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Tax overhaul threatens US firms with four-year cash drain but could boost global mergers

US law firms are facing a fundamental overhaul over the way they calculate and distribute their profits that could result in far higher short-term tax bills if controversial proposals currently before Congress are approved.

The proposals could see US firms with over $10m in revenues forced to switch their accounting model from a cash basis, under which money received in a financial year is taxable, to a UK-style accrual method, where taxable revenue includes work done but not yet billed or collected.

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You’re gonna need a bigger boat! – big data and the modern law firm

Big data has been hailed as the next big thing to hit legal tech and has already become a force in US litigation. Legal Business assesses the prospects for the analytics-powered law firm

In 2011, McKinsey defined big data as ‘datasets whose size is beyond the ability of typical database software tools to capture, store, manage and analyse’ and hailed big data analytics – applying algorithms to crunch together numbers from disparate sources to uncover new correlations, patterns and trends – as ‘the next frontier for innovation, competition and productivity’.

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LB100 firms review partnership model as HMRC’s LLP changes loom

The impact of HM Revenue & Customs’ decision to overhaul the way salaried partners are taxed is being felt across the City as a number of leading firms confirm they are reviewing their arrangements, although some of the largest Legal Business 100 firms have come out to categorically deny the changes will have any effect at all.

Firms including Herbert Smith Freehills, Ashurst, TLT, DWF, Weightmans, and Trowers & Hamlins have all confirmed to Legal Business that they are reviewing their partner remuneration arrangements in anticipation of the new rules, which will mean partners with under 25% of their salary attached to profits will be regarded as having a ‘disguised salary’ and treated as employees by tax authorities in a move expected to add thousands of pounds onto firms’ tax bills.

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CC’s Tinkler addresses recent private equity departures

In mid-February, Latham & Watkins confirmed its third London private equity partner hire from Clifford Chance (CC), with Kem Ihenacho set to follow on the heels of global head of private equity David Walker and newly-made up partner Tom Evans.

Ihenacho was co-head of the Magic Circle giant’s Africa practice, but here London head of corporate, Simon Tinkler, talks to Legal Business about CC’s position in the private equity market.

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Turning the corner, honest: can Shearman turn a proactive run into a sustained revival?

David Stevenson assesses Shearman’s hopes of regaining its potency

‘The work that’s been done over the last few years is bearing fruit. Like a tree blossoming,’ observes Laurence Levy, head of European M&A at Shearman & Sterling. Long-time Shearman watchers have, of course, become familiar with variations on the revival rhetoric that Shearman has used several times before. But has this once celebrated Wall Street name really rediscovered its winning ways?

Firm-wide, the jury is at best still out, but focusing on its London operation it is easier to be upbeat. The firm’s City arm broke the $100m turnover mark in 2010 and has generally been growing at a respectable clip since then, up from $112.6m in 2012 to $134.8m for the 2013 financial year.

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Return to form for Queen’s Counsel as 100 advocates take silk

Latest QC promotions round the largest in three years

In stark contrast with the recent decline in the number of Queen’s Counsel (QC) appointments, the latest round announced in February saw 100 advocates awarded the elite kitemark, up by 19% on last year’s all-time-low figure of just 84.

The number of applicants rose this year to 225, in what may be interpreted as the litmus test of confidence in the wider economy, after queries were raised from within the profession over whether previous drops were a reflection of not just the £2,000 cost of applying to become a QC, but also fears that the associated higher rates would not be supported by cash-strapped clients.

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Arbitration heavyweights resign to form boutique

Partasides and Petrochilos to join former colleague Jan Paulsson

Breakaway arbitration boutiques are increasingly common but they rarely have the gravitas of the latest entrant, as Freshfields Bruckhaus Deringer’s London international arbitration group head Constantine Partasides last month resigned alongside Paris-based partner Georgios Petrochilos, to form a heavyweight trio alongside former co-arbitration head Jan Paulsson.

