While no two years are ever quite the same in the world of Legal Business’ Global London report, the story can usually be summed up as one of bifurcation. It tells of the dynamic high-flyers and those foreign firms whose London practices have yet to take off the ground.
For years there has also been a relative predictability in the worry lists of City leaders of non-UK law firms – concerns around London’s place on the world financial stage post-Brexit, an overdue downturn and the perennial challenge of keeping a grip on market share in an ever-more competitive arena.
As we went to press with the Global London 2020 report this time last year, the legal community – as the rest of London – had fled the Square Mile amid the unfamiliar territory of a lockdown as the coronavirus pandemic asserted itself in earnest. Then, even as global stock markets went into freefall, many believed – or hoped – that Covid-19 would be at worst a short-lived disruption to the hustle of corporate life and at best a rare chance to briefly embrace the novelty of working from home for a few weeks. How wrong they were.
Indeed, it would have been difficult to predict that one year on we would be viewing this traditional bifurcation through an entirely different lens – coronavirus winners and losers – and the outside world through a never-ending series of Zoom and Teams meetings.
A relative deluge of lateral activity in the first quarter of 2021 has marked a stark contrast with the hiring market of 2020 as Global London’s 50 firms cut their cloth in anticipation of financial reversals. After years of relatively uninterrupted growth, headcount numbers in 2019 began to plateau with a 4% increase to 7,434 – as City outposts settled into maturity.
‘We saw a significant increase across transactional and disputes and in areas that are driving the global economy, like tech, life sciences and financial services.’
Richard Trobman, Latham & Watkins
In 2020, however, torpor set in as lawyer headcount at the top 50 firms was flat at 7,460, reflecting a depressed hiring pattern among firms in the group at large. Year-on-year comparisons are striking. The top 50 firms made only 108 partner hires in 2020, a 31% drop from the 156 made last year, while the decrease was even more pronounced in the top ten where 35 hires were made compared with 53 the previous year, a 34% reduction. However, it was the bottom ten that felt the pinch most keenly, with the number of hires nose-diving by 70% to just seven compared with 23 in that bracket the previous year.
The horizon for partner numbers has been more heartening, with the total number of partners increasing 5% to 2,115 from 2,066 in last year’s report, in large part on the back of a 5% increase in partner promotions to 110 from 105 in 2019. The averages have not declined either, having stayed flat at 42 partners across the top 50 and 102 partners at the top ten firms. Also compelling is the headline statistic that the number of lawyers in the 50 largest City offices of foreign firms has increased by a striking 78% in a decade, compared with 4,182 in 2010.
No flies on you
Latham & Watkins, notwithstanding a parsimonious promotions round that saw only three new partners in London compared with five in 2019, stood out as the paciest firm in the top ten, increasing fee-earner headcount by 8% to 485. In fact, it was one of only six firms in the top ten that saw headcount growth at all, alongside White & Case (+6%), Kirkland & Ellis (+4%), Mayer Brown (+7%), Weil (+7%) and Milbank (+3%).
Latham is far from the most expansive Global London firm on a five-year track but has grown headcount a respectable 56% since 2015 and continues to impress in strategy and in deed. Financial performance in the City outpaced the firm at large, which added $566m to its top line overall in 2020 to hit $4.33bn, an increase of 15% on the $3.768bn of 2019. The Los Angeles-bred giant also hiked profit per equity partner (PEP) by 20% from $3.78m to $4.52m while London turnover is estimated to have been bolstered by 20%, now generating some $540m, further staking its claim as one of the most potent foreign practices in the elite UK legal market.
Chair Richard Trobman therefore has good reason to be optimistic as his predictions last year of continued double-digit growth came to pass, pointing to over-performance in some sectors that has chimed with the experiences of other pandemic winners. ‘We saw a significant increase across transactional and disputes and in areas that are driving the global economy, like tech, life sciences and financial services. In capital markets, M&A and banking we are global market leaders and the increase has still outpaced the market.’
‘The legal industry is a people business and firms have had to put their money where their mouth is.’
Melissa Butler, White & Case
He notes a significant uptick in the number of hours billed to clients, with key mandates including advising NVIDIA in its $40bn acquisition of Arm from SoftBank, retailer New Look on its restructuring and insolvency-related litigation coming out of the pandemic, as well as acting for the banks on a €1.8bn credit line for TUI Group.
