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Dice falls in Linklaters’ favour as partner profits shoot up 10% and £100m added to top line

Linklaters has posted the strongest financial performance of its peer group with a 7% revenue uptick to £1.63bn and double-digit profit growth.

The results today (11 July) show profit per equity partner (PEP) at the Magic Circle law firm rose 10% to £1.7m in 2018/19 after being flat in a mixed 2017/18.

Linklaters added £108m to its top line in the year to 30 April 2019, while pre-tax profits rose 11% to £751.6m, compared to slower 2% growth to £676.2m the previous year.

‘The reason we had such a good year is we had fairly consistent levels of activity throughout the 12 months and throughout our regions,’ Linklaters managing partner Gideon Moore (pictured) told Legal Business. ‘It goes back to our culture, teamwork and remuneration arrangements with the lockstep partnership: clients appreciate the fact that we are able to deliver the best team to the deal rather than doing a deal from one office because it helps its bottom line.’

The strong financial showing came amid a relatively moderate headcount increase over the financial year, with the firm adding 60 lawyers to take its ranks to 2,780, while the number of equity partners rose by three to 443. Total partner numbers were up by four to 464.

Asked how the firm managed to improve its performance, Moore said: ‘It’s a reflection of the market and the way in which sometimes the dices fall: you can lose a big deal and it makes a big difference one year; it can go the other way another year but it does not mean that as a firm you were better or worse. You have to look at law firms and how they are doing financially over a longer period than one year.’

Since Moore took over as managing partner three years ago, Linklaters has grown revenue 24% from £1.31bn and PEP 17% from £1.45m.

The firm had a solid list of mandates to point to. Moore singled out the work advising Japanese giant Takeda Pharmaceutical on the £46bn takeover of Irish drug-maker Shire, which saw lawyers from several Linklaters offices in Asia, Europe and the US involved, and the $90bn merger of industrial gas group Linde and Praxair.

Linklaters also advised The Carlyle Group on the multibillion pound acquisition of a minority stake in Spanish energy company CEPSA and HSBC on the disposal of its $5.2bn Brazil business to Banco Bradesco.

Other highlights over the year saw the firm launch a joint operation office with 25-lawyer Shanghai firm Zhao Sheng in May 2018, an arrangement that Moore said enabled Linklaters to ‘recruit and retain very good lawyers’ that would have previously been barred from practising PRC law.

He also pointed to contract lawyering platform Re:Link, established in April to employ legal staff on an interim basis on specific projects: ‘We interview and on-board lawyers on the platform in the same way that we on-board them at the firm: if we would not accept you as a lawyer at Linklaters we will not accept you on the platform,’ Moore said.

On the lowlights front, Linklaters suffered its fair share of knocks from US rivals over the year. Private equity (PE) star Vincent Ponsonnaille quit alongside fellow corporate partner Laurent Victor-Michel to spearhead the launch of Kirkland & Ellis’ new Paris base. London insurance partner Victoria Sander and financial regulation partner Carl Fernandes both moved to Latham & Watkins, while corporate partner Roger Barron left for Paul Hastings.

Moore was bullish about the firm’s global PE offering, saying it ‘is the strongest that it’s ever been in terms of collegiality, client base and deals we are doing’.

The newly re-appointed managing partner was also optimistic about the outlook: ‘The economic headwinds that people have been talking about for 12 months are now beginning to blow, but I don’t think they are blowing particularly hard. Activity levels are generally a bit lower than they were last year, but not down as much as people had suggested they would be. We have such a diverse practice range and such a wide geographic spread that unless the markets are really calm we will be doing something somewhere.’

Linklaters’ PEP now tops that of Clifford Chance (CC) after the Magic Circle rival last week revealed an increase of just 1% in partner profits to £1.62m.
Freshfields Bruckhaus Deringer, meanwhile, grew PEP by 6% to £1.84m and revenue 5% to £1.472bn.