Legal Business

Private equity provides the pace as Freshfields posts second year of steady growth while net profits edge up

Private equity provides the pace as Freshfields posts second year of steady growth while net profits edge up

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 .

nathalie.tidman@legalease.co.uk

Legal Business

Freshfields partner fails to block SDT sexual misconduct tribunal

Freshfields partner fails to block SDT sexual misconduct tribunal

The Solicitors Disciplinary Tribunal (SDT) has thrown out an application by Freshfields Bruckhaus Deringer partner Ryan Beckwith to dismiss its prosecution following misconduct allegations made against him by a junior member of staff.

The move came to light today (19 June) on the second day of a case management hearing before the SDT. The case against the restructuring partner will now start on 30 September and run for two weeks, the SDT confirmed.

The Solicitors Regulation Authority (SRA) in May published a list of allegations against Beckwith following a case management hearing the previous week in which Beckwith – who has been placed on indefinite leave by Freshfields – is alleged to have attempted to engage in sexual activity with an intoxicated junior member of staff in an abuse of seniority at an event organised by the firm.

The SRA referred the case to the SDT in late June last year. The allegations are as yet unproven and the SRA declined to comment at this time due to the ongoing hearing.

Freshfields senior partner Edward Braham said: ‘We note the decision of the tribunal and confirm he remains on indefinite leave.’

The allegations centre on two instances. Firstly, that Beckwith kissed or attempted to kiss Person A (the SDT has imposed reporting restrictions on their identity), over whom he was in a position of seniority, and secondly, that he initiated and/or engaged in sexual activity with the same person.

Both he and Person A were allegedly intoxicated at a celebratory event organised by the firm for its partners and employees, and the statement says that Beckwith knew or ought to have known that the Person A gave no indication the approach was wanted, and that he knew or ought to have known his conduct was an abuse of his seniority or authority.

With regards to the second instance, the SRA added that Beckwith knew or ought to have known that Person A was heavily intoxicated to the extent that she was vulnerable and/or her judgement was impaired; that she had not invited him to her home; and that he knew or ought to have known that she had not allowed him into her home with a view to sexual activity taking place.

nathalie.tidman@legalease.co.uk

Legal Business

Paywars III – City elite caught between rock and hard place

Paywars III – City elite caught between rock and hard place

The news last month that Freshfields Bruckhaus Deringer was to push through the highest real-terms pay rises by a major City firm for a decade is a significant moment for the London legal market.

The decision to hike its associate pay scale, raising its benchmark rate for newly-qualified solicitors from £85,000 to £100,000 is a bold and expensive step for the City giant. Back-of-the-envelope calculations suggest such a move, which will put Freshfields well ahead of its Magic Circle peers, comes at an annual cost in the region of £10m.

Legal Business

Associate pay war, anyone? Freshfields sets new Magic Circle standard by raising NQ pay to £100k

Associate pay war, anyone? Freshfields sets new Magic Circle standard by raising NQ pay to £100k

Marco Cillario assesses the City-wide implications of Freshfields’ decision to dramatically hike associate salaries

A decade after leading the way in resetting downwards the going rate for City associates, Freshfields Bruckhaus Deringer in May set a new standard for Magic Circle firms, raising its newly-qualified (NQ) salaries from £85,000 including bonuses to a symbolic £100,000, with bonuses on top.

Legal Business

Deal watch: Seats at the table for Travers, Skadden and Gateley as Pret acquires EAT and Oliver’s chain collapses

Deal watch: Seats at the table for Travers, Skadden and Gateley as Pret acquires EAT and Oliver’s chain collapses

Two opposite developments in the UK high street have seen City and US firms advise as food chain Pret A Manger acquired rival Eat and high-profile British chef Jamie Oliver’s restaurant business went into administration.

Also keeping City insolvency practitioners busy was the news today (22 May) that British Steel has been put into compulsory liquidation.

Skadden, Arps, Slate, Meagher & Flom advised Pret as it agreed to acquire all of Eat’s 94 shops for an undisclosed sum, with plans to turn most into ‘Veggie Prets’.

The US firm’s team was led by London corporate partners Richard Youle, Katja Butler and Linda Davies. Freshfields Bruckhaus Deringer partner Alex Potter is advising Pret on antitrust.

On the other side of the table, Travers Smith’s head of private equity and financial sponsors Paul Dolman led the team advising Ardian, Horizon Capital and the other selling shareholders of Eat.

‘I acted for Horizon when they acquired Eat [in 2011] and we have acted for them ever since, so we were the logical people to advise on the sale,’ Dolman told Legal Business. ‘Travers has in-depth expertise in this sector.’

The deal sees Travers’ and Pret’s paths cross again after the City firm advised previous owner Bridgepoint on the £1.5bn sale of the food chain to JAB Holding Company one year ago, with a team including Dolman and private equity partner Ian Shawyer.

Under Bridgepoint’s ownership the company, founded in London in 1986, expanded its presence in the UK and US, and launched in France, China, Dubai and Singapore, quadrupling its revenues to £879m. It now counts over 500 shops in nine countries.