Dispute resolution partner Partasides spent ten years practising in the Magic Circle firm’s Paris office before returning to the UK in 2007 to head up its top-tier arbitration team. He is listed as a leading individual in The Legal 500 and recent arbitrations he has led include acting for a telecoms operator in a treaty claim regarding an expropriation of a multibillion-dollar business in North Africa.

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A wider horizon – Switzerland edges into the global economy

mountains covered with Swiss flags

While historically relatively untouched by the globalisation of legal services, international firms have continued their recent surge into Switzerland, with Geneva – home to a third of the world’s private wealth – emerging as the most popular hotspot. As recently as January, CMS von Erlach Henrici – the local Swiss member of the global CMS network – merged with Geneva practice ZPG Avocats, adding six partners, including former ZPG managing partner Charles Poncet to the firm, now known as CMS von Erlach Poncet.

In September last year, Speechly Bircham also opened in Geneva – an office led by Michael Wells-Greco and of counsel Francis Rojas, who joined from the Luxembourg-based Maitland. This was the LB100 firm’s second office launch in the country in recent years, having first launched in Zürich in 2011. Continue reading “A wider horizon – Switzerland edges into the global economy”

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Life During Law: James Palmer

I don’t believe people that do well have an unerring right to succeed and it’s entirely down to their own abilities. Loads of incredibly able people don’t hit the right spot. I was very lucky that I started working as a lawyer doing something that I turned out to be good at. I could easily have done something else. I applied because I didn’t know what else to do.

Law attracts people who are not just in it for money, but want that sense of professionalism and intellectual curiosity, and also people who want to work with other people. I became more entrepreneurial as I became older, but whether I am entrepreneurial, I’m not sure. I’m a team person, not a classic entrepreneur.

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Early numbers in US results season confirms solid growth as Shearman and Dechert lead the pack

US leaders grind out growth in 2013 despite ‘anaemic economy’

Despite having to contend with what Latham & Watkins’ outgoing global chairman Bob Dell described to Legal Business as a still ‘anaemic economy’ last year, early results among the US law firms to disclose their 2013 financials are solid, with many forecasting a return to substantive growth this year.

Dechert was among the first to reveal its financials for 2013, with revenue up by 6.6% to $777.2m from $729m.

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The Last Word – English Law

With the popularity of English law a key issue in the global legal market, we ask partners for their take on the exportability of UK law and how it stacks up against New York law.

Early adoption

‘Where parties adopt a law other than their own and look for a law with application for an international contract, English law is popular by quite some margin followed by New York law. It’s particularly increasing in use in South America. One important aspect of that is the role of the Commercial Court in London in continuing to develop and adapt the law to changing circumstances.

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Slaughters adds US capability in Hong Kong as best friends become rivals

Moore becomes first lateral hire in firm’s 125-year history

It had been well telegraphed but even so news that Slaughter and May was making the first lateral hire in its 125-year history to add US securities capability to its Hong Kong arm was enough to send a minor jolt through the global legal profession.

Slaughters unsurprisingly chose a top-notch CV to break with tradition, hiring Morrison & Foerster’s co-head of China capital markets John Moore. Moore, who joined the UK firm in February as its 12th Hong Kong partner, is the former head of the US capital markets team for Herbert Smith and has also previously held senior roles at Sullivan & Cromwell and Goldman Sachs.

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Global office launches for Norton Rose, Quinn Emanuel, Bakers and Jones Day

Global 100 firms embraced foreign expansion again in February. Norton Rose Fulbright (NRF) announced a significant addition to its Latin America footprint with the launch of an office in Rio de Janeiro, hiring BP’s global corporate assistant general counsel (GC) Andrew Haynes as office co-head, while US litigation leader Quinn Emanuel Urquhart & Sullivan set up shop in Brussels, Baker & McKenzie in Myanmar and Jones Day in Perth.

NRF’s new office in Brazil, which will also be run by current head of Colombia, Glenn Faass, will be the firm’s third in the region after Venezuela (Caracas) and Colombia (Bogotá), and its 55th office worldwide.

Haynes joined NRF at the start of February from BP, where as assistant GC global corporate he oversaw all M&A legal work for BP.

