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Freshfields reports ‘very solid performance’ as it progresses US growth plans

Freshfields Bruckhaus Deringer today (27 July) announced its 2021/22 financial results, becoming the latest magic circle firm to highlight its US growth amid a robust performance.

The firm marked its sixth consecutive year of revenue growth with a 10% rise, bringing its turnover to £1.7bn – notably pacier growth than its 5% increase to £1.59bn last year.

The firm saw similar progress in terms of profit per equity partner (PEP) with an increase of 8% up to £2.07m from £1.91m last year.

The results reflect, at least in part, the firm’s ‘significant growth’ across the Atlantic. In the past year, it has doubled the size of its Silicon Valley office. Among the West Coast hires, it added data privacy and security lawyer Christine Lyon in August 2021 from Morrison & Foerster and corporate partner Andrew Hill from Wilson Sonsini in May. In New York, the firm added two M&A partners from Cravath Swaine & Moore; Damian Zoubek joined in September 2021 while Jenny Hochenberg arrived in May this year.

Freshfields managing partner Rick van Aerssen told Legal Business: ‘We are very happy with our very solid performance with more or less equal growth across the board. Given our investment in the US, there has been significant growth there for both our legacy clients as well as our growing base of US-headquartered clients. We now have a significant US team with 60 partners on the ground. We are ahead of our plan that we set ourselves in the region.’

The firm also published its first diversity and inclusion annual review this year. While the firm acknowledged there is a still a way to go, it is proud of its progress, and with key highlights including 48% of new partners being women and 67% increase in the number of black associates at the firm.

However, this year has not been entirely smooth sailing for the firm, which had to contend with its withdrawal from Russia. Meanwhile, in the City, it lost two up-and-coming private equity partners Vincent Bergin and Keir MacLennan to Kirkland & Ellis in October 2021, while competition partner Marie-Claire Strawbridge to Morrison & Foerster in March.

Despite this, Freshfields has kept pace with its magic circle peers and matched Allen & Overy’s (A&O) 10% revenue growth and exceeded Clifford Chance’s (CC) 8% increase. However, its overall revenue was slightly lower than its competitors, which was reported at £1.94bn for A&O and £1.969bn for CC.

In terms of PEP, Freshfields was ahead of both A&O and CC which reported PEP of £1.95m and £2.04m, respectively.

The firm also commented on A&O’s announcement earlier this year that it has frozen its newly qualified (NQ) solicitor salaries at £107,500 citing a ‘more challenging business environment’. With Freshfields’ NQ pay currently sitting at £125,000, van Aerssen said: ‘This is a bellwether signal that the hiring market is cooling down a bit, but we’ve always known that we shouldn’t underspend on incoming talent. Typically, we do very well with “lifers”, with the vast majority of our partners being those who trained with us, so underinvesting in that talent pool has never been an option for us.’

Looking ahead, the firm remains optimistic about the coming financial year despite rising economic headwinds, said van Aerssen. ‘For a firm like ours, any sort of crisis has always been good for us. If you look what we did qualitatively and quantitively going in and coming out of the financial crisis in 2008, it was phenomenal.

‘What we are seeing now is a big change in the mix but given our set up we are now working on a lot of transactions driven by macro trends. We are helping governments with the energy transition; we are also all over the rescue financing for gas suppliers on the continent as well as the privatisation of EDF. There is also all the countercyclical stuff, the disputes and R&I work, for which we are traditionally very strong.’

Freshfields is now aiming for its seventh consecutive year of revenue growth for financial year 2022/23 with the US remaining a main priority. van Aerssen concluded:

‘Top of the management agenda is to keep the ship steady and smooth sailing in what is going to be choppier waters. Growth in the US continues to be front and centre for us, but other than that I don’t foresee significant changes ahead for us.’