Eat was founded in 1996 and bought by Horizon in 2011 with plans to build hundreds of shops. But it has struggled in recent years and reported pre-tax losses of £17.2m in the year to end of June 2018.

Meanwhile, Daniel French, an insolvency partner at listed firm Gateley, is leading the team acting alongside administrator KPMG after Oliver’s business became the latest victim amid difficult times for the UK high street.

Jamie Oliver Restaurant Group will see 22 of the 25 eateries it operates close, resulting in 1,000 job losses.

This is the second prominent high-street insolvency Gateley has acted on this year. The firm also advised KPMG on the administration of Patisserie Valerie in January.

Elsewhere, Clifford Chance (CC)’s insolvency team is advising as British Steele entered compulsory liquidation, putting its 5,000 employees at risk of redundancy.

The government’s official receiver has taken control of the company and together with Big Four accountancy firm EY is looking for a buyer, while it continues to trade normally.

CC’s restructuring head Philip Hertz and partner Iain White are leading the team advising on the process.

The Magic Circle firm was previously among the advisers in one of the largest UK insolvencies to hit the construction industry in recent years, when construction giant Carillion collapsed in January last year.

marco.cillario@legalease.co.uk

Legal Business

City paywars: a history lesson – Freshfields hikes hark back to era of Magic Circle domination

City paywars: a history lesson – Freshfields hikes hark back to era of Magic Circle domination

The news this week that Freshfields Bruckhaus Deringer was to push through the highest real-terms pay rises by a major City firm for a decade is a significant moment for the London legal market.

The decision to hike its associate pay scale, raising its benchmark rate for newly-qualified solicitors from £85,000 to £100,000 is a bold and expensive step for the City giant. Back-of-the-envelope calculations suggest such a move, which will put Freshfields well ahead of its Magic Circle peers, comes at an annual cost of more than £10m.

This takes us right back to the market-churning pay rises of 1999/2000 and 2007/2008, a period of utter domination in Europe for the Magic Circle when their decisions clearly defined the market. After the banking crisis, the circa-£66,000 starting rate at elite London firms was reset downwards to £60,000 in 2009 (led again by Freshfields). For the next decade, real term pay rises have been modest… until now.

Not only will this put intense pressure on Freshfields’ rivals to respond, but it nails the City giant’s colours to a clear strategic mast, strongly suggesting a turn in the direction of the US legal model, with lower leverage and smaller and more focused pool of associates. Lawyers in support departments will be feeling unease, unless we see more watering down of the associate lockstep model (which would be fine).

Certainly, the economics of this decision must force Freshfields to further sharpen its practice, a debate that has been internally gathering much force. Given the supposed fundamentals of Freshfields’ global elite aspirations, that logic is inarguable. The camp at Fleet Street arguing for Freshfields to stop trying to split the difference between two contradictory strategies will feel they have won a notable tactical victory.

In truth, the wider London elite cannot continue to allow such a huge disparity in the pay scales they are offering against major US rivals; when firms like White & Case and Kirkland & Ellis are offering compelling platforms for junior lawyers and often better promotion prospects, it has been plain for some time that the game was up .

Such moves also increase the pressure for City leaders to expand their LPO-style delivery arms to handle the increasing areas of work their associates are priced out of, and refer more work to mid-tier law firms. That is how the market should logically evolve anyway.

If Freshfields’ move on salaries helps the highest levels of City law to face some of evolutionary realities they have ducked for the last five years, they will have done their peers a favour. Not that they’ll get any thanks.

alex.novarese@legalbusiness.co.uk

Legal Business

Shades of 2007: Freshfields sends NQ salaries soaring above £100k to head off talent threat from US rivals

Shades of 2007: Freshfields sends NQ salaries soaring above £100k to head off talent threat from US rivals

Freshfields Bruckhaus Deringer is fighting the war on talent by becoming the first Magic Circle firm to raise its pay for newly-qualified (NQ) solicitors to £100,000.

The £15,000 salary uptick is symbolic, given the pressures imposed on the City elite by US competitors in recent years. There will also be a discretionary bonus on top of the new NQ salary.

The move also gives Freshfields the edge on its Magic Circle peers. Slaughter and May last year upped its NQ salary from £80k to £83K to match peers Linklaters and Allen & Overy (A&O), while Clifford Chance (CC) increased its NQ salary to £91k including bonuses.

A Freshfields spokesperson said: ‘We have increased associate salaries with effect from 1 May. Our pay offering is a critical part of our talent strategy and reflects our continued commitment to attracting and retaining the very best talent in the legal market. We regularly review our compensation and benefits across the firm with this in mind.’

Freshfields last month redoubled its promotion efforts, making up to partner 22 lawyers, of which eight were in the City. The round was a significant lift from the previous year, when only 12 lawyers were promoted to partner, including five in the City.

Those promotions were a sign of a wider trend, with A&O, CC, Freshfields, Linklaters and Slaughters collectively making up 120 partners in 2019, a significant 35% increase on the 89 promoted at the Magic Circle last year.

