Ashurst is targeting expansion in the US as the firm announces financial results that show profit per equity partner reaching a record high and turnover just shy of £1bn.

The firm’s 2023-24 financial results show revenue climbed 9% to £961m, while PEP went up by 14% to hit £1.336m – a record-high figure that more than makes up for a slight decline last year that edged it down from £1.175m to £1.17m.

The revenue increase marks Ashurst’s eight consecutive year of growth, although is is slightly below last year’s increase of 10% and the previous year’s of 12%.

Global CEO Paul Jenkins told Legal Business he is happy with the results for the first year of the firm’s 2027 strategy: ‘We’re clear on where we want to focus, in terms of geography, sectors and practice areas, and it’s very good to see the fruits of that focus.’

He is also optimistic about his firm’s prospects of crossing of crossing a key milestone: ‘We’re in line to cross a billion pounds in revenue for this financial year.’

More than 85% of the firm’s turnover came from its five key sectors: banks and private capital, real estate, technology, infrastructure, and energy and resources, the last of which accounted for 23% of the firm’s revenue.

‘We’re starting to see a bounceback in transactional work’, said Jenkins. ‘But what we saw last year was particular activity in the energy sector, which translated to growth in a variety of areas, including projects, disputes, and corporate M&A.’

The firm’s disputes, investigations and advisory practice grew by 10%, while projects and energy transition was up by 11%, with ‘double-digit growth’ in corporate in Korea, Australia, Singapore, France, Italy, and the UK, and 10% growth in funds and restructuring across Asia Pacific. The firm also saw a strong performance in its consultancy and governance division (up 47%) and its Ashurst Advance business (up 16%), which launched a third global delivery centre in Krakow this February.

The UK, US, and Middle East all outperformed the firmwide revenue increase, with turnover bumps of 13%, 18%, and 17%, respectively. The firm also cited ‘significant growth in Singapore and a solid year in Australia’, with Italy and France as ‘standout jurisdictions’ in continental Europe.

The US growth rate was slightly slower than the 20% increase reported last year, however Jenkins said the firm has ambitious growth plans, targeting energy, real estate, private capital, and technology for further growth stateside.

Jenkins commented: ‘In the US, we’ve continued to double down on infrastructure and financial institutions. We continue to look for the right opportunities in our other key areas of focus. We’re looking for both incremental growth and more significant growth – whether it’s teams or otherwise. But we’ll only do that if it’s the right opportunity from a business perspective, and the right opportunity hasn’t arisen yet.’

US highlights over the last year include derivatives partner Nick Allen joining the New York office from Fried Frank in April, and Los Angeles projects and energy transition specialist Tristan Robinson being made up to partner in the firm’s most recent round of promotions.

The firm has secured a number of notable mandates. Ashurst’s London team is advising real estate investment trust Tritax Big Box REIT on a £3.9bn recommended all-share combination with UK Commercial Property REIT. Globally, the firm’s London and Hong Kong teams also advised The Hongkong and Shanghai Banking Corporation on the provision of its digital assets platform, known as HSBC Orion, to the Central Moneymarkets Unit of the Hong Kong Monetary Authority.

One area in which Jenkins sees opportunities, in the US and elsewhere, is private capital. Global private equity practice co-head David Carter left the firm for O’Melveny & Myers last week. However, Jenkins noted that Ashurst promoted PE senior associate Sara Hamzawi to the partnership in April, and pointed to firmwide experience in the broader private capital space beyond private equity.

Finally, Jenkins also highlighted the firm’s pro bono work: ‘Social responsibility is often not touched on in this context, but it’s very important to the firm, and we had our strongest pro bono year ever, at over 65,000 hours across the global firm.’

Alexander.ryan@legalbusiness.co.uk

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‘I don’t think you will get any of the City firms to talk about this sort of thing… You have? Well. I am astonished. It is one thing for the Americans and accountants to get into this sort of thing, but not the lawyers.’

‘Anyone who gives you that information will be booted out of the partnership.’

‘When clients see these types of figures, they will inevitably think we are being too highly paid and in many ways they are right. I can see a time when lawyers will not be able to justify making this amount of money. We have to steer a course between our competitors laughing at us for not grossing enough, and clients being angered by the amount of money we are making.’

These three quotes, taken from our very first financial survey in 1992, speak volumes. The fact that no-one would go on the record, even for more generalist comment around law firm revenues, spoke of an industry above such grubby considerations as money. In spite of this reticence, the fact that LB managed to extract the turnover and profit figures of 35 UK firms with revenue over £20m by anonymous co-operators at those firms tells its own interesting story, even as that data was divulged despite ominous warnings from management around the partnerships.

But once the floodgates were opened, there was no holding back. The industry went from not knowing what profit per equity partner figures were one year, to in 1993 being presented with the financial data of the top 100 UK firms – the LB100 as we know it today.

The cloak and dagger secrecy of law firm financials has evaporated over time as the concept of the profession evolving into a business took hold.

The contrast between then and now is extraordinary. In 1993 more than 20,000 lawyers in the UK grossed £2.68bn. Now, 76,627 fee-earners have amassed £31.35bn, more than a tenfold increase in turnover for the group. The average firm in 1993 had 200 lawyers billing around £27m compared with 776 lawyers billing £313.5m.

Faced with these comprehensive figures, it’s fair to say that the cloak and dagger secrecy of law firm financials has evaporated over time as the concept of the profession evolving into a business increasingly took hold. That said, there are even now in 2022 firms which prefer to remain tight-lipped on the vulgar subject of lucre, with Slaughter and May (not required to file LLP accounts) being the perennial poster child of those not wishing to discuss financials. A handful of others did not disclose details of profit.

A read through this year’s LB100 report, as with the vast majority that preceded it, reveals nary an anonymous comment, indicative of an industry that has grown confidently into the groove of speaking about such pecuniary matters. It might also be said that this transparency speaks of a professionalised industry that has grown as Legal Business has grown with it, through the boom years and the bust.

nathalie.tidman@legalease.co.uk

The post Still vulgar to talk about money? Three decades have made the industry less coy appeared first on Legal Business.

Pinsents senior partner Richard Foley argues the industry needs new benchmarks for success

As Legal Business publishes its LB100, it seems apt to step back and ask ourselves whether the industry is focusing on the right things as it seeks to measure success. It should be uncontroversial to say that if law firms are to work better – for themselves, the wider business community and society – they must be diverse and inclusive of all talents. Measuring that type of success is every bit as important as whether a firm moves up or down a place or two in the financial league table. So, perhaps one measure we should look to in the next year’s LB100 is the progress firms are making in tackling issues of inclusion and diversity?