The firm also made some significant lateral hires in the City, not least at the start of 2020 as Latham renewed its push into London’s public M&A space with the hire of Freshfields Bruckhaus Deringer’s rising star Sam Newhouse and expanded its City emerging company capabilities through Taylor Wessing’s Mike Turner and Bird & Bird’s Shing Lo. Other notable additions in 2020 were structured finance partner Steve Curtis from Clifford Chance, Mayer Brown restructuring partner Jessica Walker, M&A partner John Guccione from OMERS Infrastructure and capital markets partner Manoj Tulsiani from Linklaters.
Meanwhile, Kirkland was noticeably more frugal on the partner hires front in 2020, only adding one to its partnership in the form of Linklaters’ tax lawyer Mavnick Nerwal. The Chicago-bred juggernaut is unsurprisingly still the market leader in the number of promotions it makes – year after year breaking its own record – with its unusual model that sees large ranks of salaried partners made up before being admitted to its tightly-held equity. Operating a fast-track system, associates can make salaried partner six years after qualification – bucking the wider trend of pushing back promotions. In that vein, 19 lawyers were made up, including three lateral promotions, a number that far outstripped the conservative market at large, with only Reed Smith coming remotely close with its 12-strong round.
White & Case was also notable for being a top ten firm that saw headcount growth, albeit only by 6%, especially as 2020 proved a return to form after 2019 when it shrank 9% in London to 415 fee-earners. With 441 fee-earners, it is now the fourth largest among the top 50, although surprisingly, given its penchant for lateral hires, it has only grown 5% over the past five years.
London executive partner, Melissa Butler is bullish, noting that the number of partners in London has grown 37% during the period where the firm’s ‘2020 strategy’ was in place. There were 89 London partners in 2016 and there are currently 122 City partners. Optimism has been boosted by its strongest City financial results yet, with the London office increasing revenue by 18% in 2020 to $397m from $337m in 2019. This outpaced global turnover growth of 9% to $2.4bn from $2.18bn in 2019, while PEP broke the $3m mark, a 16% increase on the $2.6m recorded the previous year.
Butler says: ‘The entire office has been very busy, the financial restructuring and insolvency and bankruptcy teams particularly, but also capital markets and disputes. The entire London office did well, not just down-cycle practices. We are really proud of what we have accomplished.
‘2020 has been a challenging year on a deeply personal level and it is hard to separate the personal challenges from the professional successes. We have prioritised our people and the financial success is the output of that. The legal industry is a people business and firms have had to put their money where their mouth is.’
By comparison something of a Johnny-come-lately in London, Boston-bred Goodwin is perhaps the epitome of a firm that has leveraged its focus on life sciences and tech to help it to come into its own in the coronavirus environment and more than make up for lost time.
‘People have been taking stock of their careers and it’s linked to mental health. People are much more focused on wanting to work in a friendly, pleasant environment.’
Sally Davies, Mayer Brown
It is hard to believe that, as recently as 2011, its City outpost comprised one solitary partner at a desk with a phone in the form of ex-Ashurst corporate real estate veteran and now Goodwin’s European chair, David Evans. From that standing start, Goodwin now ranks among the top five fastest-growing London offices, growing headcount 13% over 2020 to 133 lawyers and 42 partners. Its 329% headcount growth in the past five years far outstrips even its nearest competitor, Quinn Emanuel Urquhart & Sullivan, which has swelled lawyer headcount by 188% since 2015. Just as eye-catching was Goodwin’s 34% London revenue hike to $99m from $74m in 2019.
The firm made nine laterals during 2020, including the former Sidley Austin private equity team led by Erik Dahl and Christian Iwasko, while also establishing a City litigation and disputes practice with the hire of Bryan Cave Leighton Paisner’s banking litigation head Oliver Glynn-Jones. At the end of last year, Goodwin chair Rob Insolia made an optimistic prediction that has already come to pass. ‘As long as we get global stimulus and the vaccine is rolled out, I think, from an economic standpoint, the recovery will continue. Clients are finding a lot of value today. There’s no question that life sciences is going to continue to be at the fore. It was already and it has picked up dramatically as a result of the pandemic. And technology will continue to fuel our ability to function and connect.’
For its part, US-bred dispute resolution specialist Quinn Emanuel has galvanised its position, not only as a Covid winner, but as a continued pace-setter in the City, hiking London revenue 27% to reach £127.4m as profit surged 34% to around £91m, putting the office’s profit margin at an impressive 71%.
Indeed, the old wisdom around disputes teams profiting from global uncertainty has proven well founded, with standout mandates for Quinn Emanuel including a landmark Supreme Court win in December, where Mastercard’s efforts to thwart former financial ombudsman Walter Merricks’ £14bn group action claim against it were quashed. In 2020 the firm also bolstered its senior ranks with the addition of litigation partner Justin Michaelson from Fried Frank.
