Legal Business

Defying gravity – double-digit boost marks a decade of revenue growth for Macfarlanes

Defying gravity – double-digit boost marks a decade of revenue growth for Macfarlanes

Macfarlanes has reported robust financial results for 2019/20 – its tenth consecutive year of revenue growth – with virtually double-digit increases in turnover and profit per equity partner (PEP).

Added to this, the firm has also announced an 88% retention rate of trainees qualifying next month, as well as the lateral hire of well-regarded finance partner Malcolm Hitching.

The results announced today (3 August) show turnover grew 9.5% to £237.65m and PEP 10% to £1.91m, a notable year-on-year improvement on 2018/19, where revenues increased 8% while PEP fell marginally. Meanwhile, operating profit increased 14% to £126m, giving the firm a margin of 53%.

‘At the start of the year we would not have predicted the outcome that was achieved,’ new senior partner Sebastian Prichard Jones (pictured) told Legal Business. ‘There were many reasons for caution, including the governmental situation, Brexit, the General Election and then Covid/lockdown. Throughout the year, however, our clients remained active right across our three main practice areas (transactions, disputes and advisory). The strong activity levels right across the firm produced a decent outcome.’

He added that notwithstanding the current uncertainty, the firm was still investing in the business, with 22 of 25 trainees qualifying this September accepting places as qualified lawyers, representing an 88% retention rate.

Pending a salary review to be conducted in the autumn, the newly qualifying trainees will be paid a provisional base salary of £80,000. Individual and firmwide bonuses will be paid in addition to this as usual.

Head of graduate recruitment Seán Lavin commented: ‘We have not changed our policy due to the coronavirus situation and we are pleased to have been able to maintain our consistently high retention rates for our trainees…We recruit, train and retain them with an eye to the firm’s long-term future.’

The firm has also announced today the lateral hire of finance stalwart Malcolm Hitching, who will be joining Macfarlanes a week today (10 August). A debt finance expert with over 20 years’ experience specialising in alternative credit, leveraged finance, speciality finance and private equity, Hitching joins from the London office of Ropes & Gray, where he has been a partner since 2017. Prior to this, he had spent 13 years at Herbert Smith Freehills.

Commented Prichard Jones: ‘Through periods of market turbulence we feel that it is important to position our practice for the opportunities that more challenging times may present. Malcolm’s hire is a reflection of this thought process.’

Private client specialist Prichard Jones officially took over the senior partner role from Charles Martin in April, following a carefully managed transition period. The latest financial results mark the end of a highly successful 12-year run for Martin, during which time he led Macfarlanes to become one of the most successful and profitable operators in the City.

For more on Macfarlanes’ lengthy run as a City powerhouse, see our 2019 feature ‘Defying gravity – Inside the improbable rise of Travers and Macfarlanes’ (£)

Legal Business

Revolving doors: DLA wins back Proskauer real estate partner as Macfarlanes and Dentons make City hires

Revolving doors: DLA wins back Proskauer real estate partner as Macfarlanes and Dentons make City hires

City lateral recruitment picked up pace again last week as DLA Piper won back a real estate partner from Proskauer Rose, Macfarlanes hired for its financial services team and Dentons strengthened its employment bench.

Joanne Owen rejoined her old firm DLA after a three and a half-year stint in Proskauer’s City corporate team, having previously worked at DLA for nearly 20 years. She advises on institutional and corporate property matters and cross-border corporate real estate transactions. She has acted for leading private equity houses, sovereign wealth funds and private high net worth investors.

The firm has also added partner Katie Jacobson to its real estate practice in Birmingham from Hogan Lovells. Jacobson, who advises institutional investors across the retail, office and industrial sectors, will join DLA at the end of this month.

Elsewhere, Macfarlanes has hired Eversheds Sutherland financial services partner Andrew Henderson, who is set to join his new firm in early 2020.

Senior partner Charles Martin told Legal Business: ‘Andrew is an outstanding fit for us given his focus on investment management clients. He offers particular expertise in retail funds, AIFMD (alternative investment regulation) and international issues, all of which are important to many of our clients.

‘All regulated financial services businesses are dealing with a huge amount of regulatory change and active intervention from regulators. This impacts our clients in the financial services industry. They look to us for joined up advice spanning all the legal aspects of the sector that matter most to them. This almost always includes regulation and quite often means that they look to us to support them when they make important judgement calls in the regulatory field,’ added Martin.