If that is the way we go, however, I would caution against ranking firms by reference to their gender pay gap (GPG) ‘number’. The GPG regime, for example, is a thoroughly well-intentioned piece of legislation that has shone a spotlight on some of the inherent structural iniquities that exist in the UK workforce – not least within the legal profession. It has sparked debate and raised awareness, and if over time GPG reporting is treated in the right way, I have no doubt it will drive positive change.

If, however, what we see is not meaningful change but a knee-jerk desire to change the ‘number’, or celebrate marginal changes in the gap from one year to the next, the point has been missed. Many believe that if we focus on the right inputs, the right outputs will follow. However, that is where I fear too much focus on GPG numbers may lead us in the wrong direction.

If the aim is to get an output of zero GPG, it requires some inputs that run counter to the spirit in which the regulations were introduced – namely discrimination. Filling the most junior roles in the business with men would narrow the gap in the short term, but it is hardly tackling the underlying issue. Similarly, a series of targeted promotions of talented women could lead to a short-term narrowing of the GPG, but it would not change the underlying operating environment for women.

As a senior partner, of course I am pleased if the gender pay gap narrows, but only if it does so as a trend over the long term and is as a consequence of the other things we are doing. Instead of shining a spotlight on one aspect of diversity and inclusion, we need to turn on the floodlight across all aspects of our business.

We need to ask some deep and troubling questions of our organisations, and identify the underlying factors that are barriers to progression of all the under-represented groups in our firms.

‘Do we really believe clients will think we are doing well simply because we pay our partners more than the next firm?’
Richard Foley, Pinsent Masons

Institutions that genuinely want to make progress need to systematically identify and break down these barriers. Some will relate to gender and others will not, but the point is that if we focus on the inputs properly, a more representative and diverse profession will follow.

If we create a business environment designed to ensure all of our people are being given the opportunity to succeed irrespective of irrelevant characteristics such as gender, race, sexual orientation and more besides, then we will be making real progress.

What are the things that will create such an environment? Our research suggests the following: flexible working arrangements, agile working, mentoring, career planning, tackling bias, output (rather than input) based performance metrics and not as ‘yes, we also do all that’ or ‘yes, we allow things like that’ but as standard behaviours embedded as business norms.

As the market gets better at embracing those ideas, we will see change. It will not be easy, not least because it requires us to identify, measure and then hold ourselves to account by reference to metrics that have not been historically important, using data that can be hard to capture.

Certainly what is clear, though, is that the days are over when growing profit per equity partner and ‘bench strength’ was all that mattered. As Alex Novarese argued in these pages recently, law firms are ‘entreated to do better on all manner of broader concerns one minute’ only to be ‘berated for not driving partner profits up’ the next.

Do we really believe that our clients will think we are doing well or are a good business simply because we are paying our partners more than the next firm, or more than last year? You only have to read that out loud to hear the absurdity of it.

Profit is important as a driver of growth and investment, and the partners, as shareholders, look to market-level rates of returns as part of the picture. However, I believe that what will separate the winners and losers in tomorrow’s legal industry is the ability to build a business that stands for something more, and to be able to measure and communicate true progress.

Richard Foley is senior partner of Pinsent Masons.

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The chief executive of Knights says its listing last June  has instilled market confidence in its ability to deliver an ambitious acquisition pipeline. This comes as the law company announced a third law firm acquisition today (15 January) and reported a 37% increase in revenue to £23.9m for the six months to 31 October.

Knights, the largest law firm initial public offering (IPO) to date after raising £50m last year, has acquired Leicester-based employment specialist Cummins Solicitors, which has five fee-earners and £784,000 in revenue, in a £1.5m deal. It takes Knights’ total fee-earner numbers to 485 across eight offices.

The acquisition was announced alongside Knights’ first half-year results since its IPO, and follows an £8.5m deal for Leicester-based Spearing Waite last October. Alongside the increase in revenue – of which organic growth was said to be 10% – earnings before interest, tax, depreciation and amortisation grew 50% to £5.3m.

Knights chief executive David Beech (pictured) told Legal Business the performance confirmed what the firm had been doing for the past six years since he acquired the then £8m firm for a ‘low seven-figure’ sum alongside investor James Caan.

The firm moved from a partnership – with seven equity partners – to a plc in 2012 and Beech says that has firmly set a corporate culture within the business as the partners moved away from being owners to employees.

‘We want to reinvest most of the profits into growing the business through recruitment and acquisitions,’ he commented. ‘The listing has created profile and a confidence in the market when we go and talk to people, they don’t question our ability to deliver an acquisition.’

Beech said there was a strong pipeline of new recruits and acquisitions – the group wants to grow 50:50 between the two and added 35 recruits in the half-year – which meant the firm could afford to be pickier with targets with the capacity to complete four acquisitions a year. Cultural fit was the key, he said, with Cummins’ founder Michael Cummins seen as a future leader.

‘We are low ego, friendly, team orientated, and, it’s a bit crude, but we have a no-dickhead policy,’ Beech said. ‘You have to search, but they’re out there.’

Revenue per fee-earner also increased 25% to £66,000, which Beech said reflected a 10% improvement on recovery and training its fee earners to not underestimate costs when engaging clients. Former non-executive director Richard King has come on board as chief operating officer to help with that.

‘We’re getting quite ambitious,’ Beech said. ‘I wouldn’t have used ambition as a word six years ago but we’re gaining confidence.’

Knights’ strong performance follows that of Gateley, which was the first UK firm to list back in 2015, announcing last week its half-year revenue for the same period was up 20% to $46.4m. The firm expects its revenue to surpass £100m for the full financial year.

Hamish.mcnicol@legalbusiness.co.uk

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In its first financial results since the £43m IPO in May, Rosenblatt has recorded a slight uptick in revenue and profit as it simultaneously launched its own litigation funding arm.

For the first eight weeks of its listed life, Rosenblatt generated £3m in revenue, compared to £2.6m for a two month average in the last financial year. EBITDA edged up from £0.9m to £1m on the same metric while profit before tax was also marginally up: from £0.8m to £0.95m.

The moderate uptick is however boosted by the firm’s cash position, which stands at £11.8m. Rosenblatt also boasted a strong balance sheet of net assets worth £32.7m.

Rosenblatt chief executive Nicola Foulston (pictured) told Legal Business: ‘I’m particularly pleased with the performance of our disputes and employment teams, but we are less happy with corporate. This is partly due to them [the corporate team] assisting with the IPO process itself and uncertainty around Brexit. We’ve seen businesses hesitate and a lot of M&A deals are being diverged.’

When the listing was announced, Foulston also outlined the firm’s intention to set up a third-party funder within ‘the next couple of years’, but the firm announced today (18 September) that it had launched the arm called Rosenblatt Litigation Funding Ltd. With that move only taking around four months, it would seem that the decision to accelerate the plans was influenced by the proposed listing of Vannin Capital, a major player in the litigation funding market.

