Legal Business Blogs

Macfarlanes’ revenue continues to defy gravity but PEP holds steady

City stalwart Macfarlanes has posted a mixed bag of financial results as the ninth consecutive year of revenue growth failed to translate into a rise in profit per equity partner (PEP) following last year’s 26% surge to £1.74m.

The results announced today (10 July) show turnover grew 8% to £216.98m in 2018/19, a significantly slower pace than last year’s exceptional 20% rise to £201.5m.

Operating profit rose 4% to £110.74m but PEP was marginally down to £1.734m as the firm grew its tight equity partner ranks by three to 56. The total number of partners at the firm was down by three to 84.

‘In a tricky environment to see this increase in revenue is pretty gratifying,’ senior partner Charles Martin told Legal Business. ‘Our model of having a balanced practice between transactional, advisory and contentious/investigation is delivering greater resilience and that accounts in substantial measure for the positive revenue growth.’

On the comparatively slower profit growth he said: ‘We have a cost base that we are obviously working hard to contain but we have to be realistic. We pay our people properly in line with what the market demands.’

Mandates keeping the firm busy included advising Searchlight Capital Partners on the English law elements of its $2bn acquisition of Mitel Networks Corporation; Foncière des Murs on the purchase of 14 hotels for £858m; and a consortium of Stanhope, Mitsui and AIMCo on the letting of White City Place to Novartis.

The year saw some unusual lateral activity for the mid-tier thoroughbred. Of the only 14 partners the firm has hired in the last decade, three joined since the beginning of 2019. Following the early retirement of one of its highest billers, Graham Gibb, in February the firm brought in Ashurst’s former corporate head Robert Ogilvy Watson. The same month it hired Charles Russell Speechlys private client property partner Ian Cooke, and in the spring it recruited corporate partner Peter Baldwin from Ropes & Gray.

Martin added: ‘Going into the summer we are busy. It’s very important to have a busy July, August and September because if you are not you will suffer. So far the signs of activity are good.’

Macfarlanes, which remains one of the most successful and profitable operators in the City, is due for one of the most significant moments in its recent history next year, as Martin hands over to private client partner Sebastian Prichard Jones in April 2020 after 12 years at the helm.

For more on Macfarlanes’ improbable rise under Martin’s watch, see ‘Defying gravity’ (£)