The last of the big four City firms to post its results, Freshfields Bruckhaus Deringer has revealed an 8% slump in its profit per equity partner (PEP) for the 2014/15 financial year, while firmwide revenues were more or less flat, rising just 1%.
The firm’s partner profits dropped to £1.37m from £1.48m after growing 6% in 2013/14. Turnover stood at £1.245bn, growing only slightly from £1.23bn the previous year, although according to the firm, ‘on a constant currency basis’, revenues increased by 4%.
Net income was also down by 1% to £574m, compared to the £578m reported in 2013/14. On its PEP, the firm said in a statement: ‘The impact of accounting changes relating to the categorisation of a number of our partners as equity partners and of the currency movements give rise to an 8% reduction on the £1.48m reported in 2013/14.’ Equity partner numbers have grown by 7%, from 390 to 419.
It has been in interesting year of change at Freshfields, where some of its traditional values have been challenged. Legal Business first reported in March 2015 the firm’s plans to launch its Manchester hub on a radical scale as the City leader repositioned for the changing legal market.
The move meant that up to 800 support service jobs would be affected at the firm’s Fleet Street-headquarters. Freshfields appointed Anup Kollanethu as its centre director for the North-West based combined legal and business services centre, having signed a lease for space in Arndale House. The firm is also planning to potentially open a further two support outposts in Asia and the US to provide 24/7 legal support.
Freshfields also addressed its historically-valued lockstep model after it made a series of modifications which allowed a small number of above-lockstep deals, first in the US when it made partner recruits in Manhattan in 2014, and more recently in London, after it hired high yield heavyweight Ward McKimm from Kirkland & Ellis – understood to be on an annual package of around $6m.
In addition, the firm is also gearing up for its new leadership with Edward Braham set to serve as senior partner, and Christopher Pugh running as co-managing partner alongside Cologne-based Stephan Eilers. Michael Lacovara will take up the executive partner role out of New York, signalling the firm’s increased interest in the region.
Commenting on the latest financial results, David Aitman, global managing partner, said: ‘We’ve developed very strong transactional, regulatory and contentious practices over the years, which have helped deliver a very solid financial performance against strong currency headwinds. We believe we are well-placed in the year ahead to build on our position as the leading integrated international law firm providing high value advice to clients.’
Freshfields is the last of the big four Magic Circle firms to reveal its financials. Clifford Chance yesterday (7 July) announced a small dip in revenue to £1.35bn and in PEP in its home currency, while Linklaters only made marginal gains, with a 1% rise in revenue to £1.27bn. Of the four, only Allen & Overy has showed meaningful growth, moving ahead of Freshfields and Linklaters by revenue to £1.28bn, up by £47m or 4%.