Vannin announced earlier this month that it planned to issue £70m of new shares in a float expected to take place in October, and appointed Allen & Overy’s former senior partner David Morley as part of the ambitious plan.

However Foulston dismissed such claims: ‘It’s nice to be quoted in the same sentence as Vannin! As a result of the IPO and the publicity we have received we have seen litigation activity increase much faster than we expected so that came with a need to provide third party funding.’

She added: ‘I was quite keen to see us move into this market as litigation funding is becoming too slow, the decisions on big cases take ages to come through. We see perfectly good cases running out of time all as a result of funding not being secured.’

Foulston stated that Rosenblatt would target smaller, mid-tier disputes, and said the funding arm had already picked up an arbitration case which had a £5m funding requirement.

Acquisitions are also on Rosenblatt’s agenda, as Foulston commented: ‘I would be disappointed if we don’t make any acquisitions in the next 12 months.’

Despite these ambitions, Rosenblatt has suffered the departure of finance director Patrick Firebrace, who today joined VWV as director of finance. Firebrace played a key role in Rosenblatt’s listing earlier this year.

Currently, the record for largest UK law firm float is held by Knights, with the Staffordshire-based firm announcing a £50m IPO in June.

tom.baker@legalease.co.uk

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In the last boom year in 2008 before the global financial crisis took its toll, the picture was rosy for UK-bred law firms. Riding high on an exchange rate that was more than two dollars to the pound, Clifford Chance (CC) topped the table with revenues of nearly $2.7bn, heading a list of seven $2bn+ firms, of which four were Magic Circle and another, DLA Piper, the result of a headline-grabbing UK/US tie-up.

Buoyed by their own success, the messages from the City elite were naturally upbeat. Not least because those firms felt that with the globalisation of legal services in full swing and the focus of clients shifting away from New York and towards markets like China and India, their attractiveness to US suitors had never been greater. ‘We want to be the number one global law firm and, without a strong US component, we won’t achieve that,’ said Linklaters’ then firm-wide managing partner Simon Davies. Freshfields Bruckhaus Deringer’s chief executive at the time, Ted Burke, echoed the point: ‘We’ve never seen so much interest in us from New York firms.’

However, in ten years that position has dramatically changed. While the currency effect has had a material effect on UK firms’ revenues in US dollars, Freshfields and Linklaters are the slowest-growing law firms in revenue terms in the Global 100 over the last decade. Even in home currency, turnover is up just 19% and 18% respectively – very poor by the standards of many leading US firms. Even if the average annual exchange rate for 2007 were applied to Freshfields’ £1.4bn revenue today, it would still only be up by 18%. In contrast, there are six US law firms that we have data for reaching back a decade that at least doubled their revenues (and more than tripled in one case).

One of the main reasons the Magic Circle felt they had the momentum was that US peers had failed to break London convincingly while the UK elite had branched out successfully over Europe and Asia. As it turned out, US firms’ assault on the City took a decidedly more tactical and fruitful turn in the wake of Lehman Brothers’ collapse. Three of the most successful Global 100 firms (see box below) – Quinn Emanuel Urquhart & Sullivan, Kirkland & Ellis and Ropes & Gray – have all made huge inroads in the City in recent years. While ten years ago progress in the lateral hiring market was sporadic in terms of notable transfers, in the last five years the pace and calibre of US acquisitions has been striking, culminating in Kirkland paying $10m a year to secure the services of Freshfields private equity heavyweight David Higgins at the end of 2017.

You can reverse those dynamics for the Magic Circle in New York. And the warning signs were evident back in 2008. Instead of closing, the profitability gap between top-tier US and UK firms has substantially widened – the average between those four dropping from $2.5m to $2.1m in ten years – meaning all have been forced to dispense with rigid locksteps to come up with more flexible remuneration packages to reward star individuals. Yet they simply cannot compete with packages at elite US firms, which have continued to hurtle skywards. Ten years ago, five firms had profit per equity partner in excess of $3m – Sullivan & Cromwell; Slaughter and May; Cravath, Swaine & Moore; Quinn Emmanuel; and Wachtell, Lipton, Rosen & Katz. This year there are 17, and Wachtell; Kirkland; Paul, Weiss, Rifkind, Wharton & Garrison; Quinn Emanuel; Sullivan; and Cravath all break $4m. All the while, more aggressive packages for star M&A and disputes partners mean that the biggest names now command annual packages in excess of $10m.

But while New York firms still feature prominently in many of the major metrics – particularly profitability – a ten-year view clearly illustrates some relative loss of dominance for the Wall Street elite. The top ten US performers in organic growth includes only one New York-bred outfit, Paul Weiss. The list is instead dominated by institutions bred out of Chicago, Los Angeles, Boston and Washington DC, including Illinois juggernaut Kirkland.

Quinn Emanuel’s ascent has been particularly startling. Entering the Global 100 for the first time in 2008 with revenues of $384.5m, the LA-born litigation leader has taken full advantage of the global bull market in high-end disputes to expand its business throughout Europe and Asia, growing revenue 220% to $1.2bn. Meanwhile, having a canny ability to excel in both disputes/regulatory work in the US, as well as having muscular transactional practices, has served Kirkland, Paul Weiss and Gibson, Dunn & Crutcher well. And Cooley stands out as a rare West Coast tech success story of the past ten years, although some of its growth came from large team hires (from Morrison & Foerster and Edwards Wildman Palmer in London, for example).

But while the sluggish performance and currency woes of the UK elite are clear, some US firms have seemingly managed to achieve the impossible; a backwards move over a ten-year stretch. Most notable laggards are Cadwalader, Wickersham & Taft, O’Melveny & Myers and Shearman & Sterling. Cadwalader’s loss of status is capped by this year falling out of the Global 100 having been ranked at number 58 a decade back with $587m in turnover. This year, revenue was down 10% year-on-year to $408.1m – a drop of 30% since 1998, a near halving of income once inflation is accounted for. Lawyer headcount at the firm is down 44% over the same period. Cadwalader’s problems began when its structured finance team was decimated by the credit crisis and the collapse of core clients Lehman and Bear Stearns.

O’Melveny, once considered West Coast royalty and among the top 25 Global 100 firms in 2008, has also shed headcount significantly in ten years – from over 1,000 lawyers to 660 on average in 2017. Revenue followed suit, taking the firm from 24th in 2008 to 58th – despite a slight lift in turnover in 2017. The irony is that the faded LA glamour of this institution appears to have made it open to a tie-up with a far larger UK player – crunch talks with Allen & Overy (A&O) were taking place this summer as Legal Business went to press. Yet while partner profitability is broadly comparable even such a tie-up is regarded as a formidable cultural and logistical challenge to win partnership backing.

