order. The humbling of the Magic Circle would have huge implications for the global currency and dynamics of the UK legal sector, the world’s second-largest legal market.
The trends:
The Magic Circle remains on top in Europe and the group still has huge assets at its disposal. However, significant ground has been ceded in the last ten years in core practice areas like private equity, white-collar crime, leveraged finance, funds and litigation, largely to US firms but also to some mid-tier and domestic European players with clearer propositions. Even in mainstream corporate, there are signs of its position being eroded.
Moreover, a stronger US currency and economy, combined with the sharpening of the European practices of a dozen US key rivals, has weakened its defensive flank, as has the group’s failure to achieve meaningful growth in the US.
Higher-paying US firms progressively won the war for talent, demonstrated by a lengthening line of big-name recruits in the last five years in London. There is also a threat in another guise, as pacey mid-tier City firms continue to achieve superior financial performance, a marked contrast with the pre-Lehman era. A five-year assessment of the four largest Magic Circle firms’ performance in the Legal Business 100 (LB100) shows average revenue and profit per equity partner (PEP) up 26% and 30% respectively. Many mid-tier City firms have massively outpaced this while Macfarlanes and Travers Smith have broken the £1m barrier for PEP. The bottom line is the group enters the new decade in a far weaker position than it welcomed its predecessor.
‘Will the Magic Circle today still exist in ten years? Of course. But what will be the significance of this grouping if firms with large US practices dominate the global legal landscape?’
David Walker, Latham & Watkins
LB’s take:
The 2020s will mark the period that finally resolves whether the Magic Circle faces demotion to second-string international players or can galvanise to remain global elite contenders.
Key issues will be the ability of the group to reform governance structures that hand an effective veto to older partners to block necessary reforms. The other over-riding issue is the requirement for credible strategic responses to the US market.
While scepticism remains, many feel the failed merger between Allen & Overy (A&O) and O’Melveny & Myers is the kind of high-impact move that could get the group out of the strategic stalemate. ‘Me and Mark [Rigotti] believe that the A&O management was trying to do the smart thing,’ says Herbert Smith Freehills (HSF) senior partner James Palmer. ‘If A&O and O’Melveny had pulled it off, it would have been very transformative for both.’
A&O and Freshfields Bruckhaus Deringer are the club members most likely to either break the cycle of decline or re-enforce the intractability of their position, with both facing key leadership elections this year and material strategic decisions. On current form, further decline rather than rebirth is the more likely state the group will end the decade in but by the close of this year the playbook of this duo will give a much clearer guide to the odds.
Leadership
Can the pioneers of leadership rediscover the magic?
The stakes:
It is an enduring irony that during the 1990s the UK profession was routinely written off for conservatism and hostility to leadership in a period in which the profession took dramatic risks and produced figures like Nigel Knowles, Bill Tudor John, Anthony Salz and Geoffrey Howe.
Yet the 2010s proved the decade in which City law fell out of love with leadership as grudging partnerships kept their leadership teams on increasingly tight leashes. Given some of the c-suite excesses and missteps of the 2000s, some correction was understandable but it soon became clear that it was becoming increasingly difficult for large, London-bred law firms to get much of anything agreed of note, with the strange and counter-productive exception of a rash of large Australian mergers.
This inertia has proved increasingly out of step with the times as UK law firms face pressing decisions on business models, technology and international expansion with little mandate to respond. Furthermore, as leadership has weakened, it has diffused, with many firms having 20 to 30-plus partners with leadership duties in some form, further debasing governance.
CC corporate partner Guy Norman observes: ‘Many UK-headquartered firms would admit that in an ideal world they would have a leaner management structure. There’s tension between having a more centralised management structure to reduce the extent to which partners are not distracted from client work and on the other hand a sense within the partnership that a greater degree of democracy is important.’
‘Many UK firms would admit that in an ideal world they would have a leaner management.’
Guy Norman, Clifford Chance
The trends:
‘I don’t see leadership diminishing,’ says one City senior partner. ‘But you see something like the A&O and O’Melveny talks and it shows the limits of that. That’s been the trend over the last 25 years.’