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Divided we fall – Sidley Austin announces review of Frankfurt office following partner departures

Europe’s largest and one of its most highly divided economies, Germany has put many law firms’ strategy to the test and today (25 February) Sidley Austin announced that it has placed its Frankfurt office under review following a number of partner departures.

The Global 100 top 15 firm’s announcement – which follows the decision by Shearman & Sterling last year to close its Dusseldorf and Munich offices and consolidate its efforts in Frankfurt, as Latham & Watkins also last May announced the launch of a further German office in Dusseldorf – comes after Sidley tax partner Werner Geisselmeier left for Pinsent Masons’ Munich office in December last year, leaving the office with only one partner. Continue reading “Divided we fall – Sidley Austin announces review of Frankfurt office following partner departures”

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Deals: CC, Taylor Wessing and Ashurst act on infra and real estate deals

Advisers benefit as investors target industrial assets

The shift towards global industrial real estate portfolios as an asset class last month saw Clifford Chance (CC) advise newly-formed SEGRO European Logistics Partnership (SELP) on its €472m acquisition of a portfolio of prime development land in Germany, Poland and France from funds managed by Tristan Capital Partners.

The CC team leading the deal included global head of real estate Adrian Levy, alongside London real estate partner Mark Payne and fellow City-based head of real estate tax David Saleh.

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BT selects Axiom for global legal outsourcing and analytics contract

Jobling steps aside as head of volume business BT Law

An innovator long at the vanguard of transforming the traditional in-house legal function, BT in February entered into a three-year contract with Axiom to provide the telecoms giant with legal outsourcing and analytics services across the UK, US, Africa, Middle East and Asia, replacing and extending a contract formerly held by legal process outsourcing (LPO) provider UnitedLex.

All work previously undertaken by UnitedLex, which includes 30% of BT’s global services division’s legal work in the UK, transferred to Axiom on 1 February after a successful tender process that concluded towards the end of 2013.

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MasterCard appoints Murphy as GC as Hanft steps down

UBS and HSBC see key in-house moves

The start of 2014 has seen almost as much in the way of global lateral movement and internal promotions in-house as out. Last month, MasterCard named Tim Murphy as its general counsel (GC) and chief franchise officer; Gibson, Dunn & Crutcher appointed UBS’s former global head of investigations and Americas GC Mark Shelton as a partner in New York; and HSBC confirmed that Cleary Gottlieb Steen & Hamilton partner Shawn Chen has joined the bank to oversee its regulatory and enforcement department.

Murphy is to take his seat on the corporation’s executive committee as MasterCard’s GC from 1 April as current incumbent Noah Hanft retires from the role.

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DISSENT: The road to equity – a difficult journey, an uncertain destination

The Royal Bank of Scotland’s James Tsolakis argues the profession must accept a fundamental challenge to its traditional model

The legal profession is going through a period of dramatic and profound change, and the forces driving these changes are having far-reaching consequences on the industry. The roles and responsibilities of the equity partner are not immune from these forces, and are evolving and expanding in response. For many this is creating great ambiguity, while others are seizing the opportunity.

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Mergerwatch: Speechly Bircham in talks with Charles Russell

Speechly Bircham is trying its hand once more at finding a merger partner as the firm last month announced it is currently in talks with fellow Legal Business 100 firm Charles Russell, a deal that would place the combined firm in the top 30 of the LB100.

A joint statement released by both firms on 21 February said: ‘City law firms Charles Russell and Speechly Bircham have confirmed that they are in preliminary talks about a potential merger between their two firms.

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Where the bodies lie – the risk report 2014

 

While the regulatory upheaval of recent years has calmed down, our annual risk report finds law firms facing many threats lurking around the corner

In our seventh annual risk management and professional indemnity survey with broker Marsh, we asked law firms if they felt they had got to grips yet internally with the Solicitors Regulation Authority (SRA)’s outcomes-focused regulation (OFR) regime. One firm said: ‘Yes but it is continuous improvement so it can never be “completed”.’

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