As to once-strong brands losing their lustre, debate regarding the long-term decline of Shearman dates as far back as the early 2000s. The New York firm pioneered global expansion in the 1990s but within a decade had lost momentum. It slipped from tenth place to 25th by 2008 and now holds on to its spot in the top 50 by a mere three places. Revenue is up just 1% on last year to $917.5m. Ten years ago, revenue was $921m and then senior partner Rohan Weerasinghe admitted: ‘We overgrew in the late 90s.’ One consultant went further than that, commenting: ‘If Shearman was a corporate and I was an activist shareholder looking at the market, then a merger with a Magic Circle firm would be top of my list in a letter to the board.’

In 2008, A&O and Shearman were touted as potential merger partners. Nothing happened.

The awkward reality for London leaders facing what has been in relative terms a lost decade in global law’s top echelons is that while upwardly mobile US institutions are impossible to entice into a merger, it is hardly any easier with the players sliding just as quickly down the pecking order. LB

mark.mcateer@legalease.co.uk

Global 100 top organic growth 2008-18

Global 100 slowest growth rates 2008-18

Return to the Global 100 menu

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‘Turnover for vanity, profit for sanity.’ How many times have you heard that phrase or variations of the theme espoused in the legal industry? A lot since the banking crisis recast the profession.

Commercial firms are forever chasing the grail of higher profitability to the extent of fashioning strategy around the notion of slashing the business to achieve it. People used to forecast consolidation and the dawn of the $10bn law firm – now it is as common for law firm leaders to talk of City-bred institutions getting smaller.

The professed reasons for the doctrine vary, among them striving to focus on what you do best; technology and commoditisation; a focus on premium work; and competing with US rivals. To a point all have merit. Yet what is the evidence for the belief that law firms can continually shrink as a successful strategy or even that such an approach typically leads to high profitability? Legal Business recently took a 20-year view on the winners and losers of the Legal Business 100. Far from indicating that staying small was highly profitable, the figures showed that firms with the knack of prolonged organic growth usually sustained and often improved profitability. Firms in this camp included Watson Farley & Williams, Fieldfisher, Osborne Clarke and Stephenson Harwood. Likewise, the blistering 25-year expansion of the Magic Circle from the late 1980s onwards coincided with dramatic increases in profitability. The strongest post-Lehman performance of the Magic Circle has been Allen & Overy, the only one of its peer group to maintain an expansionary stance.

Take a look at the most upwardly mobile firms in the world’s largest legal market – among them Kirkland & Ellis, Latham & Watkins, Ropes & Gray, Quinn Emanuel Urquhart & Sullivan, Gibson, Dunn & Crutcher – none of them bred in growth-phobic Manhattan – and it is clear that super-growth hardly hurts the bottom line.

Let us add some nuance to this debate. There are most certainly times when it makes sense for law firms to restructure, whether that means closing offices, downscaling practices or the last resort of slashing the partnership. But there is a fundamental difference between a once-a-decade reboot that you then draw a line under and the idea that a firm can perpetually cut. That is why a wave of generally well-handled restructurings at leading London firms worked effectively in 2009 only to be applied with diminishing returns ever since. Law firms are intensely people businesses – it is hard to overstate the importance of partner morale to financial performance. If all you can offer the troops is a war of attrition and struggle, sooner or later they will yearn to work for a firm with a different story… or quit law altogether.

Of course, turnover can be elevated to a pointless and counter-productive goal and appropriate financial aspirations will vary enormously for individual firms by peer group and practice model.

But as a general approach for most firms, the pursuit of healthy, sustained organic growth should, alongside strong financial management, be a far more central goal. The notion that you can retrench to global victory is becoming a dangerous myth at the upper reaches of the legal profession. Far from sanity, the never-ending dash for partner profits above all other considerations is starting to look more like a form of collective madness.

alex.novarese@legalease.co.uk

The post Comment: Slashing to victory – the most dangerous law firm myth appeared first on Legal Business.

Latham & Watkins has become the first law firm ever to report revenues over $3bn with the Los Angeles-bred firm adding nearly $250m to its top line.

The US giant today (22 February) confirmed financial results for the 2017 year, showing an 8.5% hike in revenues to $3.06bn, against $2.82m the previous year. Profit per equity partner (PEP) shifted up 6% to $3.24m, arguably sealing its status as the most potent global law firm, underwritten by credible transactional and disputes coverage spanning the US and Europe. Revenue per lawyer grew at a modest 1.5% pace to $1.26m while the firm increased its headcount 6.9% to 2,436 lawyers.

Richard Trobman, who is coming to his first anniversary as co-vice-chair, told Legal Business of his take on the ‘very exciting figures’, noting: ‘2017 was a fantastic year of strong and steady demand. Q4 was incredibly busy and we see that continue into 2018 across our practices, industries and markets.’

Although the firm did not disclose London revenues, Trobman said its City arm outpaced the global performance, posting a double-digit percentage income hike. ‘Along with New York, London is the central focus of our strategy and we’ll continue to focus on it.’

Trobman said many of the firm’s core practices in M&A, private equity, capital markets and banking saw 20%-plus growth, while its contentious business continued to grow. ‘In 2017 we saw the real benefit of our integrated global platform,’ added Trobman, pointing to the fact that the firm’s top 25 clients instructed its lawyers in 21 offices across the world on average.

The list of highlights and headline hires in 2017 is unsurprisingly long. Marquee deals included acting for Siemens on the €15bn merger between its railway operations with Alstom and advising Blackstone and CVC on the £3bn acquisition of Paysafe. The firm’s 34 laterals worldwide in the year included six in London.

In the City the firm returned to the Magic Circle for well-liked M&A partner Edward Barnett from Allen & Overy. It also continued its push outside its transactional heartlands in the UK. In disputes, it tapped Quinn Emanuel Urquhart & Sullivan in the first lateral out of the elite litigation firm’s City office in nine years and Olswang just before its three-way merger with CMS.

The firm also made waves in Europe, bolstering its small Spanish operation with the hire of DLA Piper senior partner and global co-chair Juan Picón last November, one of the most renowned lawyers in the country. Trobman also pointed to Germany as the area in Europe where the firm saw the biggest opportunities.

Trobman said the bullish mood was running into 2018, promising: ‘We have only just started.’

Despite the robust performance, all industry speculation now will be on if Kirkland & Ellis can de-throne Latham as the world’s highest revenue law firm after months of market chatter about another robust year for the ultra-ambitious shop.

While Kirkland last year trailed Latham’s turnover to generate $2.65bn, the question is if the frenetic activity among its core sponsor clients can have propelled it past its global rival. However it plays out, rivals in the City can’t help but reflect that it wasn’t that long ago that industry pundits believed the first $3bn law firm would have been bred in the Square Mile. Pity the poor City leaders.

marco.cillario@legalbusiness.co.uk

For more on the competitive threat of US leaders in London, see the recent cover feature, The Departed (£)

The post Latham surges to become world’s first $3bn law firm… but can Kirkland take its crown? appeared first on Legal Business.