A&O’s failed US merger highlights the narrowing scope of City leadership, as the deal required a 90% hurdle, not for the merger itself but to overhaul the City firm’s compensation. Top ten London firms have through the 2010s repeatedly put off and then opted for modest moves away from outdated lockstep pay models that were too little, too late, trends seen at the Magic Circle except for Slaughter and May, as well as chasing pack operators like HSF, Hogan Lovells and Ashurst.
The experiment with verein-structured law firms only aggravated this shift, allowing law firms to kick the governance can down the road, with the resulting multi-polar mergers producing firms with even less clear leadership. Such results were notable as even DLA Piper struggled to maintain the dash of the 1990s and 2000s, while the once-strong leadership of Norton Rose gave way to drift following the union with Fulbright & Jaworksi. The decade also saw an absence of high-impact US/UK mergers and paltry progress in North America for London firms.
Meanwhile, the stripped-down leadership model of some of the most effective law firms like Kirkland & Ellis and Latham was to underwrite increasingly productive and focused strategies. The 2010s was a lost decade for major City law firms in leadership terms.
LB’s take:
Change will only happen in the legal profession the way it usually happens, from within its own. Large City law firms will be incapable of pushing through material reforms of dysfunctional decision-making and governance models until one or two influential standard-bearers grasp the challenge and popularise progressive steps.
Such a shock to the system would have to come from a London-driven firm – the success of US rivals can be too easily dismissed by peers looking for excuses. As our assessment of the malaise at the Magic Circle is closely tied to weak governance, A&O is the most likely to step up, given its looming leadership election and history of strong management. The gloomy conclusion, though, is if A&O cannot lead for the profession, it is hard to see any of its peers filling the gap.
As Norman concludes: ‘It’s hard for established firms, which have grown up with a certain culture and business model, to flip across into a very different one. That’s one of the reasons why abolishing lockstep and other structural changes are difficult and only happen very slowly, if at all.’
Outside capital and the law
Take the money and run?
The stakes:
A potential influx of external capital into the profession strikes at the heart of what it means to be a law firm. While many firms have considered the possibility of a listing, few follow through. Historically law firms have generated significant capital in relation to their investments and reconciling the ownership of partners and outside shareholders is clearly a major challenge.
‘I’ve not come across a large law firm that has really struggled to get the funds to do new things if it wants to.’
Simon Levine, DLA Piper
However, some question if the partnership model is equipped to tackle the challenges of the future, with needs for technology and business change seen as the key issues, particularly for broad, mid-market advisers.
‘The reality is we’ve had corporates come in and it’s a valid business model,’ says BDO tax partner Colin Ives. ’Partnerships are a difficult model to invest in, corporates invest at a lower tax rate. Investment in technology is the big thing.’
The trends:
Though the regime has been in place to allow outside investment in UK law firms as far back as 2011, the level of investment has trailed well behind expectations. Only six traditional law firms have done so to date and it took until 2015 for the first to brave the market in the shape of Gateley. Such moves have had minimum impact, remaining confined to the lower mid-market.
The industry did, however, receive something of a jolt in March 2019 with by far the largest float yet, with the initial public offering (IPO) of DWF, a top-UK 25 firm by revenue, which raised £95m and valued the business at £366m. Sentiment has, nonetheless, remained sceptical on floating law firms, even if Gateley is regarded to have used its listing effectively, with doubt raised over DWF’s apparent desire to use public markets to copy the meteoric rise of DLA Piper.
A potential float from Mishcon de Reya, a dramatic success story for the City over the last 15 years, could conceivably challenge perceptions but there is little sign of mid-market firms, let alone top-tier firms, warming to outside capital. The lack of need for capital was underlined by many UK firms slashing debt and increasing cash reserves through the decade. As DLA Piper managing partner Simon Levine puts it: ‘Truth is, I’ve not come across a large law firm, including ours, that has done well and been successful, that has really struggled to get the funds to do new things if it wants to.’
There was arguably more evidence of the industry being shaped by outside investors in private equity houses backing New Law outfits. The last two years has seen a stream of sponsors making significant investments in brand names like Axiom, UnitedLex and Lawyers On Demand (LOD), with Axiom last year scrapping its plans for its float in favour of a sale to Permira.
