Legal Business

‘It’s a differentiating year’: Hogan Lovells sees double-digit growth in revenue and PEP

As financial reporting season kicks off in earnest, Hogan Lovells has today (13 February) reported a 10% boost in global revenue to $2.68bn as profit per equity partner (PEP) jumped 20% to $2.74m.

This performance represents a $250m increase in the firm’s top line, contrasting with a $174m decline last year. After a 7% drop in revenue and an 8% decrease in PEP in 2022/23, this year’s double-digit growth strikes an optimistic tone for other Global 100 players.

UK revenue surged by 15% from $464m to $534, bouncing back from a 13% drop in the previous year, and aligning more closely with the firm’s 2021/22 financials.

The breakdown of revenue by region remained steady, with the Americas contributing 48%, consistent with last year. EMEA’s share of turnover increased slightly from 46% to 47%, while Asia-Pacific accounted for the remaining 5%, down 1% on last year.

In terms of practice areas, the proportion of revenue generated by corporate and finance work increased only 1% to 41%, the disputes practice remained the same at 28%, and intellectual property, media and technology (IPMT) dropped from 32% to 31%.

Speaking to Legal Business, chief executive Miguel Zaldivar (pictured) was satisfied with the firm’s results: ‘It’s a record performance and it’s a differentiating year for the firm if you compare these results with what the market in general saw. We tend to be optimistic but realistic. Every year we see our firm getting stronger and stronger. Our teams deliver a record year for the firm, so we’re delighted.’

Discussing the drivers of this growth, deputy chief executive Michael Davison explained: ‘It’s being able to deliver high quality legal services consistently across our network and being recognised for that. If you look at the way the market reacts to our brand, it’s a quality brand and therefore we’re getting clients coming to us for more of their legal spend.’

In his previous interview with LB, Zaldivar explained the firm’s simple international strategy with a focus on building up in the US. On the firm’s current stance on this, Zaldivar said: ‘Everybody understands the strategy. We are actually getting even more granular explaining that strategy internally. It’s about that global nature. We’re not imposing a culture on anybody, we treasure being global, and it’s shining in highly regulated sectors.’

He added: ‘We are going to continue to target high performing talent in key markets. Some of that talent will be through internal promotions, but we hope to be able to continue to attract high performing partners in New York and other foreign places. New York was one excellent step in the right direction, but we’re not finished.’

On other jurisdictional growth, Zaldivar explained: ‘London is our largest office and I am particularly proud of the achievements in that office. I’m also very proud of the growth that we have experienced in Germany, and I have to say that Paris has also been key to our success. It’s not only Paris, Germany and London that are key engines of the firm.’

The financial results come as Hogan Lovells announced yesterday (12 February) that five partners from Orrick have joined the firm in Italy. Led by Patrizio Messina, the former head of Europe and structured finance at Orrick, the newly joined partners include Annalisa Dentoni-Litta, Madeleine Horrocks, Alessandro Accrocca, and Paola Barometro. These hires are part of a larger team of 23 M&A and finance lawyers that have moved over from Orrick, split between the Rome and Milan offices.

A list of standout mandates for 2023 included advising real estate investment trust Life Storage in defending against a hostile takeover and its subsequent $12.7bn merger with Extra Space Storage, forming a $47bn enterprise value company. The firm also advised Mercedes-Benz Group on its joint venture with MN8 Energy to establish a network of over 2,500 high-powered electric vehicle chargers under the Mercedes-Benz brand across the US and Canada.

Asked about the potential of a merger with a US firm, following the firm’s failed talks with Shearman & Sterling, Zaldivar asserted: ‘We do not have ongoing merger conversations with anyone, but we anticipate being quite attractive in a market where experts are predicting consolidation. If a weaker brand wants to be part of a global powerhouse and benefit from the success, we have consistently experienced for the past four years, then we are open for business, and we’ll take your call.’

Legal Business

‘We want to associate ourselves with winners’: Hogan Lovells’ Zaldivar sets out stall for second CEO term

The partnership of Hogan Lovells has voted in chief executive Miguel Zaldivar for a second four-year term, the firm today (5 September) confirmed.

