More so than the decades which came before or followed, the years between 2002 and 2012 are defined as a stark binary between boom and bust for LB100 firms.
For many current law firm leaders who practiced throughout that decade (some of whom had just started their careers), the early 2000s was an intrepid time characterised by globalisation, with some firms more successful than others at embedding their brand across borders.
By contrast, the end of the decade saw a mass chastening by the 2008 global financial crisis, forcing firms to rethink their business models. The winners and losers of the crisis can still be seen – or perhaps more aptly – not seen, today.
As Wim Dejonghe, Allen & Overy (A&O)’s senior partner, summarises: ‘At the start of that period, globalisation was happening, with English firms expanding in Europe and Asia. In contrast, 2008 was a wakeup call which changed the industry completely, forcing firms to focus on efficiencies and cost. For the first time English firms looked at capacity and asked people to leave. More business logic kicked in.’
Globetrotting
Emerging from the hubris of the ‘90s, LB100 firms were perched atop a dotcom bubble which promptly burst in 2001, leading to a few lean years for the UK’s leading players. This saw Magic Circle firms reach their profit nadir in 2003 and 2004. Freshfields Bruckhaus Deringer’s profit per equity partner (PEP), for instance, hit a low of £675,000 in 2004, while Clifford Chance dropped to £562,000 that year (as of 2022, both firms’ PEP figures comfortably break the £2m barrier).
If there was a spark of hope for UK law, it came in the form of globalisation. The 2002-12 years started with a series of pioneering transatlantic tie-ups. In 2002, City firm Rowe & Maw struck a lucrative deal with Chicago’s Mayer, Brown & Platt, which saw the Londoners both retain their name in the merged entity (for a few years at least) and significant decision-making powers in relation to the London equity.
City firms Gouldens and Richards Butler followed suit in the years after (being consumed by Jones Day and Reed Smith respectively),
but as our recent ‘State of the Union’ cover feature on transatlantic combinations concludes, these ‘mergers’ were evidence of the impending US domination of London rather than any globetrotting success on the part of the English firms.
As Lee Ranson, Eversheds Sutherland’s co-chief executive, notes: ‘There was a lot of growth in London at the time, but it was also the period when people thought that while London was important, it would not dominate on the global stage. You only have to look at the emergence of the American firms, and where they are now!’
Rather, the early 2000s globalisation success story came from the most unlikely of sources. Spearheaded by the charismatic Sir Nigel Knowles, the 2002-12 period saw the dramatic ascent of DLA Piper from UK regional player to global primacy, a meteoric rise unthinkable in the modern market. In his time at the helm, Knowles took DLA from just six UK offices to becoming the world’s largest firm by revenue in 2009. Underpinning this transformation was the eye-catching tripartite merger in 2005 with American firms Piper Rudnick and Gray Cary Ware & Freidenrich, forming a global behemoth with 20 offices across the US.
‘I remember queues outside Northern Rock – there was a huge question as to whether the entire financial system would survive.’
Lee Ranson, Eversheds Sutherland
John Joyce, managing partner of Addleshaw Goddard, notes: ‘I remember when DLA was just a small UK firm and what they’ve done to turn into a global brand is absolutely stunning. They are the best and only example of a small, average regional firm that has created a global brand.’
DLA was far from the only firm to use the decade to expand internationally – a host of challenger firms scrambled to catch up with the Magic Circle’s entrance into the European market a decade prior. Fieldfisher, for example, opened in Germany, France and Belgium in 2007, Herbert Smith Freehills entered Spain in 2009, while Eversheds planted flags in Italy, Hungary, Austria and a host of other jurisdictions throughout the decade.
By 2012, thanks in no small part to the LB100’s globetrotting firms, industry-wide revenue had increased eightfold from £2.7bn in 1992 to £17.67bn (combined revenue for the sector sits above £31bn today). As Dejonghe comments: ‘For firms, it was simply a case of following the clients. It was the globalisation of all industries which forced law firms to do the same.’
Crisis management
Get a group of senior lawyers in a room and ask them about the decade bookended by 2002 and 2012, and most will shake their heads ruefully about the 2008 financial crisis. As the crash gets progressively distant in the rear-view mirror, it can be tempting to downplay its importance, but the gravity of the crash and its lasting impact is still felt acutely in the legal profession.
As Ranson recalls: ‘Ironically, the period immediately before the crash was the most buoyant corporate market I have ever seen. In that sense, the difference between 2006 and 2008 was stark. I remember when the crash happened, sitting around board tables saying: “Ah, there were five bidders for this entity, and now there’s one.” But suddenly all of it was gone. The work completely dried up.