LB’s take:
A warming of sentiment towards public markets will most likely require a top-50 UK player to make the jump with a clear strategic plan and secure early wins in the first two years. In that environment, amid a changing industry, the picture could materially change quickly. That said, even a successful listing from Mishcon would be unlikely to make much difference, given its unusual focus on private client and litigation. The industry would need a success story from a plc-centric firm with a plan.
A Law Society report predicted the UK legal services sector would lose £3.5bn of its value in the event of a no-deal Brexit. Brexit is a matter of damage limitation for the City, not an upside/downside equation.
The 2020s still look likely to end with public markets as a marginal force in global law. It currently seems easier to imagine major law firms in future tapping markets to support joint venture efforts for their own volume arms, as Eversheds Sutherland has proposed for its Konexo division.
The most likely manner in which investors will shape the industry during this decade will come from sponsors working with the blank canvas of New Law. The next three years will demonstrate whether private equity-backed alternative providers can live up to their own rhetoric and learn to cope with the increasing challenge of law firms building in-house legal process outsourcing (LPO) operations. But on current form, investors would be advised to stick to a sell recommendation for law for the decade.
Post-Brexit London
Can the gift keep on giving?
The stakes:
The rise of the City during the 1990s and 2000s as a global hub was a major component in making London the legal capital of Europe and conferring huge clout on leading UK law firms.
With the general election of December and its resounding victory for the Brexit-supporting Conservative Party, the uncertainty on the UK position in Europe since the 2016 referendum has at last cleared, with the UK having formally departed from the EU at the end of January.
That makes it a certainty that it and London’s financial services community will be facing considerable divergence from the EU and some, as yet unclear, additional hurdles to tap the European market. Moreover, a wrenching no-deal exit remains a possibility, with Prime Minister Boris Johnson repeatedly ruling out an extension of the transition period beyond 2020.
A no-deal exit would have substantive impact on the legal industry. A Law Society report from last year predicted the UK legal services sector would lose £3.5bn of its value, around 10% of the market, with a loss of up to 10,000 jobs. Even if few law firm leaders share such a gloomy outlook, Brexit is a matter of damage limitation for the City, not an upside/downside equation.
The trends:
City law has performed surprisingly well as Brexit has rumbled in the background. In 2019, the LB100 drove collective revenues up 9% to £26.35bn, while achieving total profit of £8.26bn. Overall, deal markets have also held up better than many feared.
But the City should still be concerned. The new European Commission president Ursula von der Leyen delivered a reality check in January, stressing that should a trade agreement be agreed, it will not be as closely aligned as before and that ‘with every decision comes a trade-off’.
A survey last month by global consultancy Duff & Phelps of 245 senior financial services executives underlined London’s loss of status, with New York being rated as the world’s top finance centre by 56%, outpacing the City on 33%. Two years previously, London was top-cited by 53% of respondents, well ahead of New York in the same research.
On the plus side, there has been little evidence in the last three years of any European hub becoming a convincing direct challenger to London. English law has also generally retained its global currency, despite ceding some ground to US law among European borrowers during the decade.
‘The problem with Brexit is there is no way to answer the question without sounding overly optimistic or pessimistic.’
Shane Gleghorn, Taylor Wessing
‘The problem with Brexit is that there is no way to answer the question without sounding either overly optimistic or pessimistic,’ laments Taylor Wessing managing partner Shane Gleghorn. ‘The UK is still attracting the predominant amount of tech deals and tech investment. The capital invested in Europe in that regard is still being invested for a big part in the UK. I don’t see that trend changing.’
LB’s take:
London’s advantages as a professional services hub, including timezone, language and a huge labour pool, are formidable, have been built for decades and will withstand sustained headwinds, especially given European ambivalence to the financial services industry.
The City is not yet close to facing serious damage and major UK firms are also substantially hedged with foreign law. ‘London will be pretty robust. It’s a good place to live, it doesn’t really have a competitor in that regard in Europe,’ says Slaughter and May senior partner Steve Cooke. ‘Obviously there will be challenges ahead depending on how the negotiations unfold, but you would hope the EU will be working hard to achieve a positive outcome.’
Cooke’s caveated confidence broadly summarises the feeling in the City and it is difficult to imagine London not being the region’s pre-eminent legal centre in ten years.