The move follows on from the firm’s board’s unanimous recommendation that Zaldivar (pictured) be re-elected for a term starting on 1 July 2024, subject to a partner vote, which closed at the end of August.

Speaking with Legal Business on the rationale of his re-election, Zaldivar outlined the four factors which contributed to the vote in his favour: ‘Firstly, the firm has a very clear vision which we implemented three years ago when I became the CEO, which emphasises the fact that we are a true international firm. We shine at the intersection of business and government, so with governments active in the highly regulated sectors like life sciences, energy, technology and financial services, we have to be the preeminent provider of solutions. So, the clarity around our vision and having the discipline to stick to those principles.’

He continued: ‘The second factor is that we have a very simple strategy which is easy for management to implement, as well as for the board, partners and the firm at large to measure and assess success. We put our clients at the centre of everything we do, so everybody is driven by this principle which has worked for us.’

Zaldivar also flagged the firm’s continued investment as a factor. ‘We decided to grow by emphasising organic growth by allowing our own people to get promoted, both on the legal side and business services. We concentrated our investments on our existing footprint instead of opening more offices, apart from one in Dublin because of the implications of Brexit to our financial services clients. It is about enhancing the strength of our firm.’

The final factor, he noted, was ‘doubling down on our commitment to diversity, equity and inclusion and achieving record levels of promotions and allowing diverse talent to achieve their maximum potential in the organisation.’

Asked about the firm’s hiring and jurisdictional growth strategy for the next 12 months, Zaldivar responded: ‘We want to grow in the US. It’s one of the most sophisticated markets in the world. We have identified growing the scale of our business in three states where we already have successful practices. We are thinking about expanding our business in New York, California, and Texas.

However, this growth in the US will not be at the expense of other key practices, he said. ‘We view English law as a very important commodity and the legal basis is relevant, not only to the UK, but to the work that is done on the continent, in Africa, in the Middle East and in Asia, so keeping our preeminent London offering is key in continuing to grow. We will probably continue to expand our existing APAC offices.’ We are looking at what is happening in Indonesia and the growth in Vietnam, south-east Asia, China and Japan. We are very committed to that market,’ he said.

Asked about the potential of a merger with another US firm, in the wake of the firm’s failed talks with Shearman & Sterling, Zaldivar asserted: ‘We don’t need to merge to achieve our goals. If you look at the US side of our business, it is worth about $1.2bn and has about 1,000 lawyers. It has a defined brand and is very strong. We are, however, hopeful that groups of successful, high-performing lawyers will be attracted to our firm. If we have groups of partners interested in talking to us in New York, California and Texas, we will talk to them for sure.’

Zaldivar, however, did not rule anything out for the future, stating: ‘If a firm is interested in talking to us, I will talk to them – I’m a deal lawyer – but we will not compromise the integrity of our balance sheet. We are not interested in deals that come with significant pension obligations, debts, or firms that have experienced a drop in revenue, talent, or partners. We want to associate ourselves with winners, which is why we are not in the market for a merger.’

Zaldivar concluded: ‘We are looking for opportunistic growth in the US, and we don’t believe that the only way to achieve that is through a merger. We will look at every opportunity with teams and firms, but we’re not actively pursuing a merger.’

Legal Business

A shoo-in: Hogan Lovells partners prepare to back CEO Zaldivar for a second term

The board of Hogan Lovells has given its unanimous recommendation for Miguel Zaldivar (pictured) to be re-elected as the firm’s chief executive for another four-year term, starting on 1 July 2024.  The move will be subject to a partner vote, which closes at the end of August.

Succeeding Steve Immelt, Zaldivar assumed the role of the firm’s CEO on 1 July 2020, after previously serving as the regional CEO for Asia Pacific-Middle East, based in Hong Kong.

