Legal Business

Financial results round-up: Freshfields tops UK elite firms

Magic Circle firm shines with 7% revenue spike in flat market

Freshfields Bruckhaus Deringer has led the Magic Circle for 2012/13 financial results in a year that has seen the UK’s elite turn out flat annual turnover and profits, while many of the UK’s top 50 reveal spikes in revenue largely generated by international expansion.

Freshfields has revealed a 7% revenue increase from £1.139bn to £1.22bn, with profit per equity partner (PEP) rising by 11% to £1,439,000.

Headline deals for the firm have included its role advising the government on the long-running IPO of Royal Mail, and advising Betfair on CVC Capital Partners’ £910m takeover bid. For Q1 of 2013, Freshfields was ranked by mergermarket in third place for global M&A behind US firms Davis Polk & Wardwell and Wachtell, Lipton, Rosen & Katz, and second for global buyouts behind Kirkland & Ellis.

Elsewhere, Magic Circle rival Linklaters’ turnover dropped by 1% to £1.195bn but its PEP saw the second-largest increase among the Magic Circle, up 6% to £1.259m. Linklaters global managing partner Simon Davies said: ‘I’m cautiously optimistic. Our longer term growth will continue at a lower pace. There’s plenty of cash in the market, although not much optimism on where to deploy it. We’re very comfortable with our model. There’s not a market that we should be in and are not.’

Meanwhile, Clifford Chance’s preliminary figures showed a flat turnover of £1.3bn and a drop in PEP of 5% to £1.024m. Early numbers also showed at the time of going to press that Allen & Overy’s 2012-13 revenue increased by 1% to £1.19bn, with PEP broadly static at £1.1m.

In a year which has seen the Magic Circle outperformed by the US elite, Slaughter and May’s senior partner Chris Saul said: ‘By contrast with the States there have been some pretty material headwinds in Europe. The eurozone crisis, and the hangover from the financial crisis of 2007-08, have contributed to what people are describing as a growth crisis. This manifests itself in a lack of confidence, with CEOs unwilling to stick their necks out and do transformative deals.’

Outside of the Magic Circle, many of the top 50 UK firms revealed spikes in turnover off the back of recent mergers and international expansion. Top-20 firm Pinsent Masons posted a 40% increase in revenue from £221m to £309m following its merger with McGrigors last June. The firms, which would have had a combined turnover last year of around £294m, have in real terms seen a growth in revenue of 5%.

Clyde & Co, meanwhile, saw a hike in turnover of 17% as it continues to see the effects of its 2011 merger with Barlow Lyde & Gilbert. The insurance-focused firm’s revenues are up to £336.6m from £287m last financial year, having shot up by 38% the year before in the more immediate aftermath of its merger with Barlows. PEP is also up 4% this year from £558,000 to £580,000.

Firms that have reaped the benefit of international expansion include Bird & Bird, which announced a global revenue increase of 6%, from £235m to £249m, following an expansive year that saw the firm adding a number of offices throughout Europe and Asia.

RPC has announced a 20% increase in turnover, taking the City firm’s revenue to £82m from £68m for 2011/12 with its profits yet to be announced. Nabarro, meanwhile, posted a 30% increase in PEP, up from £332,000 to £430,000, with the UK top-30 firm’s revenue growth up a more modest 2.6% to £116.3m in 2012/13, according to preliminary figures.

Osborne Clarke also ended a year of expansion, with new offices in Italy and Spain, with an increase in total revenues of 14% to £112m. However, the revenue growth masks a couple of slow periods for the firm’s transactional business in what managing partner Simon Beswick described as a ‘lumpy market’. Discounting revenues from the firm’s new offices, its year-on-year turnover figure fell by 1% from £98m in 2011/12 to £97m this year.

Another notable trend during a year which was otherwise characterised by little organic growth was the success of private client work, with Mishcon de Reya posting an enviable revenue increase of 14% to £83.5m, up from £73.1m in 2011/12. PEP, which has not yet been finalised, is expected to increase to over £700,000, making it one of the most profitable firms outside of the UK’s top 10.

Elsewhere, a number of the top 20 UK firms posted flat numbers.

At Addleshaw Goddard revenue dipped 2% to £167m on the previous year, while PEP edged up marginally by 2% to £457,000.