That outlook could be shaken by the EU trade deal that emerges from Brexit. Many believe the scale of the Conservative victory could reduce the influence of the hard-line Brexit supporters and encourage a pragmatic outcome.
But any departure from the European Union will have adverse effects. The lack of short-term convulsions should not warrant complacency about long-term harm. The nature of financial centres means that material damage would recall Ernest Hemingway’s description of how bankruptcy occurs: ‘Gradually, then suddenly.’ The central case remains that London will continue to be a huge asset to City law firms but the rapidly-evolving state of British and European politics means that outcome is far from assured.
Diversity and inclusion
Manage expectations
The stakes:
Despite years of diversity initiatives, high-end commercial law remains dominated by privileged white men. This has so far imposed little economic penalty on the industry but in terms of self-image, or its future ability to attract the most talented individuals, that may change in future. As Osborne Clarke UK managing partner Ray Berg posits: ‘It’s the institutions which have to change. “Are you a diverse and inclusive organisation?” is the fundamental question.’
‘In ten years there should be meaningful change on diversity in law. I’d be very surprised if that does anything other than accelerate.’
Lee Ranson, Eversheds Sutherland
The trends:
The 2010s was the era that finally proved the wait-for-it response to tackling diversity was never going to deliver. The decade ends much as it began, with the female ranks of partnerships stuck between 20% and 30% at most major law firms despite years of 50%-plus female intakes. Such figures remain well ahead of other aspects of diversity.
In 2009, for example, CC pledged to make at least 30% of its partnership female and is yet to reach that target, with 24% of its London partnership currently women, a figure that is representative of its peers.
The larger picture shows some marginal gains on gender. The Law Society’s 2014 statistical report for the profession documented 7,985 female partners. The report for 2018 showed 8,470 female partners, an increase of 6%. Other relevant developments include compulsory gender pay gap reporting but in practical terms the #MeToo campaign sparked in the wake of allegations of harassment against women, which led to a string of embarrassing disclosures for the profession, has done more to challenge male entitlement in law.
The figures on ethnic diversity make for difficult reading due to holes in the data, but Law Society statistics showed that 13% of private practice solicitors identified as black, Asian and minority ethnic (BAME) in 2017, up from 9.5% ten years earlier. Across the UK partnership of the top 12 firms, just under 7% identified as BAME in 2019 according to research undertaken by Legal Business.
LB’s take:
If the outcome changed little, the decade did at least see the pursuit of diversity moving nearer the mainstream to the extent that it is hard to see major law firms failing to make modest progress on female retention in the years ahead. The continued string of regulatory actions against law firms will further dent male privilege.
‘I’m not known for being optimistic,’ Simmons & Simmons managing partner Jeremy Hoyland reflects. ‘But on diversity, I am optimistic.’
‘In ten years there should be meaningful change,’ says Eversheds Sutherland co-chief executive officer Lee Ranson. ‘I’d be very surprised if that does anything other than continue to accelerate.’
Many that Legal Business spoke with cited female partnerships of above 30% being commonplace by 2030. But the appallingly slow record of improvements in gender representation hardly gives many signs of encouragement for improvements on ethnic and social diversity. Expect little-to-no change, through the 2020s, in the wider diversity picture and social diversity will go backwards.
New Law
A reckoning awaits
The stakes:
With the legal sector still dominated by partnerships with rigid business models making conservative use of technology, many argue Big Law is ripe for disruption. And the market rapidly expanded over the last five years for low-cost hubs focused on commoditised work and flexible access to legal staff. Different camps are vying to harness these trends, with companies like LOD, Elevate and Axiom all making inroads. The Big Four accountancy firms have all expanded once more in law, while many traditional firms have responded with their own low-cost operations. What the 2010s failed to show was evidence of clear winners. ‘We will get clarity in the coming decade,’ argues LOD co-founder Simon Harper. ‘For the last ten years it’s been hard to differentiate the substance from the hype.’
‘Lawyers have a huge amount to learn from the outside world, but there is a risk to stepping back and delegating the running of a firm to the business services staff.’