‘Turnover for vanity, profit for sanity.’ How many times have you heard that phrase or variations of the theme espoused in the legal industry? A lot since the banking crisis recast the profession.

Commercial firms are forever chasing the grail of higher profitability to the extent of fashioning strategy around the notion of slashing the business to achieve it. People used to forecast consolidation and the dawn of the $10bn law firm – now it is as common for law firm leaders to talk of City-bred institutions getting smaller.

The professed reasons for the doctrine vary, among them striving to focus on what you do best; technology and commoditisation; a focus on premium work; and competing with US rivals. To a point all have merit. Yet what is the evidence for the belief that law firms can continually shrink as a successful strategy or even that such an approach typically leads to high profitability? Legal Business recently took a 20-year view on the winners and losers of the Legal Business 100. Far from indicating that staying small was highly profitable, the figures showed that firms with the knack of prolonged organic growth usually sustained and often improved profitability. Firms in this camp included Watson Farley & Williams, Fieldfisher, Osborne Clarke and Stephenson Harwood. Likewise, the blistering 25-year expansion of the Magic Circle from the late 1980s onwards coincided with dramatic increases in profitability. The strongest post-Lehman performance of the Magic Circle has been Allen & Overy, the only one of its peer group to maintain an expansionary stance.

Take a look at the most upwardly mobile firms in the world’s largest legal market – among them Kirkland & Ellis, Latham & Watkins, Ropes & Gray, Quinn Emanuel Urquhart & Sullivan, Gibson, Dunn & Crutcher – none of them bred in growth-phobic Manhattan – and it is clear that super-growth hardly hurts the bottom line.

Let us add some nuance to this debate. There are most certainly times when it makes sense for law firms to restructure, whether that means closing offices, downscaling practices or the last resort of slashing the partnership. But there is a fundamental difference between a once-a-decade reboot that you then draw a line under and the idea that a firm can perpetually cut. That is why a wave of generally well-handled restructurings at leading London firms worked effectively in 2009 only to be applied with diminishing returns ever since. Law firms are intensely people businesses – it is hard to overstate the importance of partner morale to financial performance. If all you can offer the troops is a war of attrition and struggle, sooner or later they will yearn to work for a firm with a different story… or quit law altogether.

If all you can offer the troops is a war of attrition and struggle, sooner or later they will yearn for a different story.

Of course, turnover can be elevated to a pointless and counter-productive goal and appropriate financial aspirations will vary enormously for individual firms by peer group and practice model.

But as a general approach for most firms, the pursuit of healthy, sustained organic growth should, alongside strong financial management, be a far more central goal. The notion that you can retrench to global victory is becoming a dangerous myth at the upper reaches of the legal profession. Far from sanity, the never-ending dash for partner profits above all other considerations is starting to look more like a form of collective madness.

alex.novarese@legalease.co.uk

The post Slashing to victory – the most dangerous myth appeared first on Legal Business.

It is dominated by mid-sized firms while global players and City leaders lag far behind. Watson Farley & Williams (WFW) sits in the third spot. You must scroll down nearly 40 positions before finding the likes of Linklaters and Clifford Chance.

It is not the chart for revenue, profits or partner earnings. It is a table of major British law firms’ organic growth over the last ten years, marking the period since the financial crisis.

True, adding £350m to your top line over a decade only gives you 35% growth if you are Freshfields Bruckhaus Deringer (in 38th place), but it is more than twice the 2016/17 turnover of Mishcon de Reya, which leads the table having nearly quadrupled revenues since 2007 (for more on Mishcon’s secret formula see last year’s cover feature, ʻThe USPʼ).

The 1990s and 2000s were defined by the City elite dramatically pulling away from the herd, year-on-year for a generation. The banking crisis fundamentally changed those dynamics. Our starting point is a table that excludes Legal Business 100 (LB100) firms that have conducted major mergers, had not yet entered the group in 2007 or were taken over, leaving 53 remaining. While London’s big four Magic Circle firms have grown by 40% on average over the ten-year span, 16 largely mid-market firms have more than doubled their size in terms of revenue. Only two of that camp would now sit in the UK top 25 (see table below).

Many of the firms excelling were previously held up as symbols of the mid-tier malaise supposedly gripping the globalising legal industry. The scale of that revival among a number of firms strongly suggests something that has provided firms generating between £70m and £200m with a winning formula for a more uncertain world.

Legal Business put this assumption to the test by looking at three mid-tier players that have sustained dramatic financial performance over the last ten years… often hardly noticed by the wider market: Osborne Clarke (OC), Fieldfisher and WFW.

There is a sweet spot in law firm size to secure economies of scale but allow for tactical agility.

The second-highest ranked firm in terms of revenue growth among this trio, OC turned over £209m in 2016/17, making it one of the only three players in the current UK top 100 that more than doubled their size since 2012. Lacking a clear direction or identity only five years ago, Fieldfisher, meanwhile, posted one of the strongest performances of 2016/17, growing its top line by 36% to £165m. And finally WFW, still a mystery for many in the market, today generates nearly three times the revenue it did ten years ago, with income of £159.8m in 2016/17. What lies behind these numbers? And, more importantly, what lessons do their stories teach the legal industry?

The pivot

It was a very different picture a few years ago, especially at OC and Fieldfisher, with the pair going through near-crisis situations. The Bristol-bred OC trailed an unusual path during the 1990s, focusing on transactional work in the digital business sector and riding the late-1990s dotcom boom. The firm was expansive and despite its small size set up an international alliance in Europe, only for the early-2000s tech-slump to ravage its practice, leading the then 350-lawyer firm to shed nearly 15% of its fee-earners. Having over-expanded, the firm’s cost base was a mess and one of the strongest legal brands forged outside the Square Mile was in serious trouble.

For its part, as recently as five years ago Field Fisher Waterhouse looked like the poster child for mid-tier drift. Through 2012 the firm had been hit by the failure of merger talks with Lawrence Graham and OC, suffered the loss of well-regarded chief operating officer Charlie Keeling, and seen profits per equity partner (PEP) drop 20% to £410,000, its lowest since 2004.

In comparison, WFW was facing less stark challenges – it had a clear market position as a shipping finance specialist that launched in 1982. Yet its size put it awkwardly between boutique and a genuine force in the City, and operational grip was lacking. Over recent years merger talks with larger firms as varied as Simmons & Simmons and Chadbourne & Parke underlined its uncertain path.

All three were to change their fortunes after going through some form of purposeful reinvention. Of the trio, OC took the first steps.

