Global London – London Broncos

While generally international law firms in London have remained static, there have been a handful of US firms that have continued to shine. LB tracks the most aggressive performers in London in the past 12 months.

There must be a lot of empty desks over at Hunton & Williams’ office in London’s Gherkin. Over the course of a few short weeks in April and May last year the US firm lost virtually its entire transactional team, after a partner exodus saw the 35-strong office dwindle to just 13 lawyers (although insiders say that the number is closer to eight) by the close of 2011.

Partners Matthew Williams and John Deacon joined Hogan Lovells’ energy practice, while Paul Tetlow moved to K&L Gates. Martin Thomas and Dearbhla Quigley were picked up by Chadbourne & Parke. It’s a sorry state of affairs for a firm that began with bright hopes in London.

The firm launched in the capital in 1999, and in 2004 began an ambitious hiring spree that saw it build up a credible pre-recession AIM team that was one of the busiest in the City at the time. But after a flurry of investment and relocations of US big hitters, all went quiet. Then came the partner exodus.

The firm has said that the office will now focus on energy and infrastructure work alongside data privacy. But this year is the first in over a decade that Huntons will not feature in our Global London tables.

However, Huntons’ decline in the City is one of only a few bad stories over the past year for Global London firms. For the vast majority of other firms in our survey, things have been less dramatic, with another year of largely flat revenues and flat headcount.

LB has been running the Global London survey since 2002 (formerly the US firms in London survey), tracking the fate of the 50 largest international (mainly US) firms in London, by analysing headcount, revenues, promotions and hiring patterns.

This year we have broken down our analysis into four sections. In this section we take an overview of the market. In section two we take an in-depth look at the split between international and UK-qualified lawyers in London at global firms over the past decade and review some of the changes to immigration laws that have made it difficult to hire international lawyers into London practices.

In section three, we focus on one of the few bright spots in the lateral hiring scene of the past year – looking at UK private equity and funds lawyers, who are hot property for US firms, and analysing why these individuals are such a valuable commodity. And in our final section, we look at the hidden gems of the City, the smaller US firms that don’t get the attention they deserve and have developed focused, well-respected and successful practices in London without fanfare.

 

Headcount

While Huntons may have had a difficult 12 months, for its US and international contemporaries 2011/12 was another broadly flat year. The total number of lawyers at the top 50 international firms in London has increased slightly from 4,182 lawyers last year to 4,271 this year. Over the past four years there has been a slow decline in total lawyer headcount, and there are now 173 fewer lawyers in the City than at the pre-crunch peak of 4,444 lawyers in 2008.

Kirkland & Ellis, Greenberg Traurig Maher, Simpson Thacher & Bartlett and Vinson & Elkins all managed to buck the trend, by increasing total London lawyer headcount by more than 20% in the past year.

‘We compete with the Magic Circle firms of this world in London and we are every bit as strong as the larger players’ – Alexander Msimang, Vinson & Elkins

Vinson & Elkins increased its headcount by around 40% from 31 lawyers in 2010/11 to 51 lawyers this year. The firm is focused on energy and natural resources and London managing partner Alexander Msimang believes the firm’s growth is due to the tight specialisation.

‘We are able to focus on what we are best at and we do not need scale for that,’ he says. ‘At the heart is energy and alongside everything that complements that, like projects and telecoms. And that seems to work for us. We compete with the Magic Circle firms of this world in London and if you compare our team, we are every bit as strong as the larger players.’

 

Revenues

London revenue at the ten largest international firms is up 2.5% on last year, from £824.1m in 2010/11 to £844m this year. LB only collects information on the financial performance of the ten largest international firms in London, mainly because international firms are increasingly cagey about providing financial information for individual offices, preferring not to attribute income to a specific jurisdiction.

Of those ten biggest firms, Skadden, Arps, Slate, Meagher & Flom was one of the strongest performers with revenues up by 8% to £95m, giving the white-shoe firm an impressive revenue per lawyer of £798,000, the highest in our group. Skadden had a strong year in both litigation and M&A, playing a key role advising Roman Abramovich in his $6.5bn dispute with oligarch Boris Berezovsky last year (see LB222, ‘Battle Royale’, ). The firm also advised ExxonMobil on its $3.2bn arctic exploration deal with Rosneft in August last year.

The biggest international firm in London by both turnover and headcount continues to be Baker & McKenzie, with London office revenues now making up 9% of global turnover, or £122m. This makes it larger in terms of revenues than Wragge & Co, which appears at position 25 in the LB100. Bakers has 385 fee-earners in London, roughly the same size as Olswang.