Laura Empson, Cass
The trends:
The New Law market saw considerable growth through the decade. In 2010, just Axiom and LOD stood as viable flexible lawyering businesses, but a glut of providers have since emerged. Axiom and LOD respectively generate $360m and £40m according to their latest figures. UnitedLex, a US-based business combining consulting and managed legal services for major plcs, saw revenues hit $350m in 2018, after annual growth of 27%.
Law firms, meanwhile, saw notable expansion in comparable divisions through the 2010s. A&O launched Peerpoint in 2013, to be followed by a string of rivals. Law firms have also been quick to match pure-play New Law companies on commoditised work by creating low-cost centres. HSF launched its version in 2011 through a nearshore office focused on document-heavy work in Belfast.
A&O and HSF are believed to generate around £70m and £42m respectively from their alternative legal service divisions, while Eversheds Sutherland’s Konexo earns around £40m and has been targeted for future outside investment.
But with the market developing quickly, it was notable that the original LPO businesses failed to build on expectations throughout the 2010s. And even on the most optimistic growth predictions, New Law remains tiny against the market handled by law firms or in-house teams. A report from Thomson Reuters estimated the sector at $10.7bn, a figure dwarfed by the $700bn-plus global legal market.
Argues UnitedLex chief executive Dan Reed: ‘New Law is a bit like a revolution. If 1,000 people get into a town square asking for a revolution, CNN and the Financial Times don’t report on it. If five million get into a town square, they cover it. New Law is currently 500 people in the town square.’
LB’s take:
Heralding far cheaper commoditised legal services shaking up the profession is a prediction made confidently as far back as the 1990s when law firms were rolling out bulk conveyancing and insurance dispute arms, a reality that should temper claims for the 2020s.
The Big Four gain headlines but have yet to demonstrate the legal sector has become a top-level priority. With the group facing considerable regulatory headwinds and still shut out of the vast US legal market, this is not about to change.
Elsewhere, contract lawyering businesses can only have a moderate impact on the industry. Real change will require scale and providers to offer dramatic price savings, certainly far more dramatic than previously. The lack of such developments nearly two decades after legal process outsourcers began in earnest makes it clear that such a service is harder to profitably provide than commonly supposed, and that there remain entrenched structural barriers in the industry to the rapid adoption of such models.
There is little point discussing the survival of lockstep, the 2010s spelled the final chapter for such narrow, time-based models, with the Magic Circle substantially watering down their lockstep partnerships.
The market will continue to expand substantially in the years ahead, with law firms’ own New Law operations becoming increasingly significant, but alternative legal services will end the decade looking much like another tool in the kit than the disruptive rhetoric the industry still clings to.
Partnership and remuneration
Familiar but different
The stakes:
As the decade turns, will partnership remain the bedrock of the profession and successfully evolve with the times? Some worry it will lose its drawing power with the most talented graduates while others feel it cannot accommodate changes in the business model needed at law firms. With partnership remaining the foundation of the industry, its fate is closely bound to high-end law.
The trends:
There is little point discussing the survival of lockstep-driven systems, for all but a few tightly-focused outliers, the 2010s spelled the final chapter for such narrow, time-based models, with the four international members of the Magic Circle all substantially watering down their lockstep partnerships.
The emerging model for many firms is a blend of time-served and discretionary, merit-based remuneration with far wider gaps between bottom and top earners and substantial scope for management to alter pay. This trend was echoed with higher awards for star partners in the US and UK, with $10m-a-year deals moving into the mainstream in the last three years, most notably in the UK with Kirkland’s 2017 hire of David Higgins from Freshfields. The City firm itself responded in late 2019 with a $10m deal for New York corporate partner Ethan Klingsberg from Cleary Gottlieb Steen & Hamilton, by far the highest package ever offered by a London-born law firm.
The decade demonstrated that the arms race in partner pay was continuing to see many leading City firms restrict partnership numbers to protect profits, pushing promotions even later, despite huge outflows of mid-level associates.
Major firms also began making smatterings of non-lawyer partners but it has remained a marginal experiment despite new means of revenue. Andrew Trahair, partner and head of A&O’s Advanced Delivery & Solutions alternative resourcing business, argues there will be more to come: ‘Five or ten years ago all revenue was derived from selling legal services carried out by lawyers. What has happened now is that non-legal services provided by non-lawyers are generating revenues. We will see growth in non-lawyers generating revenue.’