The key architect of that revival was corporate partner Simon Beswick, who went on to build a reputation as a standout law firm leader among his peer group, rivalled only by former Wragge & Co senior partner John Crabtree and overshadowed only by Nigel Knowles in his prime at DLA Piper.

Beswick took over as managing partner in 2003 from the flamboyant Leslie Perrin and had to spend several years restructuring the firm and dealing with costs.

Such work was achieved with minimal fallout in the partnership, a testament to his deft handling. ‘The people who built this firm conceived the idea that it would not be a traditional, hierarchical law firm: it would be run as a business and constantly adapt to the environment; it would not be afraid of change but embrace it,’ says Beswick, now OC’s international chief executive.

The medium-term response was to recalibrate its business, beginning to expand a disputes practice that generated only 5% of its revenues, against 20% currently. There was also some widening of industry focus. This took some trial and error as the firm initially spread itself too thinly. ‘We went too broad,’ recalls Beswick. ‘In 2008/09, after the financial crisis, we realised we could not have insiders in every sector, we were not big enough. We needed to focus on just a few sectors.’

Beswick’s successor as UK managing partner, Ray Berg, the down-to-earth corporate lawyer who cut his teeth at Allen & Overy, is seen to have had a strong handover, with Berg sustaining the firm’s reputation as a progressive and imaginative outfit.

‘[Berg] is a superstar. He has real drive, real purpose and great vision for the business,’ says Greg Leyshon, head of the business transaction practice. Adds Leona Briggs, head of real estate litigation: ‘Bumping into Ray at the pub, you would not say he is the typical managing partner. He is very firm in his view but very approachable. He has really had an impact in driving our sector focus forward.’

‘The firm’s leadership is very much the Michael Chissick show. His mantra is there are only finite resources, so what are we going to focus on?’

L-R: Matthew Lohn and Michael Chissick, Fieldfisher

If OC was on a much sounder footing by 2012, Fieldfisher was near a tail spin, a painful comedown after having ridden the 1995 to 2007 boom in the City when everyone made money. ‘It’s no secret the firm went through some difficult times,’ says head of corporate Andrew Blankfield. ‘We were right not to pursue those mergers [with OC and LG]. We came out of that with a degree of self-examination.’

The firm was also riven by strong personalities and personal rivalries – which contributed to a bizarre partnership provision that prevented three of its then partners, Mark Abell, Nick Rose and Peter Stewart, from running for managing partner until 2022. Abell quit for Bird & Bird to head its franchising team in 2013 and former litigation head Stewart passed away in 2015. Rose still heads its IP and tech litigation group.

It was the energetic and entrepreneurial Michael Chissick, then heading its tech, outsourcing and privacy group, who provided a good deal of the momentum. Chissick took over as interim managing partner in 2012, taking the role on permanently in 2013, the same year Matthew Lohn assumed the senior partner role.

Current head of tech, outsourcing and privacy Rob Shooter says the firm’s leadership is very much ‘the Michael Chissick show’. ‘He has been exceptionally focused. One of his mantras is that there are only finite resources to do stuff, so what are we going to focus on?’ He describes Chissick and Lohn taking over the reins as ‘fundamental’ to the firm’s success. ‘I’m not sure how strategic a firm we were back then. Everyone at the firm now is aware of the strategy.’

Chissick overhauled the firm’s ‘virtuous triangle’ strategy introduced in 2010, which focused on clients able to feed work to its corporate, TMT and regulatory practices, and implemented a shake-up internally dubbed ‘the strategy on a page’.

A shift into Riverbank House in 2014 heralded investment in tech and infrastructure, while the firm acquired Manchester outfit Heatons that year and, one year ago, opened in Birmingham.

Governance was also overhauled, with management split into two roles: an executive committee run by Chissick, responsible for strategy implementation, and an oversight board headed by Lohn. ‘We transformed from an old-fashioned governance procedure to a reasonably standard form of executive management, partnership supervision which we hold today,’ notes Lohn.

‘We’ve made some really good calls,’ says Chissick. ‘Manchester, Birmingham and the investments made in technology, have all come good for us.’ The firm is also investing in its tech-driven New Law business Condor, overseen by ex-Ashurst securities and derivatives partner Chris Georgiou. Initially targeted at financial services clients looking for support in handling contracts and compliance issues, Condor has rapidly grown since its launch in January, being currently on track to generate £2m for 2017/18.

Chissick sums up the process: ‘We literally reinvented the firm.’

WFW’s change of tack was more subtle. Under the long-term leadership of Michael Greville, its growth had been well behind trend for years. Between 1997 and 2007 its top line grew just 61%, a boom period in which it was even outperformed by a then struggling Stephenson Harwood and many top 50 firms typically were at least doubling their income. For context, Allen & Overy increased its revenues by 431% during that period.

By the time co-managing partners Chris Lowe and Lothar Wegener took over from Greville in January 2014, the firm had already settled into considerably more confident form, in part because its practice was relatively unaffected by the post-Lehman slump then wreaking havoc on larger City peers.

While the firm stayed tightly-focused, it was also now expanding more internationally and broadening its practice beyond shipping into the energy and trade work, a shift Lowe and Wegener championed. The pair also invested in its business services and operations.

Head of disputes Andrew Savage comments: ‘The change of managing partners was a good opportunity to emphasise the recognition of the importance of energy as a sector alongside transport. There is investment going on there that people appreciate because they see there is a real commitment.’

The colours to the mast

The most obvious common ground the trio share is a relatively tight industry focus and practice slant that takes them far from the conventional full-service model that dominates in the mid-market. None have much focus on mid-market generalist corporate and finance work.

Lowe, when pushed for a non-puffy answer to why few partners quit WFW, says: ‘Where else would they go? Who else is as strong as us in our sectors?’

‘After the financial crisis, we started using the sector focus as a way to market ourselves,’ recalls OC head of digital business sector Adrian Bott. ‘Having a sector-first approach was something which made us different back in 2008.’

WFW’s Lowe says: ‘The way most firms approach sectors is by asking “who in this firm is interested in this sector?” and they end up listing 27 different sectors on their website. Here, we set more of an agenda.’

OC focuses on six industry areas, though just three – digital business, financial services and real estate and infrastructure – generate 69% of its UK revenues. In truth, digital business remains the rock on which OC built its church. ‘We invented the concept of digital business,’ says Bott. ‘The digital revolution has surpassed the traditional TMT concept. It has made everything much more connected and interdependent.’

Fieldfisher has narrowed its sector focus since the turbulent years: from 11 to five first, then down to three. Says Lohn: ‘We’re bold enough to say: here are our three areas.’ The financial sector accounts for 26% of the firm’s revenue, followed by TMT at 21% and life sciences at 14%.

In relative terms, WFW broadened its focus, but from the starting point of a near-boutique model and is still the most specialised of the three – what Lowe and Wegener framed as their ‘super sector focus’.