Bakers has an eye fixed firmly on organic growth and improving profitability. As London managing partner Gary Senior explains: ‘It is preferable to grow through internal promotion [rather than lateral hires] because there is less of a risk of someone not fitting in. There is a sense that we need to be more profitable and we are seeing incremental change, as each year goes by the perception of us in the market is changing.’

‘The thing that makes us stand out is that our message is simple and clients buy into that specialisation’ – Richard East, Quinn Emanuel Urquhart & Sullivan

While it has been a steady year for most of the larger firms in London, a select band of smaller, leaner practices have outperformed the market. Quinn Emanuel Urquhart & Sullivan and Proskauer Rose are two of the most obvious examples.

Despite only being open since 2008, litigation-only outfit Quinn now has 20 lawyers in London and has office revenues of £21.3m, with an eye-watering 68% profit margin.

‘The thing that makes us stand out in terms of US firms is that our message is simple and clients buy into that specialisation,’ says Richard East, Quinn’s London co-managing partner.

Proskauer Rose is another firm that is staying focused on a few core practice areas in London. The firm opened in the City in 2007 and suffered from unsuccessful merger talks with SJ Berwin. But the failed merger talks don’t seem to have dented the firm’s ambitions, with Proskauer picking up a number of choice hires from SJ Berwin, including funds partners Nigel van Zyl and Oliver Rochman along with six associates last year.

The firm is focused on building up in private investment, mezzanine finance and US capital markets and now has 17 fee-earners in London, including five partners. The firm just missed out on making it into the Global London 50 firms but will be one to watch out for next year. ‘The strategy we have is very targeted towards building significant practices in London in areas in which we have a leading position in the US,’ says Allen Fagin, the former chairman of the firm. ‘We’ve had lawyers joining continuously. We are in significant building mode,’ he adds.

 

Promotions and lateral hires

Promotions to partnership are up on last year. On average over the past five years, 64 partners were made up annually compared to 77 new partners this year.

Arnold & Porter, which opened in London in 1997 and currently has 38 lawyers in the capital, made up one new partner in the past year. ‘We have promoted a partner for the first time this year,’ says London managing partner Tim Frazer. ‘But looking at organic growth in its pure form? We have not been in town long enough for that.’

Shearman & Sterling also made up more partners than in previous years, promoting four London lawyers to the partnership. ‘Fundamentally the driver for growth is our training programme,’ says London managing partner Nicholas Buckworth. ‘There are firms out there that pile into the lateral market and then hope they can stick it all together. But we’ve spent a huge amount of time and effort building up our training programme and keeping our associates engaged. We are now seeing the fruits of that.’

While the appetite for organic growth may have increased, there is still demand by US firms to splash the cash and invest in partner-level hires. Over the course of the past 12 months, Global London firms made 134 lateral partner hires, compared to an average of 85 across each of the past five years.

‘There have been around 90 moves in the London market this year. There is a real appetite for bolt-on team moves.’ – Guy Adams, Laurence Simons

Two of the most prolific recruiters of the year relative to their size were Brown Rudnick and Edwards Wildman Palmer. Brown Rudnick brought in seven new partners this year – including restructuring and finance partners Adrian Harris and Alper Deniz from Chadbourne & Parke. The firm also took corporate, finance, litigation and IP partners from White & Case, Dublin-based McEvoy Partners, Lawrence Graham and Gide Loyrette Nouel.

The 29-partner London office of Edwards Wildman Palmer made nine lateral hires this year. It brought in IP, insurance and corporate partners from Bird & Bird, Allen & Overy, CMS Cameron McKenna, Nabarro, Barlow Lyde & Gilbert, Debevoise & Plimpton and Curtis, Mallet-Prevost, Colt & Mosle.

Hiring teams of three or more lawyers has become particularly popular. ‘There have been around 90 moves in the London market this year and at least 17 moves were with teams with three or more partners,’ says Guy Adams, head of European private practice at recruiters Laurence Simons. ‘There is a real appetite for bolt-on team moves, particularly in strategic areas.’

In many ways this makes sense – teams are far more likely to bring across clients than single partner hires and they also bring across junior lawyers.

‘To have an impact on the profit and loss, it helps to have full teams with associates, which means the team can become profitable more quickly,’ says Martin Piers, head of Europe, Middle East and Africa legal at recruiter Hudson. ‘It’s very difficult for English firms to do anything about it, whatever the restrictive covenants may say. If a firm can’t service the client’s needs, then they can’t kick up a stink about the client moving.’

But with most firms reluctant to hire aggressively, and headcount and revenues flat, the London market is a long way from the heady days of 2007. London continues to act as a springboard to the rest of the world and international firms don’t seem to be planning any major cutbacks in London anytime soon. LB

becky.pritchard@legalease.co.uk

 

Legal Business would like to thank AlixPartners for its support of the Global London.