In a statement confirming the board’s recommendation, Hogan Lovells chair Marie-Aimée de Dampierre, former head of the Lovells Paris office, said: ‘Miguel and his management team have delivered outstanding results over the past three years, steering our firm through turbulent and unprecedented times to achieve our highest ever financial performance, while keeping a strong focus on continuing to foster our ambitious and supportive culture. He has a clear vision and strategy, which we believe will lead us to even greater success.’

Under Zaldivar’s leadership, the firm announced ‘record’ financial results for 2021, adding $300m to its top line as revenue increased 13% from $2.3bn to $2.6bn. PEP also shot upwards 26% from $2m to $2.5m.

However, the firm’s latest financial report revealed a 7% decline in revenue to $2.43bn, alongside an 8% decrease in PEP to $2.28m. Nonetheless, Zaldivar emphasised that the firm’s performance remained strong: ‘This was actually our second-best year ever. Last year was a record year for us,’ he told Legal Business at the time.

Zaldivar’s tenure so far has been eventful to say the least. The firm’s much-talked about merger talks with Wall Street giant Shearman & Sterling having fallen over at the start of March, Zaldivar the same month assured Legal Business that the firm’s strategy remained unchanged. Alongside four core offices in London, Washington DC, Paris and Germany, he told LB that the firm aims to expand in three key US markets. ‘We said in 2020 that our priorities include a focus on growth in three markets: New York, Texas and California. And that remains true.’ He added.

Last year the firm added private equity partner Parikshit Dasgupta from Reed Smith in New York, as well as hiring M&A partners Christoph Naumann and Torsten Rosenboom from Watson Farley & Williams as part of a team transfer in Germany the year before.

The firm promoted the largest class of partners ever this year, elevating 38 new partners and 77 new counsel including the highest percentage of female partner promotions in the history of the firm, at 58%.

However, the firm also faced departures under his leadership, including the exit of two longstanding partners. Last year pensions partner Faye Jarvis moved to Macfarlanes in London while M&A partner Ben Higson left to be appointed as Vinson & Elkins’ London head of corporate.

Legal Business

‘The strategy has not changed’: Hogan Lovells holds steady after end of Shearman merger talks

‘Has the strategy changed? The short answer is: no, it hasn’t.’

That was the message from Hogan Lovells chief executive Miguel Zaldivar, who spoke to Legal Business alongside deputy chief executive Michael Davison about the firm’s strategy after its proposed merger with Shearman & Sterling fell through recently.

Zaldivar (pictured) and Davison’s comments echoed those they made to Legal Business upon the release of the firm’s 2022 financials in late February.

‘We’re ready to grow’, said Zaldivar. ‘We’re ready to consolidate our market position in our four engines.’ Alongside those four core offices in London, Washington DC, Paris, and Germany, the firm also aims to expand in three key US markets. ‘We said in 2020 that our priorities include a focus on growth in three markets: New York, Texas, and California. And that remains true.’

The firm aims to focus on the tech sector in California and on energy and life sciences in Texas.  New York, meanwhile, is a potential fifth engine, with Zaldivar highlighting its importance as a financial hub. ‘New York is linked to our commitment to the financial industry, where we think we can grow more, to build on our strengths in London. It’s a natural bridge that can further connect what we do in Europe to what we do in the US.’

Neither Zaldivar nor  Davison would comment on  the motivations behind the proposed merger with Shearman or what caused the discussions. But it is easy to see what might have been attractive about the prospect of a combination with a long-established Wall Street firm.

Still, Hogan Lovells has no intention of altering its ambitions. ‘Ideally’, said Zaldivar, ‘we would achieve a greater critical mass in New York by combining with going concerns. It doesn’t have to be an entire firm. We’re open to any option that we can explore. If it’s an opportunity to grow in one of our five key industry sectors, and in the regions that we focus on in our business plan, we will explore that.’

This resolve makes sense for Hogan Lovells, perhaps in a way that it would not for Shearman. The Wall Street firm saw significant attrition as rumours of the merger percolated through the market, losing four partners in London alone in January and February 2023. Last week it announced that it had accelerated its transition to a new senior partner, with current global managing partner Adam Hakki due to take over from David Beveridge after a formal election later in the year. Shearman has been keen to present this move as merely a slight adjustment, bringing forward a change that was already on the cards. Nonetheless, many in the market have read this as a pivot.