Transport – which includes WFW’s work in maritime, aviation and rail – accounts for 41% of revenue. Energy and infrastructure – renewables, oil and gas, power and natural resources – for 30%. Real estate for 7%. The running joke is that you can boil WFW’s business down to just two industries: transport and energy. ‘We regard ourselves as Magic Circle quality in our sectors,’ says Lowe.

The sector focus has given these firms a clear strategy and a simpler business to manage. ‘We have really simple and clear messaging internally and externally,’ says Lowe. ‘Everybody is going in the same direction.’

OC’s Beswick adds: ‘The competitive advantage of mid-market firms is we adapt more quickly. The disadvantage is we have less money to invest. Those who can do both will win. The way for us to accomplish both is by investing in the areas in which we focus.’

Focus brings another less discussed advantage: firms operating in highly segmented sections of the market are far less prone to predatory recruitment from larger rivals, both City and US, as they operate in adjacent markets, outside core transactional and disputes. In short, there are far fewer threatening rivals who can steal their partners.

All three have strong records on partner retention, while being able to target the right laterals to fit within the strategy. ‘Knowing what we’re selling and having the ability to articulate what we want, we’re not out there for finance lawyers – we’re out there for a specific breed of finance lawyers,’ says Lohn.

OC and Fieldfisher have lost 16 partners each in the last three years, while bringing in 57 and 71 laterals respectively. WFW has seen eight departures to competitors and recruited 27 partners. Lowe, when pushed for a non-puffy answer to why few partners quit WFW, says: ‘Where else would they go? Who else is as strong as us in our sectors?’

The running joke is you can boil WFW’s business down to just two industries: transport and energy.

L-R: Lothar Wegener, Chris Lowe and Nigel Thomas, Watson Farley & Williams

In 20 interviews conducted for this piece with current and former partners, even the trio’s critics describe cohesive partnerships with good morale.
One former OC partner says: ‘A lot of partners have landed there from bigger firms and they like the culture, it’s a place where people like to work. If someone moved for that reason they are less likely to move again.’

The formula does not obviously mean a particular pay model, beyond the obvious point that partners like to work in growing, successful businesses.

OC has the flattest model using a modified lockstep, paying between £395,000 to £930,000. The other two have more aggressive spreads and models, with WFW using a modified lockstep ranging from 25 to 100 points, with a discretionary bonus pool for high performers. Earnings ranged from £255,000 to £1.45m in the last year. The model includes discretionary gates requiring a partners’ vote to cross.

Fieldfisher’s system ranges from £230,000 to £2m, though the vast bulk of partners earn between £300,000 and £800,000. Profit allocations are assessed annually. Chissick observes: ‘It’s merit-based, not eat-what-you-kill. If a partner has a tough time, we support that partner.’

All three have equity/fee-earner leverage over 5:1 and generate PEP over £550,000, ahead of the current average of £495,000 for the LB100 26-50 peer group. But neither are their results merely financial engineering – all three firms have revenue per lawyer over the LB100 second quartile average of £272,000.

Surprisingly easy globalisation

Much growth for all three has been driven by international expansion, unsurprisingly focused heavily on their core industries. Says Beswick: ‘Because of our industry focus, we thought if we could find a way to support clients in other countries we would become more important for them.’

WFW was the first to focus abroad. The firm’s Manhattan branch dates back to 1990 and is now the second largest overseas source of revenue, bringing in £18m or 11% of the firm’s global turnover.

Its leadership reflects the firm’s international focus: Lowe had been based in Singapore and Wegener is currently in Germany. The German practice is now the firm’s biggest-earning non-UK base, generating £23m in revenue. While its most recent opening dates back to 2014 with the launch in Dubai, 61% of WFW’s revenue comes from outside the UK.

The Legal 500 rankings indicate the maturity of its foreign practice (see table below). WFW has 18 rankings in Asia, against none in the region for OC and Fieldfisher. Its profile in EMEA has much improved in recent years, up from seven in 2012 to 38 currently.

As for OC, having opened in Silicon Valley in the late ‘90s, it also established a presence in Cologne and Frankfurt. But it was around the time Beswick assumed the newly-established role of international chief executive that the firm set out to expand internationally.

Between 2012 and 2014, OC merged with its local alliance firms in Italy and Spain, then added offices in Hamburg, Brussels, Paris and Amsterdam.

‘The initial focus was on building a European law firm,’ says Beswick. ‘Four years ago we decided to build a Eurasian firm.’ In 2015 OC entered Hong Kong, in 2016 Singapore and in 2017 Shanghai. The proportion of the firm’s foreign revenue reached 42% in 2016/17.

The Legal 500 data shows dramatic development in its EMEA and UK practice, with EMEA rankings up from four to 40 in five years.

While the German and Spanish operations (its two highest-earning foreign bases) along with the Italian arm operate in all six of the firm’s sectors, the other practices are more specialised. Beswick cites Sweden, where the firm launched in September to initially service its digital business clients.

Fieldfisher targeted its international business later than the other two, with Chissick admitting: ‘We were late to the European party. We have a smaller footprint.’

Its international strategy was uninspiring five years back. In the previous 12 years it had opened branches in Brussels, Germany, France and Silicon Valley, but generated just 20% of revenues abroad.

A partner who joined in that period says he was concerned about Fieldfisher’s global footprint and obtained reassurance from management they were taking expansion seriously before deciding to join: ‘If you work in the tech space, you have to be in a number of countries.’

Chissick was a strident supporter of international expansion. Under his management, the firm expanded its European footprint and, like OC, later entered Asia, most recently launching in Bologna in July this year. The firm also has a lucrative Russia/CIS team largely operating out of London.

Overseas revenue has grown from 20% to 35% in less than five years, with Paris and Brussels bringing in the largest amount at £11.78m and £10.57m respectively. It now has 25 EMEA rankings in The Legal 500, against 12 in 2012.

Despite the expansion, neither OC nor Fieldfisher carry significant debt. OC’s bank loans amount to £2.3m, but the firm has a cash surplus of £29.8m in the bank. Fieldfisher had loans of £3.25m as of 31 October: the firm is paying down the amount it took to finance the move to Riverbank House in quarterly instalments of £250,000, but has surplus cash of £4.8m.

WFW’s debt is higher. Borrowings went from £4.5m to £18m in the year to April 2016, when seven of its 14 offices relocated (most significantly in New York), took on additional space or refurbished. Debt has been quickly reduced: to £13.6m at the end of April and £9.9m at the end of October.

Lowe and Wegener had both moved to toughen up financial management, ushering in detailed metrics on cashflow and moving to slash lock-up. In came a red flag/yellow flag system on billing. Notes Lowe drolly: ‘People complained about being treated like school children until they saw the impact.’