Fasten your seatbelts
As usual, there is a clutch of firms that are neither flying high nor stuck in the hangar but are taxiing steadily in the middle of the runway.
On paper, Gibson Dunn’s 2% headcount growth in 2020 is unprepossessing however, the usually conservative firm has shown ambition with the addition of three substantial partners to bolster its London office. Litigation partner Susy Bullock, previously managing director and head of EMEA litigation at UBS, is cited as a win not only for the disputes practice but will also be instrumental to the firm’s fledgling environmental, social, and governance (ESG) practice. Gibson Dunn has also hired Morgan Stanley’s managing director and EMEA head of conduct risk Matthew Nunan to its litigation practice and Ben Myers from Kirkland to its global finance practice. There is also interesting potential change afoot with the firm recently electing respected New York M&A veteran Barbara Becker to succeed Ken Doran after 19 years as chair and managing partner on 1 May. If even a small part of Becker’s ambition for the City office translates into action, more growth will certainly come in the years ahead.
Says Becker: ‘I really believe London is key to the firm’s strategic growth and is thriving. I would like to deepen and expand transactional. I’m an M&A lawyer myself and the opportunities in London are tremendous. It is a top priority and I’m determined to grow it.
‘I’m conscious of making everyone feel this is a great chapter for the firm and of creating a community again when we have had the community dispersed. We will be scaling our efforts to new heights. If you ask me what the law firm of the future will look like, I will say diverse. I am thinking a lot about tech and how it can be used in client service, diversity and inclusion.’
Mayer Brown’s growth has been something of a mixed bag, with a respectable 7% uptick in City fee-earners since 2019 tempered by more sluggish performance on a five-year track – the 10% growth makes it among the least expansive of its Global London peers.
London managing partner Sally Davies is confident about the office’s strategy and lateral additions in a challenging year. ‘We are quite clear on strategy; it hasn’t changed as a result of the pandemic. We are focused on finance, private equity, complex, high-stakes disputes, white-collar crime and investigations. The addition of Trevor Borthwick from Allen & Overy has added gravitas to our banking and finance team.’
She also points to the hire of transactional real estate partner Simon Price from Linklaters and restructuring partner Barry Cosgrave from K&L Gates, all of whom she says have hit the ground running. She also sees an advantage to recruiting in the pandemic. ‘People have been taking stock of their careers and it’s linked to mental health. People are much more focused on wanting to work in a friendly, pleasant environment.’
For its part, McDermott Will & Emery’s fee-earner headcount remained flat in 2020 but an 80% increase over five years betrays more dynamism than many peers. London managing partner Hamid Yunis is characteristically upbeat.
‘London is doing well and if I were to gaze into a crystal ball, I would say that is going to continue and we will sustain that push.’ Dorothy Cory-Wright, Dechert
‘In 2020, we continued to have double-digit revenue growth and some significant lateral hires joined us in London.
‘We probably felt that prior to 2020 we were a little light in finance and restructuring, however, with the high quality hires we made in 2020 and early 2021, we now feel that we have a very credible and growing offering. Our transactional practice in London, for a firm of our size globally, is busy but also has great potential for growth. Our strategic aims and objectives are to continue to significantly add to what we currently have. In this regard, we will be making further announcements in the coming weeks and in particular, in relation to new joiners in our litigation and Investigations practices.’
Yunis also feels confident about the support of the London office from leadership in the US – the City is a firm priority and investment continues to be made.
‘This is my third year of being the London managing partner and throughout that time, I have valued the support and guidance I have received from the US. All our practices, systems and compensation processes are truly global and reflect our “one firm” ethos and nature.’
It has been a case of swings and roundabouts for Boston-bred Ropes & Gray as London headcount saw a 6% uptick in 2019, while five-year growth was flat. Will Rosen, London managing partner, is bullish, noting strong performance across all practices. The firm does not disclose London revenue, but the office is estimated to have significantly increased turnover in 2020.
Says Rosen: ‘We’ve had an extremely strong year across all metrics and, consistent with the firm, we’ve had our best ever year in London. We have also done more work with our network, which speaks to the strengths of our clients and the firm. We are aligned in terms of our strategy and our product offering. People have been simply magnificent and they never missed a beat.’ He added that the office further raised its profile with clients to take market share, despite the obvious shift in business development methods.