Hogan Lovells, for its part, has suffered no such losses, and a source with knowledge of the firm said the end of merger talks has prompted little disappointment among its London partners. Despite a 7% drop, Hogan Lovells’ revenues in 2022 remained comfortably above the $2bn mark, at $2.43bn, the firm’s second-best year, behind only 2021.

‘The strategy has not changed’, said Davison. ‘And we’re still very focused on delivering it.’

Legal Business

Shearman and Hogan Lovells – better the devil you don’t

This comment piece has been updated to reflect an announcement late on Thursday (2 March) that merger talks between Shearman & Sterling and Hogan Lovells have been called off. In a joint statement, the firms said: ‘As has been widely reported, our firms have been in preliminary and exploratory conversations regarding a possible combination. After careful consideration, we have mutually agreed that a combination at this time is not in the best interest of either firm. We have been deeply impressed with each other’s business, practices and people and wish each other continued success.’

It’s funny how the market gets about law firm mergers. Ringing around various senior lawyers for a hot take on what they thought of a Shearman & Sterling and Hogan Lovells tie-up, most were pretty scathing.

‘A merger of losers’ and ‘a combination of mediocre and mediocre’ were just two pejorative remarks being flung around the Square Mile. Few were kind. Now that the dust has settled on the idea, and I hold my hand up to playing devil’s advocate on this one, these initial reactions strike me as a little churlish.

Legal Business

A not-so-equal footing: rankings data highlights Hogan-Shearman contrasts

An analysis of The Legal 500 rankings underlines some of the key factors driving the Hogan Lovells-Shearman merger talks

From a Legal 500 perspective, Hogan Lovells dwarfs Shearman & Sterling in terms of total rankings, with three times as many spots across the UK, US, EMEA, Asia-Pacific and Latin America – 343 to 113.

Legal Business

No personal best this year for Hogan Lovells as turnover and profits decline

As the financial reporting season kicks off once more, Hogan Lovells has today (22 February) reported a 7% drop in revenue to $2.43bn as PEP fell 8% to $2.28m.

This represents a $174m reduction to the firm’s top line and looks likely to set the mood for many Global 100 players as market forces continue to take their toll. The results mark a disruption to Hogan Lovells’ purple patch, following on from last year’s 13% revenue increase to $2.61bn and eye-catching 26% hike in PEP to $2.48m, as well as a solid showing on a three-year track.

UK revenue was $464m, down 13%, from $534m last year. Of this, $449m was generated out of London and $15m from Birmingham. The UK accounted for 19% of the firm’s total revenue compared to 21% last year.

The breakdown of revenues by region held steady, with the Americas accounting for 48% of income this year, compared with 49% in 2021/22, while EMEA’s share of turnover increased from 45% to 46%. Asia-Pacific, meanwhile, accounted for the remaining 6%, on a par with last year.

Despite widespread talk of an overall slowdown in transactions, the proportion of revenue generated by corporate and finance work dropped by only 2%, to 40%. The disputes practice was stable at 28%, while global regulatory and intellectual property, media and technology (IPMT) increased from 30% to 32%.

Speaking to Legal Business, chief executive Miguel Zaldivar (pictured) maintained that this performance was still strong: ‘This was actually our second-best year ever. Last year was a record year for us. Every star aligned, and we pushed forward and had great opportunities. This year is better than 2020 in terms of both revenue and profits.’

Deputy chief executive Michael Davison added: ‘It’s a bit like saying, sure, you hit your personal best last time, but on this race you missed it. Is that a problem? It’s still a very good result.’

Zaldivar noted that headwinds were particularly fierce in corporate work. ‘There was a slowdown in M&A and capital markets, that hit all firms in similar ways,’ he said.

Global financial instability also saw revenues when reported in Sterling increase from £1.9bn to nearly £2bn. ‘The main driver was currency’,’Zaldivar explained. ‘The British pound suffered a correction during the fiscal year.’

