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Pretty, pretty, pretty good: outgoing Hogan Lovells chief lauds best-ever financials as PEP surpasses $1.5m

Hogan Lovells has posted its strongest financial performance since its transatlantic union a decade ago, with turnover rising 6% and solid year-on-year growth in all key metrics.

Revenue in 2019 came in at $2.246bn, profits per equity partner (PEP) was up 9% to just over $1.5m despite the firm growing its equity ranks by 13 to 536, while revenue per lawyer (RPL) rose 6% to $850,000 as total headcount grew marginally to 2,642.

The results announced today (21 February) make for a nice farewell gift for chief executive Steve Immelt (pictured) and his deputy David Hudd as the duo prepare to step down at the end of June after six years.

Speaking to Legal Business, Immelt described the performance as ‘The result of what we have been working on since we came on in 2014: get our business running better, focus on profits, go to market with a view to be working on our clients’ most complex matters.’

Turnover at the firm’s 500-lawyer London office also made a big jump in 2019, growing 10% to £332.6m compared to a much slower 3% rise the previous year and accounting for a fifth of Hogan Lovells’ total billings.

‘The performance comes from consistency across the piece – strong corporate transactions, busy period for our litigation practices – and strong discipline in getting our bills out and collecting,’ said UK and Africa managing partner Susan Bright, pointing to strong performances in financial services, TMT and life sciences.

Under Immelt and Hudd’s watch, Hogan Lovells has hiked global revenue 26% and PEP 24%, a notable improvement on the firm’s previous run, when turnover and partner profits rose by just 7% and 9% between the 2010 merger and 2014.

While performance remained sluggish in 2014 and 2015, turnover has increased its pace of growth since 2016. But it wasn’t until 2019 that partner profits caught up, although the 8% rise in PEP to $1.38m in 2018 was largely due to a 6% drop in the number of equity partners.

‘There was not one thing in 2019 that suddenly moved the needle, there was a lot of good business across the entire platform,’ Immelt said. ‘I feel pretty good about 2019 as an indicator of what our direction is now and what we can do moving forward.’

He spoke of a challenging start to 2019 on the corporate side, with ‘a lot of stop and starting as everybody was trying to figure out when a recession was going to hit or expansion was going to stop’. But the second half was much better as the year ‘ended with a sense that the sail may be continuing for a while’.

Among the mandates handled by the corporate practice, which accounted for 29% of the firm’s billings in 2019 compared to 31% the previous year, Immelt noted the $4bn merger between Industrial Property Trust and Prologis: ‘It reflects a cross-border collaboration where the relationship began in the US and ended up with a very significant mandate executed in Europe.’

The firm’s flagship contentious practices matched corporate this year at 29% of billings, with cases including a Court of Appeal victory for PrivatBank in a $1.9bn fraud case against its former shareholders. Immelt also pointed to the firm’s work for Equifax, handling ‘one of the largest data breaches in US history’: ‘We were brought in for both the regulatory aspects and the following litigation.’

The regulatory practice increased its weight within the firm, accounting for 19% of turnover compared to 16% in 2018, while finance brought in 13% and IP, media and technology the remaining 10%.

The firm continued to bill around half of its revenue out of America, with Europe contributing 43% and Asia 7%.

Hogan Lovells’ strong financial results come despite a three-partner private equity team moving to Paul Hastings, including City practice head Ed Harris and despite its South African merger partner splitting from the firm]. The firm responded with 40 lateral hires in 2019, and Bright said it was now looking to rebuild its London PE practice and grow its UK corporate ranks.

As they prepare to hand over to US-based Miguel Zaldivar and London’s Michael Davison respectively, Immelt and Hudd described a more integrated firm better known for cross-border activity than in 2014. ‘There is a very strong platform, both Miguel and Michael have been part of that story and will take the firm to the next level,’ Hudd said.

Immelt admitted that the firm still needs to build a stronger practice in New York, where it only fields 150 lawyers, and revealed Zaldivar was relocating to Manhattan to lead the efforts. California was also a priority, he added, and the firm needs to ‘figure out what’s going to happen in Asia’: ‘China is going to have a leading role in the world, and law firms need to have a strong China practice – and that’s not just Hong Kong.’

For more on the challenges ahead for Hogan Lovells’ new chief, see ‘Miguel who?