Freshfields Bruckhaus Deringer has become the second of the Magic Circle to reveal 2019 results, posting a 6% uptick in profit per equity partner (PEP) to £1.84m, while sustaining last year’s income growth to push its top line up 5%.
The firm’s turnover grew £70m to £1.472bn on last year’s £1.403bn as net profit edged up 1% to £688m from £683m in 2017/18. PEP stood at £1.839m compared with £1.734m last year. While the 5% revenue increase matched last year’s performance, the 2018/19 figures are less striking in terms of profit after Freshfields enjoyed a 12% PEP hike for the 2017/18 financial year.
The results come after Clifford Chance (CC) on Tuesday (2 July) revealed a 4% revenue uptick to £1.693bn and a profit pool up 2% £637m. CC’s PEP increased 1% to £1.62m in the context of a growing partner ranks by four to 562 and equity partners by two to 394.
Stephan Eilers, Freshfields managing partner, told Legal Business: ‘The 5% revenue growth is something we see continuing – we expect to see something like that for this year as well. We have made substantial investments in legal tech headcount for our Manchester and Berlin hubs and have seen even growth across our regions and practice areas.’
Eilers pointed to key mandates for VW and advising hotel group Marriott on its data breach issue as highlights during the year. The global financial institutions group was also cited as a standout performer, with the City giant sustaining robust performance from sponsor clients despite a handful of senior losses in its buyout team.
Victoria Sigeti, London head of private equity, commented: ‘We are thrilled with the results on the GFI side. We have seen double-digit growth and the practice now represents 16% of global revenue. It shows how we differentiate ourselves with our international networks on complex deals. We are continuing to invest in the bench and are planning to make up two more partners in London next year.’
Charles Hayes, co-head of the financial sponsors group, argued that relationships with marquee clients including Advent, CVC, which he advised on its investment in Premiership Rugby, Hellman & Friedman and KKR have continued to serve the Magic Circle firm well. Freshfields also advised a number of bidders on the Nestle Skin Health transaction. Eilers, likewise, described a mandate advising KKR on its proposed investment in Axel Springer, the German media group, as ‘silver from the top German corporate table’.
The elite London firm also made waves in the Square Mile recently by hiking pay for newly-qualified solicitors to £100,000, a symbolic and expensive move that Magic Circle peers had little choice but to follow.
Eilers concluded: ‘After a strong fourth quarter, the new financial year has started well and we remain confident in our prospects and our strategy. It will allow us to continue to deliver the best possible outcomes for our incredible clients.’
But while management will be cheered by a second consecutive year of solid performance, the fundamental reality is unchanged for Freshfields and its London peers: the Magic Circle’s post-banking crisis performance has come nowhere near matching key US rivals .