Dentons has added to its UK people, reward and mobility team in London with the hire of employment partner Purvis Ghani from Stephenson Harwood.

Dentons’ head of UK people, reward and mobility practice, Virginia Allen, commented: ‘With [Purvis’] broad range of experience across multiple areas of employment and discrimination law, his expertise will enhance our offering which handles a full suite of UK employment, pensions, employee benefits and immigration matters for our clients worldwide.’

Meanwhile, Norton Rose Fulbright has hired tax partner Florent Trouiller for its Luxembourg office from Dechert. Trouiller has experience in cross boarder private equity and real estate investment and has advised clients on all tax aspects of capital markets and securitisation transactions.

EMEA head of tax at Norton Rose Fulbright, Dominic Stuttaford, commented: ‘In the last few years, Luxembourg’s significance as a jurisdiction for financial institutions has grown, and its tax regime has become more complex. Therefore, a strong tax capability in Luxembourg underpins our pan-European and international tax offering.’

The Luxembourg office opened in June 2017 with three partners and is now operating with more than 18 fee earners across various practice areas.

Finally, Taylor Wessing has hired back its former Dubai head of corporate and co-managing partner Osama Hassan after an eight-year stint at Pinsent Masons. He joins as the firm’s Dubai managing partner and was previously head of the Middle East group and the corporate practice at Pinsent Masons.

Managing partner Shane Gleghorn commented: ‘Osama is widely recognised in the UAE market. We have a long-established platform in Dubai and our international client base has evolved significantly in TMC and private wealth. These are areas that we are known for being strong in and Osama’s experience across family owned businesses and technology in the region are hard to compete with.’

Legal Business

Revolving doors: KPMG and Orrick hire City partners as Ashurst and A&O focus on Germany

Revolving doors: KPMG and Orrick hire City partners as Ashurst and A&O focus on Germany

Lateral hires in London and Germany were the order of last week, with KPMG  bolstering its City legal services bench, Orrick, Herrington & Sutcliffe hiring a London-based energy and infrastructure partner, while Ashurst and Allen & Overy recruited practice heads in Germany.

Big Four accountancy firm KPMG has hired partners Kate Eades from Greenberg Traurig and Usman Wahid from Bryan Cave Leighton Paisner in a further boon to its legal services capabilities.

Corporate partner Eades’ experience includes advising on mergers and acquisitions, restructurings and joint ventures while Wahid is a commercial and technology partner focusing on IT/technology and outsourcing transactions. He has acted for clients on business critical software, new and disruptive technology as well as infrastructure deals.

UK head of Legal Services at KPMG Nick Roome (pictured) commented: ‘Our clients need the best expertise when they look to KPMG for support with business reorganisations, deals and other complex transactions, which is why we’ve brought in Kate and Usman. Their knowledge and skills will considerably strengthen the depth of our capabilities in this area and further enhance our ability to support KPMG clients with the challenges they face.’

The appointments follow that of Peter Workman in March who joined from PwC and leads the Midlands legal services hub and Angela Savin, who joined the legal service’s tax litigation team as partner from Norton Rose Fulbright in January.

Elsewhere in London, US firm Orrick has hired as a partner former Herbert Smith Freehills energy and infrastructure senior associate Hannah Roscoe.

Roscoe is experienced in global transactional and regulatory matters including project developments, financings and mergers and acquisitions.

Global head of Orrick’s energy and infrastructure group Blake Winburne told Legal Business: ‘Our strategy is to look at the opportunities that present themselves to us in Europe for transactions as well as opportunities that are available from that platform into developing markets around the world. Hannah is going to be an important member for us, particularly on the power regulatory side but also more broadly in the power sector as well as the infrastructure side.’

Macfarlanes is set to lose senior adviser and head of digital and innovation Mike Rebeiro after 18 months. He led an initiative introduced last year to develop the firm’s digital and innovation capability. The firm said Rebeiro will not be replaced, instead a number of partners from across the firm will be moving the initiative forward.

