This year’s Legal Business 100 coincides with the most inauspicious of anniversaries after a year with the most inauspicious of beginnings. A decade since the start of the global financial crisis and just over a year since the result of the Brexit referendum, the perception is that political and economic uncertainty has ultimately had little impact on the performance of top 100 UK law firms. Particularly on those at the top.
The drama has been well documented. UK and European markets continued to show resilience, mainly aided by foreign investment, despite the last financial year starting off with six to eight weeks of post-referendum impact. By Christmas, transactional practices were upbeat and grew stronger into 2017. Then article 50 was triggered just before the end of the financial year and unease settled in again. Continue reading “Legal Business 100 overview: Your story”
While Clifford Chance and Linklaters both recorded impressive increases in revenue and profit per equity partner (PEP) in 2016/17, Allen & Overy (A&O) blew its closest rivals away with a 25% rise in PEP, which jumped from £1.21m to £1.51m, while revenue saw a 16% increase to £1.52bn from £1.31bn. On a constant currency basis, A&O saw a 6% increase in its revenues and a 14% rise in PEP.
A&O is now the second-largest Magic Circle firm in revenue terms, overtaking Freshfields Bruckhaus Deringer in the Legal Business 100.
Speaking to Legal Business, managing partner Andrew Ballheimer says its offices in the UK, Africa, Middle East, Australia, the US and Hong Kong had been significant successes for the firm this year with a strong performance across litigation, arbitration, capital markets, banking, leveraged finance, M&A, restructuring regulatory and project finance.
Making a splash in automation, Ballheimer adds the firm’s derivatives-focused product, MarginMatrix, has performed particularly well after A&O teamed up with Deloitte in the first joint venture between a Magic Circle firm and a Big Four accountant.
We are proud of the results, given the volatile backdrop. Our real growth appears higher than the legal market and that’s pleasing.
Andrew Ballheimer, Allen & Overy
In terms of talent investment, the firm made several lockstep-breaking hires in the US, bringing on a five-lawyer finance team led by leveraged finance partner Scott Zemser from White & Case, and a three-partner Paul Hastings team led by the US firm’s leveraged finance head Bill Schwitter.
A&O also made a substantial investment in IP, picking up three partners from Simmons & Simmons this year, including its former IP head Marc Döring following the hire of former colleague Marjan Noor, who moved to the firm in June last year.
There were, however, some high-profile losses, with Latham & Watkins picking up heavyweight banking lawyer Stephen Kensell and M&A partner Edward Barnett, while Milbank, Tweed, Hadley & McCloy also took on a three-partner team in New York, including the firm’s US senior partner, Kevin O’Shea.
LB: How do you view your performance?
Andrew Ballheimer: We are proud of the results, given the volatile backdrop, especially Brexit, the election of President Trump and stock market uncertainty. Our real growth appears higher than the legal market and that’s pleasing.
LB: Have you had any big pay days to bring revenues up?
Ballheimer: Nothing material. All of our practice areas and offices have done well in a challenging market. It’s a combination of our investments over the years, our geographies and our product base. Our footprint is now broader than our peer group.
LB: Headcount has stayed the same. Were there any partnership changes that would explain a 25% increase in PEP?
Ballheimer: If your question is asking whether we have played around with our denominators, the answer is absolutely not. It’s exactly how it’s always been; it’s full equity partners as a divisor of our profit and in the financial year we’ve achieved a significant growth of profit before tax with a small increase in the average number of full equity partners.
LB: You’ve had a number of impressive hires over the last year, how has that contributed to the firm’s success?
Ballheimer: The Americas has grown, our IP team has hit the ground running and we’ve made some other hires. We have made 31 lateral hires net and that has helped. It’s a constantly evolving business offering, adding on high-quality people with a cultural fit and we will continue to do that.
LB: What is the firm going to do over the next 12 months?
Ballheimer: We have to stay close to our clients and deliver at the highest standard in terms of what our clients require. The period ahead is going to be equally as uncertain, but our business is broad based, well hedged, and ultimately it’s about the quality of our offering and our client proposition. You have to evolve all the time because the demands are changing. It’s challenging, but if we continue doing all the things that we’re doing across all fronts, at least our business is in the best position that it can be in an uncertain world.
2017 has been a good year for Eversheds, which made significant strides internationally – first through its tie-up with US firm Sutherland Asbill & Brennan in February and then in gaining Singapore Ministry of Law approval and merging with local firm Harry Elias Partnership in June.
In a year of significant international change, the firm also posted its best growth in revenue terms for some time although profit per equity partner (PEP) dipped slightly. Turnover was up 8% to £438.6m for 2016/17, just eclipsing the 7% growth achieved on the top line in 2015/16. PEP now stands at £725,000, down £17,000 or 2% from the previous financial year but is up 16% from the £642,000 posted in 2011/12. Overall, Eversheds’ top line has grown 20% in the last five years, from £366m. Continue reading “Legal Business 100: Case study – Eversheds Sutherland”
* Does not include Gateley. See methodology.
In this table we blend together the three key profitability metrics, profit per equity partner, profit per lawyer and profit margin, to discover which of the top 100 firms are the most profitable. The firms have been ranked according to their aggregate score across all three measurements. Continue reading “Behind the numbers: profitability revealed”
LB100 revenue averages:
Average revenue growth
Ten fastest growing firms by revenue:
Ten fastest growing firms by profit per equity partner:
Ten fastest shrinking firms by revenue:
Ten fastest shrinking firms by profit per equity partner:
LB100 average earnings:
Revenue per lawyer £342,000
Profit per lawyer £108,000
Profit per equity partner £738,000
Average revenue per lawyer £385,000 (+5%)
Average profit per lawyer £130,000 (+6%)
Average profit per equity partner £873,000 (+8%)
AVERAGE REVENUE £686m (+10%)
Average revenue per lawyer £272,000 (+7%)
Average profit per lawyer £67,000 (+6%)
Average profit per equity partner £495,000 (+2%)
AVERAGE REVENUE £117m (+6%)
Average revenue per lawyer £214,000 (-1%)
Average profit per lawyer £51,000 (-4%)
Average profit per equity partner £345,000 (-7%)
AVERAGE REVENUE £40m (+5%)
While the second quarter of the Legal Business 100 (LB100) has seen a 7% increase to £2.93bn in its combined revenue over 2016/17, the group has been impacted by further consolidation at the start of the calendar year, which will see around £230m stripped from this total in our 2018 report. This group is starting to feel the squeeze from those above and below in the LB100 – making it the most variable section of the top 100.
Over the last financial year the second 25 accounted for 13% of the LB100‘s combined revenue, with average turnover increasing 5% to £117m. Average revenue per lawyer saw a 7% leap to £272,000, while profits per equity partner (PEP) also increased by 2% to £495,000 (see ‘Core Stats‘). Continue reading “Legal Business 100: The second 25 – Faster, pussycat”