It’s been a bumpy ride for many of the UK’s largest firms, fighting battered profits with consolidation and increased global expansion. Welcome to the Legal Business 100, where headline revenue increases hide a tougher reality
When the UK’s 62nd largest law firm by revenue is suddenly wiped off the face of the earth, despite posting a 2% revenue increase in 2011/12, you’d expect a little nervousness within the profession. Cobbetts, which went into administration in March, posted a profit per equity partner (PEP) increase of 16% in its last-ever LB100 appearance, something that many of the firms occupying the list today would gladly take. But, as it would turn out – as has been the case ever since the 2008 collapse of Lehman Brothers – when it comes to law firm financials, all is not what it seems. And, as the demise of Halliwells proved in 2010, it takes more than the collapse of a regional stalwart to seriously unhinge the market.
Mid-pack advisers faced contrasting fortunes over the year, with many generalists seeing margins under continued pressure, while a sizeable band of confident City and insurance players rode the winds
With a combined total of 9,859 lawyers, 1,416 equity partners, £2.46bn in revenue and profits of £578.7m, the firms ranked 26-50 in the LB100 lag significantly behind the top 25 as a group.
Revenue at the average firm in the upper quartile of firms is up 9%, inflated by the wave of mergers that has boosted the income at firms such as Dentons and Herbert Smith Freehills, while firms ranked 26-50 managed average revenue growth of 7%.
The gulf between success and failure among the firms occupying the second half of the LB100 is as pronounced as ever. From highly profitable boutiques to ravaged regionals desperate for a merger, we chart the haves and the have-nots
Collectively making up just a tenth of the LB100 firms’ total 2012/13 revenue for 2012/13 of £19.1bn, law firms ranked between 51 to 100 in the table can be polar opposites. The gap between high and low performing firms in these two quartiles is as startling, with profit per lawyer (PPL) varying from £177,000 at ascendant litigation specialist Stewarts Law to just £15,000 at the beleaguered Manches.
A five-year view of the LB100 underlines the profound impact globalisation has had on the UK’s top firms but also the soaring success of the best mid-pack players. Legal Business analyses the winners and losers since Lehman unleashed a storm
The five years that have passed since 2008, when the previous year’s credit crunch morphed into full economic meltdown, have been, in relative terms, the bleakest period economically in the UK since the Second World War. Yet despite this, with the exception of 2009/10, when total revenues tumbled 14%, collectively the UK legal profession has grown remarkably during that period. In our 2008 report, total turnover of the top 100 firms was £13.96bn. This year, those top 100 firms have amassed revenues of £19.1bn, an increase of 37%. Continue reading “LB 100 – The Five Year View: Riders on the Storm”
Respectable, yes, but 2012/13 was a tough year, even by the post-Lehman standards law firm leaders have become accustomed to. While a frantic run of consolidation and international expansion pushed revenue up 8% to £19.1bn, like-for-like growth was far more subdued.
On all objective measures of productivity and profitability, there were further slides, even before accounting for inflation. Back-of-the envelope calculations indicate that the UK’s top 100 law firms are about 25-30% off their boom-time highs in real terms underlying profitability.
In trying to respond to that pressure there has been a genuine shift in gravity among the UK’s top 25 over the last half decade, with the group reborn in truly globalised form. When people used to talk about law being global, until recently they really meant six or so firms. Now it’s 20-plus. With SJ Berwin to join King & Wood Mallesons, and Ashurst this autumn to vote on full integration with its Australian partner, this group is to a considerable extent operating in a different space to the rest of the LB100. Average revenue in this group is just short of £600m, against £98m in the second quartile, while underlying profitability is nearly double that of the next 25. Continue reading “The age of turbulence has only just begun for the UK’s top 100 firms”
Which firms are the most profitable? In this table we blend together all of our profitability measures, including PEP, profit per lawyer and profit margin to discover which of the top 100 firms are the most profitable. The 100 firms have been ranked according to their mean rank across all three measurements.
From consolidation to price pressure, to market confidence, leading management figures at Legal Business 100 firms give us their views on the 2012/13 year and the challenges ahead
Value for money
‘We’re facing fee pressure of course – and it won’t ease – but there is recognition from clients of different levels of service. The key word is not price but value. Finding a pricing structure which works for the client is essential, as well as supporting the legal departments of clients – helping them to frame key issues to management, helping on staffing shortages, training and knowledge management and so on. These are all areas law firms should embrace.’
Paul Olney, practice partner, Slaughter and May