Marco Cillario assesses the results amid another strong year for the City’s mid-tier
The latest financial results by UK law firms show leading mid-market players once again harnessing robust commercial activity to post a series of startling results well ahead of larger rivals.
From Travers Smith to Fieldfisher, from Osborne Clarke to Simmons & Simmons, double-digit revenue growth was the new normal in 2017/18, with many also pointing to solid performance on profitability.
There were some exceptions, with chasing pack outfits like Herbert Smith Freehills and Ashurst posting more subdued numbers. Among the most eye-catching results, Travers’ 18% turnover rise to £146.9m combined with a 24% surge in profits per equity partner (PEP) from £970,000 to £1.2m.
The performance reflected a busy run in the firm’s much-vaunted private equity and mid-market corporate team alongside continued growth in its disputes team. Bridgepoint in particular proved a fruitful source of work, instructing Travers on its £1.5bn sale of food chain Pret A Manger in June.
‘The strategic investments in our people and business over the last few years are paying dividends, and the confidence we have in our model is reflected in some fantastic work this year,’ said managing partner David Patient.
Meanwhile, Fieldfisher and OC cemented their reputation as mid-weight bellwethers, hiking revenues by 24% to £207m and 14% to €273m respectively.
‘All of the offices have grown,’ said Fieldfisher managing partner Michael Chissick (pictured). ‘We had a very strong year in the tech sector and particularly in GDPR privacy work – we are the go-to firm for that type of work. We had a very strong run in litigation and international arbitration.’ Fieldfisher saw PEP grow 17% to £750,000 this year. Demonstrating a 117% growth in revenue from £95m in 2012/13, the results will be taken as evidence of a reinvention of the once-struggling firm over the last five years.
OC’s average partner profits, meanwhile, grew by 11% to £711,000. UK managing partner Ray Berg said the firm had seen consistent performance across all its practices and sectors in what he described as ‘strong’ market conditions.
Simmons’ managing partner Jeremy Hoyland was also upbeat after one of the firm’s strongest results since the banking crisis, hiking revenues 12% to £354m. After a year of sustained foreign expansion, the 280-partner law firm also saw PEP up 8% to £686,000.
‘All of the offices have grown. We had a very strong year in the tech sector and particularly in GDPR privacy work.’ Michael Chissick, Fieldfisher
Hoyland said the ‘all organic’ revenue growth was ‘significantly greater than expected’ and attributed it to high demand in the firm’s core sectors, spanning funds, financial institutions, life sciences and TMT. Together these areas contributed to over three quarters (76%) of the firm’s income.
Another standout performance came from Macfarlanes, which broke the £200m barrier after a remarkable 20% uptick in turnover to £201.5m. The firm also cemented its position as one of the most profitable operators in the Square Mile, increasing PEP by 26% to £1.74m, higher than most of the Magic Circle.
Bird & Bird posted its 27th consecutive year of revenue growth after an 11% hike to £337m and a 10% uptick in PEP to £550,000 and Taylor Wessing hiked revenues and PEP by 12% to £144.6m and 20% to £579,000 respectively.
However, HSF chief executive Mark Rigotti argued that top line growth was no longer a priority after his firm posted revenues of £926.8m, up by less than 1% on last year’s £920.5m.
‘Clients are putting pressure on prices, the old days of putting rates up and focusing on revenues are gone,’ said Rigotti, who could point to a robust 12% growth in PEP to £852,000.
It was a similar story at Ashurst, with the firm growing revenues by 4% to £564m but increasing PEP 11% to £743,000. Managing partner Paul Jenkins said of the latter metric: ‘We were aiming for 10% growth and we have achieved that over each of the last two years, so we are very happy. We have focused on areas of strength for profitable growth and driving cost efficiency and innovation in service delivery.’
Elsewhere, Clyde & Co’s 9% revenue growth to £551.3m this year meant it has expanded its top line by nearly 200% on a ten-year track – Clyde’s turnover in 2008 stood at just £185m.
Results were more subdued at Stephenson Harwood, which recorded a 6% rise in revenues to £189m but suffered the second consecutive year of falling PEP, down 6% to £664,000. ‘Our PEP is down but we were expecting that,’ said chief executive Sharon White. ‘We ended up a little ahead of budget actually. It wasn’t a surprise.’
Pinsent Masons saw revenues up 6% to £449.8m and PEP up 4% to £653,000. However, the five-year picture remains strong: turnover has increased by 40% over that period, while profitability has grown 60%, with the firm being one of the most consistent performers in the UK top 100 in recent years.
In contrast, one of last year’s fastest growing mid-market players, Watson Farley & Williams (WFW) saw its top line growth fall to 3% compared to last year’s 20% rise. Co-managing partner Chris Lowe confirmed that its revenues of £162.9m resulted in a drop in PEP from last year’s £600,000. He attributed this to the 11 lateral hires the firm made – nearly double last year’s number – and noted the revenue figure was ‘currency neutral’, unlike last year when half of its growth was due to exchange rate movements.
If the mood was upbeat looking back, the tone is more cautious for the year ahead. Macfarlanes senior partner Charles Martin summed up a common sentiment noting: ‘The year has started well, but it’s far too early to say.’