‘I remember queues outside Northern Rock – there was a huge question as to whether the entire financial system would survive.’
The crash certainly claimed its victims – just two years later, Manchester firm Halliwells collapsed in part due to the recession, but more notoriously for a £20m payout to equity partners linked to a property deal. But worse was to follow in 2012, when Dewey & LeBoeuf, a firm that once turned over $1bn at its peak, collapsed following the disastrous merger of insurance and energy player LeBoeuf, Lamb, Greene & MacRae with the fading New York grandeur of Dewey Ballantine.
Despite these seismic collapses, today, some partners reflect on the crisis philosophically. Says Slaughter and May corporate co-head Simon Nicholls: ‘There was quite a big shake-up after the financial crisis. Though fewer firms disappeared than you might have expected when things first hit, a lot of firms changed their size, structure, shape and practice mix following that. Some areas were hit more than others – real estate and the mid-market – and I suspect there were fewer lawyers in many City firms as a result, at least for a while. But I was always surprised that the longer-run impact of the financial crisis was lower than it might have been.’
Ranson goes as far as to argue the crisis provided a shake-up that the profession much needed to root out sloppy inefficiencies: ‘The dominant feature of that decade would be the global financial crash. That led to a big reshaping of the market. The market recovered relatively quickly but firms changed their structures and how they resourced themselves as a result. It used to be “one partner, one PA”, but because of the crash the whole sector became more professionalised. It saw the rise of chief operating officers and accountants in law firms.’
The newly installed management team at Watson Farley & Williams (WFW), Lindsey Keeble (managing partner) and George Paleokrassas (senior partner), recall that WFW ‘didn’t have the same crash others did’ due to limited exposure to corporate. But thinking about the wider market, Paleokrassas argues the crisis produced an unforgiving split between winners and losers: ‘There was a quick bounce back from the crisis for some firms with people taking advantage of huge restructuring work. That distinguished several firms that were able to capitalise on that. Meanwhile, you had other people struggling with huge teams that were completely under utilised. They went from churning work to a complete standstill.’
Arguably the greatest unforeseen impact of the 2008 crisis was the cementing of the US firms as major players in London. As Dejonghe outlines: ‘Finance changed past 2008. Finance traditionally was global banks around the world, and six of the ten major banks were European in 2008. But the crisis made the European banks largely disappear from the global scene. That, combined with increased regulation, meant banks lost market share to the private money industry.’
Of course, the decade to follow would see the likes of Kirkland & Ellis and Latham & Watkins take London by storm as a result of that shift, betting big on private equity and seeing exponential growth as a result. This came at the cost of the Magic Circle and its traditional banking client base, in a shifting of London power dynamics still very much present in 2022.
‘That decade for me is when people started talking seriously about the climate, following the Kyoto Protocol in ‘97. That was the awakening of people.’Gareth Price, Allen & Overy
In disputes, the 2008 crisis also provided a lucrative stream of work that saw the creation of conflict-free disputes-only shops (chief among them being the timely arrival of US firm Quinn Emanuel Urquhart & Sullivan in 2008) in London. The likes of Quinn, Enyo, Stewarts and Signature Litigation took advantage of this healthy workstream and the parallel emergence of litigation funding to establish themselves in the London market.
The BlackBerry Age
What else does this period conjure in the memories of senior partners? Undoubtedly the decade to follow has the most reasonable claim to being ‘the ESG decade’, but Gareth Price, A&O’s global managing partner, attributes the first germs of environmentalism to this period: ‘That decade for me is when people started talking seriously about the climate, following the Kyoto Protocol in ‘97. That was the awakening of people. It’s continued to grow since then, but I remember it as the decade I started my journey into renewable energy. Shareholder capitalism started to go down the agenda, and the thought that businesses had a wider responsibility went up the agenda.’
Keeble drolly notes that ‘getting a BlackBerry’ was the most transformative thing to happen to her during the decade. She is not the only lawyer to speak of a ‘pre and post BlackBerry age’, whereupon client expectations radically shifted towards near-24/7 availability.
As John Cleland, managing partner of Pinsent Masons, concludes: ‘When the technology was introduced, we thought it would increase our leisure time – the technology would manage everything and we could sit back for the rest of the day. Instead, it raised expectations and return times for clients – there’s much more pressure now.’ LB