A spokesperson for Macfarlanes said: ‘Mike has led our team to a successful conclusion of our project and we believe we are now uniquely placed to advise our clients in all sectors on the disruptive effects of new technologies. We wish Mike every success in his future endeavours and thank him for the contribution he has made to Macfarlanes.’

Meanwhile in Germany, Ashurst has hired former Shearman & Sterling tax lawyer Anders Kraft to its Frankfurt office as head of tax.

Kraft has experience in national and international tax advice, capital markets transactions, internal corporate restructurings as well as general tax planning and tax disputes. He acts for domestic and international corporate clients, private equity firms, banks and financial services providers.

Managing partner of Ashurst in Germany Tobias Krug commented: ‘Anders is highly experienced in advising on the tax aspects of domestic and international real estate, private equity and corporate transactions and he is a perfectly complement to the European and German tax team.

He added: ‘Ashurst is already ideally positioned in these areas and Anders will make a significant contribution and help us deliver even more for our clients.’

Also in Germany A&O has hired Osborne Clarke data protection expert Ulrich Baumgartner to its Munich office as head of the data protection team in Germany.

Baumgartner focuses on German and European data protection law as well as cloud and IT law. He will work closely with the firm’s IP/tech team.

Senior partner of Allen & Overy in Germany Thomas Ubber commented: ‘Client demand for advice in the field of data and data protection has grown strongly in the wake of various new laws and increased digitalisation and use of technology.

‘With Ulrich, we now have the necessary enhancement at partner level and at the same time further develop our global consulting practice on cloud-based business models.’ Ubber added.

Finally, in Singapore, HFW has added dry shipping expert Christopher Metcalf to its growing shipping practice. Metcalf, who joins from Clyde & Co, has acted for vessel owners, charterers, offshore service contractors, oil majors, mining companies and traders in contentious and non-contentious matters in the shipping, offshore and oil and gas sectors.

In the last five months, HFW has added eight shipping experts globally including shipbroker Chris Jones and an Ince shipping team, which launched the firm’s Monaco office earlier this month.

Legal Business

Macfarlanes’ revenue continues to defy gravity but PEP holds steady

Macfarlanes’ revenue continues to defy gravity but PEP holds steady

City stalwart Macfarlanes has posted a mixed bag of financial results as the ninth consecutive year of revenue growth failed to translate into a rise in profit per equity partner (PEP) following last year’s 26% surge to £1.74m.

The results announced today (10 July) show turnover grew 8% to £216.98m in 2018/19, a significantly slower pace than last year’s exceptional 20% rise to £201.5m.

Operating profit rose 4% to £110.74m but PEP was marginally down to £1.734m as the firm grew its tight equity partner ranks by three to 56. The total number of partners at the firm was down by three to 84.

‘In a tricky environment to see this increase in revenue is pretty gratifying,’ senior partner Charles Martin told Legal Business. ‘Our model of having a balanced practice between transactional, advisory and contentious/investigation is delivering greater resilience and that accounts in substantial measure for the positive revenue growth.’

On the comparatively slower profit growth he said: ‘We have a cost base that we are obviously working hard to contain but we have to be realistic. We pay our people properly in line with what the market demands.’

Mandates keeping the firm busy included advising Searchlight Capital Partners on the English law elements of its $2bn acquisition of Mitel Networks Corporation; Foncière des Murs on the purchase of 14 hotels for £858m; and a consortium of Stanhope, Mitsui and AIMCo on the letting of White City Place to Novartis.

The year saw some unusual lateral activity for the mid-tier thoroughbred. Of the only 14 partners the firm has hired in the last decade, three joined since the beginning of 2019. Following the early retirement of one of its highest billers, Graham Gibb, in February the firm brought in Ashurst’s former corporate head Robert Ogilvy Watson. The same month it hired Charles Russell Speechlys private client property partner Ian Cooke, and in the spring it recruited corporate partner Peter Baldwin from Ropes & Gray.

Martin added: ‘Going into the summer we are busy. It’s very important to have a busy July, August and September because if you are not you will suffer. So far the signs of activity are good.’

Macfarlanes, which remains one of the most successful and profitable operators in the City, is due for one of the most significant moments in its recent history next year, as Martin hands over to private client partner Sebastian Prichard Jones in April 2020 after 12 years at the helm.

