Clifford Chance (CC) has become the second Magic Circle firm to announce its financial results for the 2015/16 year, with revenues up 3% to £1.39bn while profit per equity partner has leapt by 10% to £1.23m, the firm’s highest to date.
Partnership profit rose by 10% to £494m, while the firm saw America revenues grow by a substantial 13% while Asia Pacific revenues increased by 9%. These regions now make up 13% and 16% of total turnover respectively. Managing partner Matthew Layton said in 2015 his aspiration was to grow both revenues to 20% and 25% respectively of firmwide turnover over five years while also maintaining the firm’s position in the UK and Europe.
Key financial decisions which have had a positive impact on profits include subletting 400,000 sq ft of its Canary Wharf office space to Deutsche Bank last year, while the firm also increased efficiencies by moving 400 back-office staff from its Canary Wharf headquarters to a new location five minutes’ walk away. The changes, amongst others including what the firm calls ‘continuous improvement techniques’ amongst its lawyers, has enabled operational savings last year of more than £7m.
Layton (pictured) told Legal Business he was delighted with the results, having introduced new strategy just 18 months ago. He added: ‘There’s obviously been some headwinds in the markets with commodities, China and the Brexit referendum but we saw growth across all the regions. The Euro denominated the Sterling however.’
Key transactional work included advising the key Anheuser-Busch InBev shareholders in relation to financing its bid for SAB Miller, the biggest brewing takeover in history, and advising EDF on proposals for China General Nuclear Power Corporation to invest £6bn in the Hinkley Point C nuclear power project.
The firm was involved in advising the joint global coordinators on Bank of China’s $3.55bn four currency multi-tranche bond issuance, where a multiple series of notes were issued under Bank of China Limited’s $20bn Medium Term Note Programme.
CC also increased investment in artificial intelligence tools, announcing yesterday (5 July) that it has entered into partnership with artificial intelligence (AI) provider, Kira Systems, in a bid to provide greater cost efficiencies to clients.
While he denied talk of merger discussion in Asia and the Americas, Layton now points towards further growth in the latter, particularly within its Washington DC and New York offices. ‘We’re seeing good opportunities for lateral growth.’
Other major changes last year included a move towards a more meritocratic system. Last May, Legal Business revealed the partnership voted through a stretching of the top of its lockstep – from 100 to 115 or 130 – in a bid to retain and recruit star partners. While the firm has yet to offer extra points to partners, Layton said: ‘Lockstep means a lot of different things. Our results this year showed it can be very successful. It’s how it’s applied – we’re a global profit pool and there are no barriers to operating as a truly integrated global firm. We’ve now got greater flexibility from stretching the lockstep.’
‘I’m very focused on team success and a balance across all the practice. It does take time to build a strategy like this but its building momentum. I want people to be engaged in the dialogue and I don’t feel a resistance to the direction of travel we’re going in.’
Nearly two years into his role, Layton doesn’t rule out the possibility of running for the top management job at CC again. His term ends in the summer of 2018.
Earlier today (6 July) Allen & Overy was the first of the Magic Circle to announce financial results, with revenue up by £29m (2.3%) to £1.31bn while PEP remained stable at £1.2m. the firm said it was a strong year for global disputes and M&A while alternative delivery models, such as its Peerpoint, contributed toward growth.
Read our wrap of big four 2015/16 financial results here.
Read more in the feature: ‘Clifford Chance: On the shoulders of giants’