Legal Business

Hogan Lovells losing bulk of South African practice as merger partner breaks away

Hogan Lovells losing bulk of South African practice as merger partner breaks away

Hogan Lovells’ South African headcount is being slashed as its merger partner splits from the firm following a troubled six-year tie-up.

The firm confirmed today (1 August) that it is undergoing a ‘restructuring’ of its South African practice that will see 71 of its lawyers set up an independent law firm, while Hogan Lovells will re-launch a 20-lawyer office in the country under its UK LLP.

The move, approved by the partnership last night, brings to an end the troubled tie-up with South African firm Routledge Modise, launched in December 2013, which saw its local branch operate as a financially and operationally separate entity under the Hogan Lovells logo.

The office met several hurdles along its way, seeing its headcount shrink from 120 to 91 and recently attracting criticism for its work for the South African Revenue Service (SARS). At the beginning of last year, Labour peer and former cabinet minister Peter Hain accused the firm of being complicit with corruption and money laundering in the country and called on the Solicitors Regulation Authority (SRA) to withdraw its authorisation as a recognised body.

In summer 2018 the SRA confirmed it would not take any action against the firm, and the South African Law Society found no evidence of misconduct by the firm.

The office also saw the departure of one of its partners amid allegations of sexual misconduct between the end of 2017 and the beginning of 2018. Hogan Lovells declined to provide details of the episode, nor specify whether it had been reported to local authorities at the time.

As a result of last night’s decision, five of Hogan Lovells’ South Africa partners and 15 other lawyers will form a fully-integrated office focused on corporate, finance and natural resources work.

Meanwhile, 21 other partners – including South African chairman Nkonzo Hlatshwayo – will launch an independent firm under a different name alongside 50 other lawyers following a two-month transition period.

A spokesperson for Hogan Lovells told Legal Business that while the sexual misconduct episode was unrelated to yesterday’s decision, the issues involving the work for the SARS had been a factor, as they arose from work that the firm did not necessarily wish to continue carrying out in the country.

‘One year ago we were looking at a position where the office was coming under severe criticism,’ the spokesperson said. ‘We made sure we went through the appropriate process in terms of giving evidence to Parliament and supporting the independent investigation by the Law Society.’

They added that once all claims against the firm had been dismissed, ‘we looked at the relationship we had with Hogan Lovells South Africa: this is the only office that is not fully integrated’. After a conversation with the South African partnership the firm concluded that ‘the best way forward was to have a smaller, focused office’ while Hogan Lovells South Africa pursued its own strategy with a wider range of clients in the South African market, ‘for example the government sector which is not necessarily a sector we want to pursue in South Africa.’

Hogan Lovells’ Johannesburg-based services center, which hosts around 200 employees, is unaffected by this decision.

Legal Business

Inflection point – Ashurst steps back from the brink but can the revival last?

Inflection point – Ashurst steps back from the brink but can the revival last?

It was not all plain sailing,’ reflects Ben Tidswell, Ashurst’s chair, on the aftermath of its 2013 merger with Australia’s Blake Dawson. ‘But partners saw what we were trying to achieve and most wanted to be part of that. Now the firm is enjoying the success of that.’

Tidswell speaks with the palpable relief of one whose darkest days are behind him. The merged firm is now on the brink of revealing its best financial showing to date after years of indifferent or poor performance. Tidswell may well celebrate given the upheaval that preceded this inflection point, dwarfing any woes suffered by City rival Lovells following its 2010 union with Washington DC’s Hogan & Hartson.

Legal Business

Legal 500 Data: Behind the story

Legal 500 Data: Behind the story

The Legal 500 2019 London rankings

Ashurst and Hogan Lovells are the subject of this month’s cover feature – both firms that underwent large mergers in the last few years. Here we look at the firms’ London rankings in The Legal 500. For further information see ‘Inflection point’.


Legal Business

Tightening of ranks at Hogan Lovells sees PEP approach $1.4m as turnover rises 4%

Tightening of ranks at Hogan Lovells sees PEP approach $1.4m as turnover rises 4%

Hogan Lovells has posted an 8% increase in profit per equity partner (PEP) to $1.38m after reducing equity partner headcount 6% to 523 in 2018.

The firm today (25 February) posted revenue of $2.12bn, up 4% on $2.04bn in 2017, a less pacey rate of growth than the 6% achieved in each of the previous two years. Revenue per lawyer (RPL) grew at a faster 6% pace to $804,000 as the firm cut its legal workforce 2% to 2,637 while total partner headcount, including non-equity partners, was down 4% to 803.