For more on Macfarlanes’ improbable rise under Martin’s watch, see ‘Defying gravity’ (£)

Legal Business

A special situation – Macfarlanes overcomes lateral reluctance with rare spate of hires

A special situation – Macfarlanes overcomes lateral reluctance with rare spate of hires

Corporate partner Peter Baldwin joins the City outfit from Ropes & Gray

Traditionally reticent to engage in the lateral recruitment market, Macfarlanes has continued its recent flurry of hires, this time recruiting special situations and corporate partner Peter Baldwin from Ropes & Gray.

Legal Business

Defying gravity – Inside the improbable rise of Travers and Macfarlanes

Defying gravity – Inside the improbable rise of Travers and Macfarlanes

‘If you look at Wall Street, this model is replicated again and again. There is no reason it shouldn’t work in the UK.’ David Patient, now seven months into his second term as Travers Smith’s managing partner, responds philosophically to this Legal Business comment on the performance of his firm and Macfarlanes: ‘If two firms with once-derided models can so comprehensively outpace the wider industry, then even more of the profession’s battered received wisdom should be sceptically revisited.’

Criticism of Travers and Macfarlanes has largely focused on them being old-school, City-centric law firms, barring one tiny European outpost apiece. Yet the pair continue to defy expectations post-Lehman. For Travers, 2017/18 was its ninth consecutive year of growth, yielding an 18% uptick in turnover to £146.9m and a 24% surge in profit per equity partner (PEP) to £1.2m. Meanwhile, Macfarlanes’ reputation for striking profitability has yet to desert it in eight years of sustained revenue and PEP growth (marred only by a shaky 2015/16), with the firm upping revenue by 20% to £201.6m in the last financial year and posting an enviable 27% increase in PEP to £1.74m.

Legal Business

Legal 500 data: behind the story

Legal 500 data: behind the story

The Legal 500 United Kingdom 2019 rankings

Our cover feature this month looks at London-centric peer firms Macfarlanes and Travers Smith. Here we look at the two firms’ UK rankings in The Legal 500. For further information see ‘Defying gravity’.

Legal Business

Double whammy for Ashurst as London head quits for BCLP and Macfarlanes hires former corporate head

Double whammy for Ashurst as London head quits for BCLP and Macfarlanes hires former corporate head

Ashurst London managing partner Simon Beddow and former corporate head Robert Ogilvy Watson have quit the firm to join Bryan Cave Leighton Paisner (BCLP) and Macfarlanes respectively.

A partner at the firm for 21 years, Beddow had led the firm’s City base since 2016 and was previously the firm’s corporate co-head. He will become BCLP’s deputy head of corporate.

BCLP’s co-chair Lisa Mayhew said: ‘At the time of our merger, we said that we would enhance our corporate team in London and hiring someone of Simon’s calibre clearly demonstrates this.  One of his priorities will be to consider which further additions we wish to make.’

Ashurst has appointed real estate finance partner Ruth Harris to replace Beddow as London managing partner, effective today (1 February).

Managing partner Paul Jenkins told Legal Business: ‘Simon wanted to continue in a management role and there wasn’t one available at Ashurst. We want people to be more transaction and client focused.’

He added: ‘I see it as a changing of the guard. We have some amazing corporate partners including Tom Mercer, Karen Davies and Jason Radford. The corporate practice has seen 17% revenue growth over the last year. It’s the strongest it’s been in many years. The departures are not going to impact that.’

Ogilvy Watson, whose 18 years as partner included a seven-year spell in the firm’s Hong Kong office from 2008, has acted on a number of public M&A transactions, including ITOCHU Corporation’s $10.4bn acquisition of a 20% stake in CITIC and Volcan Investments’ £778m offer for Vedanta Resources. He led Ashurst’s corporate practice until Jason Radford took over last year, and is a rare lateral for Macfarlanes, which is beefing up its public company M&A practice.

Macfarlanes senior partner Charles Martin told Legal Business: ‘We see public M&A as an important part of the practice and we see this as a quite interesting year for strategic M&A.’ He added: ‘When the opportunity to have Robert join us came along it seemed very timely.’

He added that the hiring process took ‘weeks rather than months’ and ‘as we got to know him, we thought he would be an outstanding addition to the team’.