This year, the group has also made up noticeably more women lawyers after an embarrassing 2018 for many. For its part, Freshfields promoted six women, equal to 27% of the new partner intake.

nathalie.tidman@legalease.co.uk

Legal Business

SRA releases full allegations against Freshfields partner Beckwith

SRA releases full allegations against Freshfields partner Beckwith

The Solicitors Regulation Authority (SRA) has today (3 May) published the full list of its allegations against Freshfields Bruckhaus Deringer partner Ryan Beckwith.

In the published allegations, which follow a case management hearing at the Solicitors Disciplinary Tribunal (SDT) last week, Beckwith – who has been placed on indefinite leave by Freshfields – is alleged to have attempted to engage in sexual activity with an intoxicated junior member of staff in an abuse of seniority at an event organised by the firm.

The SRA referred the case to the SDT in late June 2018. The allegations are as yet unproven, with last week’s case management hearing adjourned until 17 June. The SRA said it would not comment further at this time due to the proceedings being live.

The allegations focus on two instances (and can be read here): that Beckwith kissed or attempted to kiss Person A (the SDT has imposed reporting restrictions on their identity), over whom he was in a position of seniority, and that he initiated and/or engaged in sexual activity with the same person. Both he and Person A were allegedly intoxicated at a celebratory event organised by the firm for its partners and employees, and the statement says that Beckwith knew or ought to have known that the Person A gave no indication the approach was wanted, and that he knew or ought to have known his conduct was an abuse of his seniority or authority.

With regards to the second instance, the SRA adds that Beckwith knew or ought to have known that Person A was heavily intoxicated to the extent that she was vulnerable and/or her judgement was impaired; that she had not invited him to her home; and that he knew or ought to have known that she had not allowed him into her home with a view to sexual activity taking place.

In a statement, Freshfields’ senior partner Edward Braham said:  ‘A partner of the firm is the subject of Solicitors Disciplinary Tribunal (SDT) proceedings and is on indefinite leave. Given the ongoing proceedings, to which we are not a party, it would be inappropriate to comment further on this case.’

He added: ‘The firm takes all complaints extremely seriously. When this complaint was reported to us we instructed an external law firm to conduct a thorough investigation and we took actions in the light of the report’s findings.

‘We want a culture that is welcoming and allows our people to flourish, and we work hard to achieve that. We are running a firm-wide programme to ensure our values and behaviours are consistently experienced across the firm, and I am confident that we will continue to achieve change where it is needed.’

Beckwith has instructed criminal law partner Nick Brett of Brett Wilson, while the SRA is being represented by Capsticks partner Daniel Purcell. Beckwith was one of five promoted in the City to partner in 2012 as part of a 20-strong round.

hamish.mcnicol@legalbusiness.co.uk

Legal Business

Freshfields partner on indefinite leave ahead of disciplinary tribunal hearing

Freshfields partner on indefinite leave ahead of disciplinary tribunal hearing

Freshfields Bruckhaus Deringer partner Ryan Beckwith is set to appear before the Solicitors Disciplinary Tribunal (SDT) next week having been placed on indefinite leave by the firm.

The Solicitors Regulation Authority, (SRA) which referred the case to the SDT, is yet to publish the allegations but said it would do so in the next few weeks. An early-stage case management hearing is set to take place Friday 26 April.

The Magic Circle firm confirmed Beckwith was on indefinite leave but declined to comment on the reason.

A Freshfields spokesperson said: ‘We are aware of the publication regarding a hearing before the Solicitors Disciplinary Tribunal involving a partner at the firm, who is on indefinite leave. The matter is subject to proceedings and we are unable comment further.’

Restructuring and insolvency partner Beckwith has instructed criminal law partner Nick Brett of Brett Wilson, while the SRA is being represented by Capsticks partner Daniel Purcell, according to a hearing document.

Beckwith was one of five promoted in the City to partner in 2012 as part of a 20-strong round.

He was on the Freshfields team for the collapse of UK construction giant Carillion, advising PwC as the manager of the liquidation last year.

Earlier this month it emerged that a solicitor at Allen & Overy (A&O) had been recommended for prosecution by the SRA over a controversial non-disclosure agreement (NDA) drafted for film producer Harvey Weinstein.

A&O was dragged into the spotlight a year ago, after it was revealed the City firm had drafted an NDA for Weinstein in 1998 after Zelda Perkins, who worked at the producer’s company Miramax, alleged Weinstein had sexually harassed a colleague.

nathalie.tidman@legalease.co.uk

Legal Business

Apollo hamstrung as Freshfields helps Berry complete eleventh-hour bid for UK plastics group

Apollo hamstrung as Freshfields helps Berry complete eleventh-hour bid for UK plastics group

Freshfields Bruckhaus Deringer successfully advised US manufacturing company Berry Global as it completed a late bid for UK-headquartered RPC Group, after private equity house Apollo Global Management cornered itself with a best and final offer.

The £3.43bn Berry bid only slightly surpassed the previous £3.3bn bid from Apollo, but was approved in early March by RPC’s board. Apollo made its final bid for RPC in a no-increase statement, leaving out the necessary caveats to return with an improved offer.