‘In today’s market having a strong handle on capacity is critical to achieve profitable growth,’ chief executive Steve Immelt (pictured) told Legal Business. ‘We have to be lean, we have to have adequate staffing but we have to be very careful not to be overstaffed, and we were very focused on that. Notwithstanding those changes, revenue went up and RLP is considerably up.’

The numbers are less flattering in sterling teams, with revenue rising by less than 1% to £1.6bn while PEP passed the £1m mark growing 4% to £1.035m.

London revenue meanwhile broke the £300m barrier rising 3% to £301.9m.

While the firm made 31 partner promotions and 18 lateral hires, losses in 2018 included London litigation duo Jon Holland and Andrea Monks to Latham & Watkins in January and private equity partner Robert Darwin to Dechert in August, as well as a five-strong California team to Baker McKenzie.

The firm also cut 54 of its around 500 business support roles in London, moving most of them to its low cost centres in Johannesburg, Louisville and Birmingham.

The majority of revenue came once again from America, which accounted for 51% of the firm’s billings. Europe was second at 42%, with Asia Pacific and the Middle East contributing the remaining 7%.

Key mandates for the corporate practice, which accounted for 31% of turnover, included Walmart’s $16bn acquisition of a 77% stake in Flipkart. The firm’s contentious and employment practice, which was busy with key client Uber on a number of cases, brought in 28% of billings.

Immelt said that the regulatory practice, accounting for 18% of turnover, had a ‘very strong year’. ‘That’s not surprising. We have a leading trade practice and there are trade issues happening all over the place.’

The remaining turnover came from finance (14%) and intellectual property, media and technology (9%).

Looking to the future, Immelt said that work levels had been healthy at the start of 2019 and concluded: ‘Brexit is typical of the type of volatility that we see today, but that’s the benefit of being in a very well hedged firm like Hogan Lovells. We have a strong US practice, a strong practice in London and a strong practice in Europe.’

Legal Business

Hogan Lovells partner leaves firm after watching pornography at work

Hogan Lovells partner leaves firm after watching pornography at work

A Hogan Lovells partner has agreed to leave the firm after being caught viewing pornographic images on a work computer.

The firm suspended the partner in November last year and launched an investigation after the partner in question was caught by a lawyer from a window in Irwin Mitchell’s offices, which are next to Hogan Lovells’ base on Holborn Viaduct.

According to RollOnFriday, the Irwin Mitchell lawyer used a mobile phone to film the partner and sent the footage to lawyers at Hogan Lovells, who reported the incident to the firm’s HR team.

A spokesperson for the firm said:  ‘After our investigation we agreed that the partner would not return after their suspension period and they are no longer with the firm. This incident is not a reflection of who we are and the culture and inclusive values we stand for.’

Following the incident the firm has also ‘tightened’ its policy on the websites that can be accessed at work: ‘We didn’t block access to websites unless they represented a cyber security risk (e.g. they have malware on them). The nature of our work for clients sometimes means we need to carry out investigations in areas which require us to have flexible access. We have reviewed and tightened this policy.’

Law firms have in recent months been subject to increasing scrutiny on partners’ misbehaviour after several reports of sexual misconduct emerged in the wake of the #MeToo movement.

Firms to see partners leave following complaints of sexual harassment include Reed Smith, Quinn Emanuel Urquhart & Sullivan, Latham & Watkins, Herbert Smith Freehills and Dentons.

Meanwhile, the Solicitors Regulation Authority is investigating Baker McKenzie after accusations that one of its London partners sexually assaulted an associate in 2012. After news of the incident came to light in February last year, the firm announced the partner would leave and acknowledged it should have handled the incident better.

Legal Business

Hogan Lovells cuts 54 City jobs as law firms keep slashing London biz service roles

Hogan Lovells cuts 54 City jobs as law firms keep slashing London biz service roles

Hogan Lovells is to cut 54 business support jobs from its City arm as the firm moves to expand its low-cost hubs around the world.

The Anglo-American law firm announced today (20 June) that most of the roles have been moved to its low cost centres in Johannesburg and Louisville, and a new business support team established in Birmingham.

The announcement follows a review of 90 non-legal City jobs launched in September last year. A spokesperson said 17 staff members remain under consultation, with further updates expected later this summer. Hogan Lovells counts around 500 business support roles in London.

The firm said in a statement this was ‘a carefully considered step focused on improving our business performance and sustainability in a rapidly evolving and competitive legal market’.

Some of the 54 roles were on short-term contracts and a handful of staff have transferred their roles to Birmingham, though the move represents a substantial reduction in the size of its City staffing.