How big?

Capable of reinventing themselves, galvanising the partnership and sharpening their focus, these firms have dramatically expanded headcounts over the past decade. OC has more than twice the number of lawyers it had in the early 2000s at about 720 today, while Fieldfisher has grown from 386 to 594.

And they all have plans to continue growing. WFW is the clearest on this point, Wegener saying he wants to increase partnership headcount from 146 to 250 by 2020.

This raises the question of how much they can expand – and sustain their competitive edge – before facing challenges seen by larger City rivals. Will the firms become too large to be coherent and what happens when partners accustomed to dramatic growth face the grind of a more mature business?

OC is the obvious example here, as the one which is more likely to face both these challenges sooner rather than later. Like Fieldfisher, the firm used a verein structure to expand quickly into other jurisdictions, and has just moved into the UK top 25 in revenue terms.

Management insists the firm does not perceive itself as a verein. ‘In Germany, Spain and Italy we have worked together for a long time – there are personal relationships going back 20 years,’ says Berg. ‘For the new offices, we have all been actively involved in recruitment: these aren’t faceless people in a different office. These are partners well known to everyone.’

Berg says OC will not open international offices at the same pace in the near future. One former OC partner comments: ‘Their challenge now is consolidating their operations and providing meaningful growth from new clients, stepping up the food chain in terms of the quality of the work. That’s the real test to see if they can challenge their competitors higher up the table.’

Berg professes to be bullish on OC’s ability to sustain momentum but concedes that growth must ultimately slow. Fieldfisher, for its part, uses a verein for its offices in China, Italy and The Netherlands, while its German, Belgian, French and US offices come under its core partnership.

‘Ray Berg is a superstar for OC. Real drive, vision and purpose.’

If OC and Fieldfisher have arguably kicked potential problems down the line by using multi-profit centre mergers globally, WFW has always maintained a single profit centre.

Judged on the recent trends in financial performance, it looks perfectly conceivable for the trio to each reach the £250m revenue region while maintaining their agility and pace. While full-service players have struggled in recent years beyond that scale, the continued momentum of global insurance player Clyde & Co, whose global profile and heavily-focused practice bares some comparison to the trio, suggests specialisation in law firms can counter the inertia that has engulfed many top 25 firms. With revenues of £508.1m, Clydes has still grown its top line by 77% in the last five years, by some margin the best relative performance in its peer group.

‘Life is dynamic’

It is hard to overstate how fundamentally the dynamics of the UK and global legal markets have changed since 2007, at the expense of many large legal firms still essentially using a strategy forged in the 1990s.

Our analysis reveals a number of factors these three standout performers have in common. All share a tight focus and an outright rejection of the full-service model. Reviewing 20 years of LB100 data indicates a delicate practice balance that supports high performance. These firms are not boutiques, they can hedge out industry and practice lines, as well as global markets against the UK. The degree of specialisation and focus has to be pitched just right to support sustained above-trend growth; boutiques have as many vulnerabilities as large, sprawling generalists.

The wider point comes back to law firms struggling with complex businesses. Our analysis indicates there is a sweet spot in terms of law firm size – large enough to back investment and secure central economies of scale but small enough to keep partnerships aligned and allow for tactical agility. For UK law firms that suggests there is something potent about operating in the £70m to £200m range. Law firm leaders may be able to effectively expand beyond this scale by avoiding full service. But, the data suggests that a complex, multi-service law firm is usually a drifting one.

The performance of these firms is also a reminder that partner morale and retention goes a long, long way. Another pay-off of specialising, at least in the UK legal market, is that it segments their business and greatly limits exposure to predatory recruitment.

The trio also benefits from well regarded and articulate leadership, the latter virtue far from a given in the law, which took coherent decisions at points when the firms needed to make them. But then, midweight law firms are easier to shift direction than their larger equivalents.

The final point is crass but worth repeating. These firms are successful now because they have been successful before. Law firms have a propensity to replicate super-growth well above trend… or years of inertia. They hit self-sustaining cycles for better or worse and nothing begets success like success.

And all of these observations, if ultimately borne out in the years ahead, are ominous for larger City players, which are being hit from above and below and, in the shape of US firms, face more profitable rivals with more specialised business. That is extraordinarily hard to counter and many will be sceptical that current attempts to overhaul the partnership models of the Magic Circle will be up to that task.

There has been some luck in where this trio placed their bets – WFW benefited from upheaval in the maritime sector during the global downturn as most firms stalled, while the tech focus of Fieldfisher and OC is obviously well suited to the age of disruption. ‘Tech will play a big part in what happens in the next five years and we want to be ahead of the curve in helping clients achieve what they want,’ says Bott.

But the trio has shown an ability and agility to adapt with the times. Concludes Berg: ‘Life is dynamic by definition and business is dynamic. Successful people and businesses are those willing to accept and embrace change.’ LB

marco.cillario@legalease.co.uk
tom.baker@legalease.co.uk

For analysis of Mishcon de Reya please see our 2016 feature ‘The USP‘

Practice rankings – a five-year overview

Number of practice area rankings. Source: The Legal 500

The client view – strengths and weaknesses

Fieldfisher: Average 7.94/10

Osborne Clarke: Average 7.72/10

Watson Farley & Williams: Average 7.01/10

Table ranks highest and lowest scores out of 13 criteria. Source: The Client Intelligence Report

LB100 firms – the top 20 for organic revenue growth

1997 to 2007

2007 to 2017

Classed by revenue in LB100 in 1997 and 2007

Fieldfisher: In numbers

Partners

229 partners, 87 of which are equity partners (excluding foreign vereins in Italy, The Netherlands and China)

UK partnership has 166 partners, 69 of which are equity partners

Global lawyer headcount is 594

Lateral hires and departures in the last three years

Partnership model: Merit driven

Top three industries by revenue

Top clients

Financials 2016/17 and largest international offices

Total revenue: £165m (+36%)

Global PEP: £639k (+16%)

35% of turnover comes from overseas

Osborne Clarke: In numbers

Partners

218 partners, 130 of which are equity partners

UK LLP has 117 partners, 62 of which are equity partners

Global lawyer headcount is 722

Lateral hires and departures in the last three years

Partnership model: Managed lockstep

Top three industries by revenue

Top clients

Financials 2016/17 and largest international offices

Total revenue £209m (+17%)

UK PEP £652k (+2%)

Global PEP £550k

42% of turnover comes from overseas

Watson Farley & Williams: In numbers

Partners

146 partners, 73 of which are equity partners

Lateral hires and departures in the last three years

Partnership model: modified lockstep with gates and additional bonus pool

Core industries by revenue

Top clients

Financials 2016/17 and largest international offices

Total revenue £159.8m (+22%)

Global PEP £620k (+30%)

61% of turnover comes from overseas

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