In the face of these external shocks, Zaldivar and Davison argued that the results show resilience, as well as stability in headcount. Said Zaldivar: ‘Some firms saw partner attrition. We didn’t.’ In fact, the firm announced the promotion of 38 new partners and 77 new counsel, which Zaldivar said was the largest class of partners ever promoted, up 40% from the 27 announced in 2022. These included the largest proportion of female partner promotions in the firm’s history, at 58%.

A list of standout mandates included advising Duke Realty Corporation on its combination with logistics real estate company Prologis, valued at $23bn. In UK M&A, the firm advised Shaftesbury in its all-share merger with Capital & Counties Properties, creating a combined portfolio valued at $5bn.

Davison said that the firm intends to continue with its sector-focused strategy: ‘When we’re looking to expand, we need to think about where our clients want us to be through the prism of our industry focus.’

‘Energy is going to really carry the day for us in 2023’, added Zaldivar, pointing to the increasing prominence of the sector in the context of both the ongoing energy transition and heightened concerns about energy security raised by Russia’s invasion of Ukraine.

Commenting on the US strategy, Zaldivar said: ‘We have what we call four engines. One is in Washington DC, and the others are in the EMEA market. But there are three markets where we’re working very hard to grow, and those are Texas, New York, and California. Our desire is to achieve greater scale, particularly in New York, where we aim to build a fifth engine. In New York, our main focus is financial institutions. In California it’s tech. And then in Texas it’s a combination of energy and life sciences.’

Neither Zaldivar nor Davison would be drawn on the rumours of an upcoming merger with Shearman & Sterling that persist in the market.

Legal Business

Hogan Lovells hails ‘record’ financial results as revenues and profits soar

In what it calls the ‘most successful year in the firm’s history’, Hogan Lovells has added $300m to its top line as revenue increased 13% from $2.3bn to $2.6bn.

It posted an even more striking profit result, with PEP shooting upwards 26% from $2m to $2.5m. Revenue per lawyer also saw a healthy 17% increase from $884,000 to just over $1m.

The 13% revenue hike far outstrips last year’s 3% increase in global fee income. Remarkably, the 26% jump in PEP is lower than last year’s startling 31% rate, although this was caveated by the introduction of a compensation floor for some partners in response to the pandemic.

Chief executive Miguel Zaldivar (pictured) hailed a stringent ‘financial discipline’ driving profitability: ‘There was no significant change to the partnership structure in the last year – we got invoices out early and converted WIP into revenues.’

Embodying the firm’s transatlantic focus, 47% of Hogan Lovells’ business originated from the Americas, with an equal 47% being generated from its EMEA business. The remaining 6% was derived from Asia. The UK specifically made up $534m of the firm’s overall revenue, representing 21% of the business.

Zaldivar said the results were a reflection of his ‘balance, balance, balance’ mantra: ‘We’ve had record years in every market. The economy in the US is booming, and we saw record performances in London, Germany and France. In our business, that geographical balance used to be a hedge, but it has now become a driver of success.’

In terms of practice groups, Hogan Lovells’ corporate and finance group represented 42% of turnover, with global regulatory and intellectual property, media and technology at 30%, and litigation, arbitration and employment at 28%.

Headline mandates for the period included the firm’s US practice, led by Silicon Valley M&A partner Keith Flaum, advising Oracle Corporation on its $28.3bn acquisition of Cerner Corporation. And in a notable disputes matter, Hogan Lovells is representing ENRC in its high-profile claims against the UK Serious Fraud Office following the conclusion of a long-running fraud and bribery probe.

Deputy chief executive Michael Davison told Legal Business: ‘Usually when there’s an M&A boom, there’s a slowdown in contentious work, but we’ve had both. It’s been a record year for our litigators.’

Hogan Lovells also announced this week plans to relocate to a new London headquarters in 2026, swapping Atlantic House for soon-to-be built premises at Holborn Viaduct. The firm will occupy all 12 floors of the building, which will comprise 266,000 square feet.