Regional managing partner Susan Bright told Legal Business: ‘It is about efficiency – there are obviously cost savings in having people in Johannesburg, Louisville and Birmingham – but it’s also about creating teams of people doing specialist roles working together.’

This move is the latest in a series of comparable initiatives by City law firms. Last month Ashurst launched a redundancy review which could result in 80% of its 100-strong secretarial team in London being axed, while Pinsent Masons started a consultation on cutting 100 non-legal jobs last year . Most recently Ince & Co this month announced it was to cut 30 roles, primarily impacting its business service ranks.

As law firms keep slashing back workforces in expensive City-based locations, north or near-shoring hubs are expanding rapidly. It is an astute nod to client calls for efficiency but cynics will note that this trend is occurring at a period of rising partner profits and fresh hikes to associate salaries, two very well paid groups that are largely untouched by such brutal calculations.

Legal Business

Partnership Perspectives

Partnership Perspectives

‘The Dickensian management role of closed doors is a thing of the past.’

Jonathan Kewley, partner and co-head of Clifford Chance’s tech group. Made up in 2017

What attracted you to partnership?

I’m working in tech, a space that didn’t exist 30 years ago. There are challenges facing clients that didn’t exist five years ago. The tech environment fits with the character traits of partnership. You have to be entrepreneurial, and it’s more exciting to be that way. It maintains interest.

Legal Business

Momentum at last for Hogan Lovells as global turnover passes $2bn mark

Momentum at last for Hogan Lovells as global turnover passes $2bn mark

Eight years into its transatlantic union Hogan Lovells is finally gaining some momentum, posting another solid financial performance and passing the $2bn revenue mark in 2017.

Global turnover rose 6% to $2.036bn while profit per equity partner (PEP) returned to growth, rising 2% to $1.28m. The weak pound meant the firm experienced an 11% top line uptick to £1.58bn in sterling terms.

Revenue per lawyer grew 3% to $758,500 and headcount rose 3% to 2,685 in a year marked by a merger in Boston and 37 lateral hires.

This follows a mixed 2016, where the firm boosted turnover by 6% after years of lacklustre performance but PEP remained flat.

Chief executive Steve Immelt (pictured) said he was ‘very pleased’ with the firm’s latest results but told Legal Business of a challenging year as the uncertainty surrounding the start of Donald Trump’s administration in the US, Brexit and the UK general election had a ‘restraining effect on what people do and are planning to do’.

‘We had a lot of up and downs in work over the course of the year but the last few months were very strong,’ added Immelt, whose term was recently extended by a further two years until June 2020. ‘We go into 2018 with momentum and the macroeconomic outlook is more positive.’

Corporate and regulatory, which accounted for 32% and 16% of revenues respectively, had a ‘very strong year’ according to Immelt. The litigation, arbitration and employment group was the second largest contributor at 28%, while the finance team and intellectual property, media and technology group contributed 14% and 10% each.

Growth was slightly more subdued in London, where turnover rose 4% to £292.6m, although the London team led on one of the leading corporate mandates for the firm worldwide, the £3bn takeover of Paysafe by Blackstone and CVC, and saw the arrival of Freshfields investment funds veteran Jonathan Baird.

Most of the revenue came from the Americas, which brought in 52% of fee income followed by Europe at 41%. The firm was in expansion mode throughout the year in the US. In September it merged with Boston-based litigation and investigation firm Collora, taking on all of its 15 partners, while last spring it made a major Silicon Valley play with four corporate partners from Weil, Gotshal & Manges.

‘We do a tremendous amount of work in life sciences, so not having an office in Boston seemed like a gap,’ said Immelt. ‘So far it’s been terrific. We are working together on matters they brought with them.’

The firm also ventured into non-legal advice in London, launching a financial services regulatory consulting practice led by former PwC director Steve Murphy. Immelt said the practice was still ‘at an early stage but we continue to see opportunities to offer clients non-legal advice’.

Legal Business

Let’s be friends – Hogan Lovells hooks up with NewLaw darling Elevate for flexi-lawyer service

Let’s be friends – Hogan Lovells hooks up with NewLaw darling Elevate for flexi-lawyer service

Hogan Lovells is the latest firm to venture into flexible lawyering after agreeing a partnership with New Law pioneer Elevate.

The deal announced today (15 February) will give the transatlantic giant access to a pool of 1,500 self-employed professionals worldwide to support its UK business. Elevate will provide a group of pre-vetted lawyers to choose from for specific projects, with Hogan Lovells’ paying Elevate for the cover. Hogan Lovells expects to use between 30 and 50 lawyers from the pool every year and will be looking at four to ten-year qualified lawyers across all practice areas.

