Legal Business Blogs

Merger frenzy hikes Legal Business 100 income but growth masks another tough year

The latest Legal Business 100 results show the total revenue of the UK’s top 100 law firms has topped £19bn for the first time, while the number of lawyers across those firms has passed the 60,000 mark, also a first. However, this top-line growth is largely the result of another year of fervent merger activity, masking the fact that on a granular level many firms are struggling to achieve revenue and profit growth. Total revenue for the LB100 for 2012/13 is £19.1bn, an increase of 8%, while total lawyer headcount swelled 10% to 61,299.

However, average revenue per lawyer (RPL) is down 2% to £312,000, while profit per lawyer (PPL) and profits per equity partner (PEP) are down 2% and 4% to £95,000 and £622,000 respectively. The primary cause for this year’s drop in RPL and PPL is the swathe of mergers over the past year, particularly among firms in the top 25.

The top quartile of firms includes firms such as Dentons, Herbert Smith Freehills, Pinsent Masons and DWF, all of which reported significant revenue increases on the back of largescale tie-ups. As such, average revenue across the top 25 is up 9%, higher than firms ranked between positions 26-50 (4%) and 51-100 (5%).

However, stripping out the results of the Magic Circle –which collectively were largely flat on revenues and profits – the remaining 20 firms in the top 25 are up 14% and average PEP is down 4% to £557,000. Contrast this with the 26-50 bracket of firms, where there has been comparatively little merger activity, and while average revenue is up by a modest 4%, PPL is also up on average, by 5% to £59,000.

Star performers this year include Mishcon de Reya, which continues its startling ascent up the LB100 rankings, growing revenues by 88% in five years, from £47.1m in 2007/08 to £88.4m in 2012/13. That figure represents 21% year-on-year growth in revenue terms, while PPL has increased by 38% to £112,000 – a clear sign that its firm focus on servicing high-net-worth individuals on their business and personal needs is paying off.

‘Our growth plan is moderate; we want to grow to a £100m business in three years,’ said managing partner Kevin Gold.

‘It’s moderate in the sense that our growth up until this point has been extraordinary.’

In stark contrast Manches, which has had a strong private client practice for many years, has seen revenues fall 24% in the last five years and by 13% in the last year from £30.2m to £26.3m. PPL has tumbled 40% to just £15,000 – one of the lowest in the entire LB100.

For the full Legal Business 100 report, click here.