With the coronavirus pandemic still wreaking havoc across many industry sectors, London’s legal elite has continued to buck the dire wider market with the third Magic Circle firm announcing revenue growth.
Results announced today (21 July) from Clifford Chance (CC), show the London outfit confirming robust growth in the face of the most challenging trading environment since the depths of the banking crisis. The City leader said that revenues for the 2019/20 period were up 6% to £1.803bn, up £110m on the previous year, while profits per equity partner increased 5% to £1.69m. Partnership profit for the year totalled £666m, an annual increase of 5%.
The results strikingly exceed the 4% topline growth CC achieved in 2018/19 and come despite the heavy drag of the coronavirus outbreak on the last two months of the financial year. The performance also slightly outpaces the 4% growth at CC’s old sparring partner, Allen & Overy, and compares favourably with Linklaters, which last week confirmed that its revenues for 2019/20 were up 0.7% to £1.64bn.
A standout result from the last trading period was CC’s 13% growth in the US in local currency terms (and 16% in sterling). The London firm now generates £263m from its US practice, an increase of 70% in sterling terms over the last five years. Its core London practice was the second fastest growing region in 2019/20 with revenues up 6% annually to hit £587m. CC’s total revenues have increased 34% over the last five years.
The firm also noted the continued growth in its client portfolio of private equity and alternative capital providers, with revenues from this group of much-courted institutions rising nearly 70% in five years. CC managing partner Matthew Layton (pictured) told Legal Business: ‘I take the view that [financial sponsors] will continue to be critically important as people look to rekindle economies and we’ll continue to see opportunities there.’
Key mandates for the firm included advising Telefónica on the £31bn merger of 02 and Liberty Global’s Virgin Media, acting for Pfizer on an agreement to co-develop a potential Covid-19 vaccine and advising German state development bank KfW on an emergency finance package to mitigate the impact of the pandemic.
The results will be seen as a clear win for CC but Layton noted that the outlook for the current year remained highly uncertain given that its 2019/20 figures were boosted by a strong pipeline before regional lockdowns crippled the global economy. Growth figures from top London firms accounting in sterling will also have been moderately flattered by currency movements over the 2019/20 year, though CC achieved growth in all its regions in local currency terms.
‘There are a lot of clouds on the horizon. It is difficult to see how it is going,’ he added. ‘If you look at the risk of a second wave [of Covid-19], the Brexit process, the geopolitical uncertainties around trade and a US presidential election looming, I believe it will remain challenging.’
The results nonetheless confirm earlier indications that London’s leading law firms are so far riding out the crisis in confident form, thanks in part to lessons learned during the banking crisis. As the 2020 results season gets under way, it will become clear whether smaller peers have managed the same feat.
With CC looking as well positioned as it has for more than a decade, Layton said key future priorities would be driving further progress in the US and pushing forward meaningful change on inclusion and diversity, which he dubbed ‘a passion for me’.
With his second term as managing partner up in 2022, Layton also cited the importance of succession planning, noting: ‘We’ve got some great young talent coming through.’
Barring calamity, Layton at least looks set to bow out on a high from what has traditionally been viewed as one of the toughest leadership roles in City law.
For more commentary, see: ‘After their lost decade, the current crisis should see the Magic Circle back on world-beating form’