Brace for impact
Shearman & Sterling has fallen into the Covid loser category, with headcount flat over 2020 and down 22% since 2015, earning it the unwanted title of having one of the group’s fastest-shrinking London offices. Financially the picture was scarcely better globally, with PEP plummeting 24% from $2.5m to $1.9m and revenue declining 11% to $861m from $968m. Indeed, the impression of this once-potent Wall Street force relinquishing its power and direction has lingered for so long now these numbers are unsurprising. Notable London departures recently include head of EMEA capital markets David Dixter for Milbank, litigator Susanna Charlwood returning to Allen & Overy and finance partner Peter Hayes joining Paul Hastings after 20 years.
Of the group shrinking in London Jones Day has seen the most dramatic descent, dropping headcount 17% in 2020 and 32% over five years. It is perhaps telling of the firm’s global priorities that only two new City lawyers were made up last year of a US-centric 50-strong round. Other reversals are less profound, with WilmerHale seeing a 5% headcount dip having promoted no new partners last year, contributing to an 18% headcount reduction over five years. Similarly, Squire Patton Boggs saw a 4% reversal in 2020 despite high hopes last year of an energising office move, in the context of a 15% drop since 2015. Sullivan & Cromwell has fared little better, sustaining a 4% dip in headcount over 2020 and shrinking 12% over five years.
Cleary Gottlieb has for several years appeared on the cusp of taking its London office to new heights without ever gaining much traction. Ambitions indicated by a 2018 investment in new offices at 2 London Wall, with the capacity to accommodate some 180 lawyers – 40 more than the old premises allowed – have still yet to come to fruition. In 2020 London headcount dropped 8% in the context of a 5% reduction in fee-earners over five years. Almost painfully conservative in the lateral market, Cleary’s City office has nevertheless bucked its own trend in organic growth, promoting two new partners in the last round – Paul Gilbert and Michael James in antitrust and corporate respectively. Although sedate by the standards of more aggressive peers, for Cleary the move is quite dynamic, if you consider that only four partners were made up in London in the previous five global promotions rounds.
Expecting to fly
Although all work – especially in a pandemic – is very welcome, corporate hands across the Square Mile have probably become a little jaded with the now ubiquitous phrase ‘Covid-friendly sectors’. However, there is no escaping that the tech sector in 2020 played a huge part in bolstering M&A activity globally as corporates and sponsors jostled to invest in the pursuit of enhanced digitalisation of products and services in this time of agile working. Linked to this is the uptick of special purpose acquisition companies (SPACs), especially in the US, with redoubled interest in growth businesses on the back of the tech boom making them especially in vogue.
City practices with US origins that have benefited from that frothy market are hopeful of the SPAC trend continuing for the foreseeable, even if recommendations made by Lord Hill in the UK listing review to open up London to such investments do not come to fruition. Similarly, those offices with life sciences and healthcare capabilities are expected to more than hold their own for the rest of 2021.
Dechert’s litigation partner and member of the London management committee, Dorothy Cory-Wright, shares the view of many that the name of the game in a downturn is having well-hedged practices.
‘We made two hires in the restructuring group last year and Adam Plainer has joined us recently from Weil. We have expanded our existing group in anticipation of market focus. It’s not only the effects of Brexit but also the rise in crypto currencies, a new area for many.’
Indeed, Cory-Wright is upbeat, noting an expected increase in regulatory and enforcement work following the change in administration in the US, post-Brexit and the aftermath of the pandemic, with opportunities of spin-off litigation.
‘We are in intelligent expansion mode. Four partners were made up in London last year. That tells the story of our vision and spanned all departments. There is a commitment to growth. London is doing well and if I were to gaze into a crystal ball, I would say that is going to continue and we will sustain that push.’
Mayer Brown’s Davies sums up the paradox of the coronavirus landscape and is alive to the challenges facing the industry at large as the world readjusts to some element of office life.
‘It’s actually been easier to talk to dream laterals as they’re not committing an act of disloyalty to their old firm by going to the office for interviews, you can just arrange an informal Zoom chat.
‘Flexibility will be key but if people decide they only want to come into the office three days a week they will have to accept that they may have to give up their desk and do something like hot-desking. That will be a challenge facing all law firms and, in fact, any office-based business.’
However these logistical challenges play out, it seems advisable that Global London frequent flyers continue to brace for further turbulence ahead. LB
nathalie.tidman@legalease.co.uk
GLOBAL LONDON: City revenues
Firms have declared London revenue in US$. Where they have declared in £, a Federal Reserve annual exchange rate of £1=$1.2829 has been applied
* Estimate – no London revenue information provided by the firm