Legal Business

LLP accounts: Linklaters posts fall in profits as top earner doubles income at Macfarlanes

LLP accounts: Linklaters posts fall in profits as top earner doubles income at Macfarlanes

Operating profits at Linklaters dipped 1% to £472.3m, while Macfarlanes’ highest-earning partner brought home almost £4m in 2017/18, the two firms’ LLP accounts showed this week.

In a mixed bag of financial results, the fall in profits at Linklaters came despite a 6% rise in turnover to £1.51bn. The operating profit figure reported is more than £200m lower than the £676.2m pre-tax profit the firm posted in July .

Linklaters said the discrepancy was because the published accounts consider as salaried employees the firm’s 150 partners that are not LLP members. The number of equity partners was down by two on last year to 310, according to the filing. Last year’s accounts had shown a 9% rise in operating profits to £476.2m in 2016/17.

The firm saw a 5% increase in its staff cots to £739m this year, up from £705m last year, as the number of lawyers rose by 30 to 2,487 and business support staff by 41 to 2,190. The share of profit available to the firm’s 13 executive committee members rose slightly however to £21.6m from £20.8m.

Linklaters has the lowest profit per equity partner (PEP) of the Magic Circle at £1.54m. Discussing the financial results in July, managing partner Gideon Moore said he was happy with the firm’s financial performance: ‘The increase in revenue was good and it’s an indication that the clients are supporting what we are trying to do’.

On the weakened profitability, he pointed to significant investments made by the firm in a number of areas, including the joint operations agreement with Shanghai firm Zhao Sheng.

Meanwhile, Macfarlanes’ highest earner took home £3.86m in 2017/18, a 90% increase on £2m the previous year. According to the accounts, the figure includes payments on retirement to a partner who is not a member of the senior management team.

Operating profits rose 24% to £106.27m amid a 20% turnover growth to £201.5m in a standout year for one of the most profitable operators in the City. The strong increase in profits came despite staff cost rising 12% to £59.3m with the firm growing its headcount by 25 to 585. The remuneration available for key management group members was £4.55m, up 10% from £4.11m in 2016/17.

In July Macfarlanes posted a PEP of £1.74m , up 26% and higher than most of the Magic Circle.

Legal Business

Macfarlanes holds hands up to significant gender pay gap at partner level

Macfarlanes holds hands up to significant gender pay gap at partner level

In another stark example of the disparity in the treatment of men and women within City law, Macfarlanes has revealed an average gender pay gap of 55% at partner level.

On a median income basis, the gap between the firm’s male and female partners is even higher: a stark 73%. A key factor making this gulf so pronounced is the feeble female representation in its partnership ranks:  in the 2017/18 financial year just 12 of Macfarlanes’ 85 partners were female.

However, in publishing the figures, Macfarlanes becomes the second law firm after Allen & Overy (A&O) to disclose its gender pay data ahead of the April 2019 deadline. At the Magic Circle firm, male partners are paid 61.2% more on average while on a median basis the disparity is reduced to 39%.

Previously Macfarlanes, and the majority of law firms, had opted not to include the specific pay gap between its partners and instead offered an overall firm statistic. But after political pressure, particularly after A&O was hounded by a government select committee over such lack of disclosure, firms are now under pressure to include partner pay data.

With the inclusion of Macfarlanes’ partnership figures, the firm’s overall pay gap which includes associates and business support staff, sits at 75% on average and 49% on a median basis.

The associate pay gap is far narrower than the firm’s partnership discrepancy, with male associates being paid 4% more on both a mean and median basis. According to the firm, this slight gap was caused by the introduction of a bonus scheme in July 2017, in which a larger number of men received a bonus than women.

Macfarlanes said more men received this bonus because more male solicitors went out on secondment, and it vowed to review the bonus scheme for the next financial year.

Senior partner Charles Martin told Legal Business: ‘It’s all about culture and moving forward as an organisation. Making progress in this regard is very high up our list of priorities.

‘It’s a combination of culture, momentum and drive to see progress, and also a lot of important nitty-gritty small changes that collectively make a big difference.’

The firm’s human resources director, Hilary Maurice added: ‘We have gone a step further in putting out more details than has been required. A lot of other firms are saying the gap is a result of the structure of the firm. ’

Among Macfarlanes’ business services staff, men earned 7% more on average but on a median basis there was a 0.5% gap in favour of women.