For an in-depth look at Hogan Lovells’ track record since its 2010 transatlantic merger, see ‘Winning Hartson minds’.

Legal Business

Global 100: Hogan Lovells – Winning Hartson minds

The champagne corks had long-since popped when the great and the good of legacy British firm Lovells and Washington DC powerhouse Hogan & Hartson met at a practice area retreat in Barcelona in 2013. While there was cause for cheer at the bedding in of their union, there was also business to attend to.

Adrian Walker, now a global board member and head of Hogan Lovells’ ESG practice, was then a couple of years into his role as global co-head of infrastructure, energy, resources and projects, a role he shared with Hogan Lovells’ current chief executive, Miguel Zaldivar. He recalls the odd mix of levity and gravity: ‘I interviewed a load of people at the firm for a video we did at the retreat for a bit of fun. I spoke to Miguel about values, and how the world will look in 50 years. He mentioned green energy and autonomous cars but noted that core values will always remain the same. We learn them from our predecessors and pass them on to the next generation.

Legal Business

Baptism of fire: New Hogan Lovells chiefs unveil record results as PEP nudges $2m

Taking the helm of a global law firm is no small feat at the best of times, much less so amid a global pandemic. However Hogan Lovells’ chief executive Miguel Zaldivar and his deputy Michael Davison, who assumed their roles last summer, had cause for cheer as the pair revealed a solid set of financial results, including a 31% surge in profit per equity partner (PEP) to $1.97m from $1.5m in 2019.

Global revenue grew a more sedate 3% to $2.3bn in 2020 compared with $2.25bn the previous year and revenue per lawyer (RPL) rose 4% to $884,000 from $850,000.  Geographical performance has been broadly in line with last year’s output, with the Americas accounting for roughly 49% of total billings, EMEA 45% and Asia-Pacific 6%.
Practice-wise, corporate and finance brought in 41% of total billings; global regulatory and intellectual property, media and technology (IPMT) generated 31%; and litigation, arbitration and employment 28%.

Speaking to Legal Business, Zaldivar (pictured) noted: ‘The highlight of the year for me has been the new management team transitioning in the middle of the pandemic. We have hit the ground running and the firm has had its highest revenue and profit in history. The credit for that goes to the partnership.’

Explaining the substantial PEP increase, he said: ‘We are not an outlier in achieving double-digit PEP growth, many other firms have done this too. The main contributor was not a drop in equity partners. In 2020 we introduced a floor on compensation for some partners to act as protection to them without a financial risk to the firm. We decided that would be prudent, given the fluctuation in the market, and that has had the effect of increasing PEP.’

He praised Davison and teams around the world for their impressive financial discipline. ‘Our lawyers are doing timesheets daily and sending bills out every month. Clients have paid and cashflows have been positive and healthy. Michael has been the enforcer of the rules!’

But it has not all been plain sailing, as Davison admits. ‘We will look back on this as a uniquely challenging situation. We continued to operate but in a very different way and supported each other through, but it has not been easy.’ He pointed to a voluntary redundancy scheme that saw business services staff cut in the US and UK as a cost-saving measure.

The pair provided a long list of standout matters for the year, including in corporate and finance, advising Marvell Technology on its $9bn acquisition of Inphi and acting for Arm, the UK-headquartered multinational semiconductor and software design company of SoftBank , in its $40bn acquisition by NVIDIA.

The firm acted for ENRC on high-profile claims against the Serious Fraud Office and its former legal advisers and secured a major win for Uber on regaining its London licence and right to continue operating in London.
Looking ahead, Zaldivar insists the firm will continue to invest in the engines of London, Washington DC and Germany, as well as in the Paris office.

It is clear that, under new leadership, The US and Asia businesses will remain at the forefront of the firm’s ambitions. Concluded Zaldivar: ‘In the US we are challenging the partnership to be more successful in New York, California and Texas. We have to grow in the US. We plan to grow organically in Shanghai, Beijing and Hong Kong, adding more corporate lawyers. We want to be stronger in China. That is the future of Hogan Lovells.’