However, professor Laura Empson, director of the Cass Centre for Professional Service Firms and a senior research fellow at Harvard Law School’s Center on the Legal Profession, warns: ‘Lawyers have a huge amount to learn from the outside world, but there is a risk to stepping back and delegating the running of a firm to the business services staff. It could create a disillusionment with management like you see in the NHS, with people not feeling management has their best interests at heart.’
LB’s take:
Despite the familiar angst, partnership will remain a huge draw to many talented graduates, providing autonomy, status, high rewards and ownership. Indeed, many of the threats to partnership that looked ominous in the post-Legal Services Act era five years ago have proved of little consequence.
City firms will, however, be forced to start offering partnerships several years earlier, a move further supported by more flexible remuneration policies and the drive to retain female lawyers. Partnership itself will become moderately more flexible – expect to see 10% of partnerships at major firms on some form of flexible or part-time arrangement. The industry will, nonetheless, continue to make only minimal ground in admitting non-lawyer partners, as it remains irredeemably hierarchical.
Half-a-dozen US practices will by the second half of the decade have supplanted the London elite in important areas of top-end law in major Western European economies.
Top London firms will within three years push through more aggressive reforms to their models to sweeten deals for top performers, steps that should have been taken five years ago. By the middle of the 2020s, top earners will take home six times that of entry-level partners, with a handful of individuals in addition benefiting from super-point and bonus schemes that push the ratio closer to ten-to-one for the select few.
US law firms
No more worlds to conquer
The stakes:
While the 2010s saw the London elite falter after the triumphant run of the previous 20 years, a group of internationally-minded US law firms only picked up momentum. The question for the 2020s is whether the Global Elite will be defined entirely by US-born law firms, at the expense of UK competitors.
The trends:
Even allowing for unflattering currency movements, recent years have seen a loose grouping of 15 to 20 leading US law firms with international ambitions comprehensively outpace London counterparts. Kirkland was a decade ago the 12th largest firm in the world in revenue terms, generating far less than the four largest Magic Circle firms. By 2018 it was the largest and in 2019 saw revenue spike 19% to hit $3.76bn, far beyond any UK outfit. Other peers to post startling growth in the last five years include Latham, White & Case, Ropes & Gray, Cooley, Goodwin Procter, King & Spalding, Covington & Burling and Milbank.
The relative strength of the US economy since the banking crisis and increased clout of US investors further bolstered the hand of such advisers. Meanwhile, the hope of City firms that they could super-charge their growth in Asia have been dashed as such markets proved too protectionist to deliver profitable growth to foreign law firms. American firms also proved increasingly able to recruit mainstream talent from top London firms as the decade wore on, helping to send revenues in their City arms surging. Latham, Kirkland and White & Case all now generate more than $350m in London and the top 50 US firms in London now employ more than 7,000 lawyers in the Square Mile.
As Latham’s Walker concludes: ‘There have been a number of recent lateral moves of high-profile M&A partners to US firms and that trend is certain to continue. You’ve only got to look at the recent moves that we made, Weil made and Skadden made: that’s all pointing in the same direction: it’s not just M&A, it’s litigation, regulatory, acting for public companies, etc. Which firm took the lead on Thomas Cook’s restructuring last year? The answer is Latham.’
LB’s view:
Despite a decade of growth and election year looming, there is still no sign of the US economy taking the wind out of the sales of leading US firms. The band is set to continue its onslaught in Europe throughout the 2020s, backed by focused yet increasingly mature practices targeted at key practice lines. The group will end the decade having made considerable ground even in areas like big-ticket disputes and public M&A that have previously resisted its efforts. Even firms that would have been dismissed ten years ago as regional US players will compete head-on with leading London firms while half-a-dozen US practices will by the second half of the decade have supplanted the London elite in important areas of top-end law in major Western European economies.
Only a drastic course correction from the Magic Circle, taking lessons on governance and remuneration from US challengers – possibly also married to an aggressive push into new business models – can stop this shift turning into a rout. But the odds strongly favour untrammelled American ascendency. LB