The deal also gives Elevate access to the Anglo-American law firm’s alumni network and the arrangement will be used to offer a different working model to those who decide to leave the 2,600-lawyer practice.

Hogan Lovells’ head of legal service delivery Stephen Allen told Legal Business: ‘The size of the transactions and matters any law firm is working on are getting bigger. It’s important that we have sufficient skills to meet the clients’ demands, so we feel we needed to expand our capability in particularly busy periods.’ He added that although the deal will initially only involve the firm’s UK operations, the collaborations could be extended globally in future.

Founded in 2011, Elevate provides legal technology, consulting and flexible lawyering to legal departments and law firms. Hogan Lovells is the first major firm to go public with a collaboration with the Los Angeles-based company, which last year generated $40m in revenues.

Elevate, which entered the UK market five years ago, also collaborates with regional law firm asb law and with the in-house departments of BT and HSBC. The much-touted business is unusual among NewLaw competitors in offering a broad range of services, spanning consulting and legal service provision.

Elevate president John Croft told Legal Business: ‘Hogan Lovells realised they needed to offer their clients a flexible service, they realised we already had that, we know how to do it and we do it at scale.’

The move will be seen as further evidence of law firms’ drive to bolster low cost operations coming in the same week that Clifford Chance acquired Carillion’s volume law arm. Changes in the industry have also seen law firms collaborate with other providers with DLA Piper in 2016 signing a deal with Lawyers On Demand to provide flexible cover while Allen & Overy the same year launched the MarginMatrix derivatives business with Deloitte.

Legal Business

More reshuffling as Hogan Lovells appoints new chair while Travers Smith confirms Patient managing partner

More reshuffling as Hogan Lovells appoints new chair while Travers Smith confirms Patient managing partner

As the January senior appointments merry-go-round at City and global law firms continues, Hogan Lovells has announced a new chair while Travers Smith has re-elected David Patient as managing partner.

In a move that brings its German practice in the spotlight, Hogan Lovells has announced that Hamburg-based Leopold von Gerlach will replace Nicholas Cheffings as chair of the board on 1 May for a three-year term.

A member of the board representing continental Europe since 2014, IP, media and technology partner von Gerlach was voted into the new role by the partnership after the board put forward his name following a firm-wide consultation process. He joined the firm in 1995.

Members of Hogan Lovells’s board make up the compensation committee, which looks after the firm’s annual bonus scheme and reviews equity partners’ remuneration every second year. They are also part of the equity elevation and partner advancement committees, working with the firm’s management on the promotion of associates and counsel to the partnership.

The board provides input to the international management committee and oversees the affairs of the firm, but has no executive responsibility for strategy.

Speaking to Legal Business, Cheffings said von Gerlach had a ‘broad combination of attributes’ that made him the right choice for the role: ‘He has been with the firm for a long time, he understands the culture, he is very focused upon collaboration and people being at the heart of our business – very good with clients.’

Real estate disputes co-head Cheffings was Hogan Lovells’ first post-merger sole global chair, taking over from co-chairs Claudette Christian and John Young in 2012, two years after the merger between Lovells and Hogan & Hartson. He was re-appointed in the role in 2015  and is now stepping down after reaching the maximum two terms set by the firm.

He said his main achievement in his six years as chair was ‘overseeing the transition from a firm which was seen as a new kid on the global block – with a lot of energy and excitement but clearly challenges in terms of delivering on its plans – to what’s now a very mature player and one of the most highly respected global law firms with a very distinct place in the legal market.’

Cheffings will continue to lead Hogan Lovells’ real estate disputes group along with Mathew Ditchburn.

Meanwhile, Travers Smith re-elected David Patient as managing partner after he stood unopposed.

Patient, who will manage the firm for a second three-year term starting on 1 July, told Legal Business: ‘Last year went by in a flash, and politically we seemed to be lurching from one crisis to another but we sailed through it all. Clients were very busy in lots of areas, regulatory has been very busy and disputes has been firing on all cylinders. Private equity and M&A have also been strong.’

He added he was ‘pretty positive’ for the year ahead. ‘There will be some bumps in the road ahead but I’m confident that this year is going to be good in lots of areas.’

Travers-bred corporate lawyer Patient became a partner in 1999, when he established its Paris office, and replaced Andrew Lilley at the helm of the firm in January 2015 . He had previously run for the managing partner role in 2009 losing out to Lilley, who went on to serve a second term in 2012.

The firm’s most recent financial performance showed a 4% rise in revenue to £125m in 2016/17, marking eight consecutive years of growth. But profit per equity partner dropped 4% to £970,000, with Patient saying at the time the firm was ‘right in the middle’ of a period of significant investment .