Global London Overview – Vantage points

A group of elite firms using their vast resources to further reinforce in the City; a larger group suffering attrition or stasis as their presence wanes – 2019 proved to be another year of diverging fortunes for international firms in London. When you add to the mix that the leading brands have seen UK revenue outstrip global growth once more, at first glance it all seems a continuation of last year’s narrative.

However, the story is not as straightforward. True, overall lawyer count among the Global London 50 reached 7,434 – a steady 4% increase on last year. But compared to 2018’s 7% growth (or 15% if you include Bryan Cave Leighton Paisner (BCLP)’s debut), the advance of foreign advisers in the City has slowed as their outposts mature.

‘I am very keen for London PEP to get to £2m. Over the last three years, we have hired 27 partners. We need to keep that momentum going.’
Alex Chadwick, Baker McKenzie

The trend is reflected in the growth in fee-earners at the top five firms by size. Last year, Baker McKenzie and Latham & Watkins achieved double-digit headcount growth; this year none of the group managed the feat, while two (BCLP and White & Case) saw lawyer numbers fall 1% and 9% respectively. The drop at BCLP means Bakers remains the only firm above 500 lawyers in the 50, boosting its lawyer ranks 8% over the past year.

Moreover, while the divide between the top and bottom of the table remains, the smaller powers have been more active than usual amid a busy lateral market. There were 156 hires across the top 50 last year – a 31% increase on 2018 – of which the bottom ten made 23, or 14%, compared to just 11 last year. The top ten, by contrast, made 53 hires, two fewer than last year and 33% of the total.

These hires – which predominantly went into corporate, disputes and finance practices – were not matched by a similar rise in partnership promotions, of which there were 105, four fewer than 2018. Nonetheless, overall partner count increased to 2,066, with the average number of partners at a top-ten firm measuring at 102, compared to 41 across the 50 Global London firms as a whole.

Kirkland & Ellis again set the bar with a pacesetting partner promotion round that saw 16 lawyers made up in the City as the firm broke its own hyperactive promotion records. Elsewhere – among firms with more conventional partnership tracks – Weil, Gotshal & Manges also placed more focus on the City, with four partners being made up, while Bakers promoted seven in a marginally increased round. But according to Bakers London chief Alex Chadwick, the growth has not impacted profit per equity partner (PEP), which stands at £1.3m in London, and more growth is expected. ‘I am very keen for London PEP to [get to] £2m. Over the last three years, we have hired 27 partners. We need to keep that momentum going, particularly in M&A, PE and disputes.’

‘The strategy is very simple. We only do five things and put all our resources into being best-in-class in those areas.’
Richard Lever, Goodwin Procter

But not all were as City-focused with promotions. Latham & Watkins gave five lawyers the nod in London – four fewer than 2018 – while White & Case was parsimonious by its standards with only three partners promoted. Ropes & Gray, meanwhile, promoted only one lawyer, despite denying claims the firm is retrenching in London and Cleary Gottlieb Steen & Hamilton neglected its London arm entirely, having only promoted one partner in 2018.

A sign of the leading firms’ growing maturity in London is that none of the top five were among the fastest-growing offices over the year. Instead, the comparatively lean Quinn Emanuel Urquhart & Sullivan was the standout, growing its overall fee-earner figure by an eye-catching 31%, almost matching its growth rate from last year. The result also confirms Quinn as the fastest-growing firm over five years, increasing in size by almost 200%. Willkie Farr & Gallagher was the second fastest in 2019, upping its fee-earners by 28%, while Goodwin Procter and Morrison & Foerster (MoFo) both grew 26% and Akin Gump Strauss Hauer & Feld grew 23%.

Financially, Quinn also posted a robust performance in London, where it broke the £100m barrier after a 20% hike in revenue. Profits, meanwhile, rose 11% to £67.2m, putting the profit margin at its London office at almost 67%. ‘Everything drove it. Every part of the practice is growing – it’s hard to think how we could have done more than we have done,’ London senior partner Richard East comments. ‘The only real constraint has been people. We hired around 25-30 associates in the last year. We have never taken our eye off the ball in the lateral market – that has been how Quinn has grown historically.’

‘Our business model is to find the right people; it doesn’t matter where.’
Paul Maher, Greenberg Traurig

An array of significant disputes out of London have bolstered Quinn’s performance. The firm is acting for the claimants in the two most high-profile class action cases in the City, with teams on Merricks v Mastercard and the Truck cartel investigation. The firm is also acting on the lucrative Ukraine v Russia Eurobond dispute.

Such impressive performances are commonplace among the top 50’s fastest growers. MoFo upped its City turnover by 25% for the third consecutive year to £38.6m, significantly ahead of its 10% growth rate globally. Milbank also outpaced global performance in London as revenues rose 10% to $171m, following a 12% increase in fee-earners through 2019. Goodwin, meanwhile, matched its global growth rate by upping City revenues 11% to $74m, a decent return following its remarkable 58% surge in 2018. Goodwin also had a striking run of mandates during the financial year, acting for Medical Properties Trust on the acquisition of a corporate structure that owns a portfolio of 30 acute care hospital facilities, valued at roughly £1.5bn.

Says private equity partner Richard Lever: ‘The strategy is very simple. We only do five things and put all our resources into being best-in-class in these areas: private equity, tech/life sciences, litigation, financial institutions and real estate. This gives us a deep focus and competitive advantage.’

Kirkland, which last year recorded a blistering headcount increase of 28%, had more subdued yet still emphatic 12% growth in the City last year. Over five years, the firm has grown 128%. Unsurprisingly, Kirkland is also poised to report another standout year financially for 2019, with City revenues estimated to be around $425m, compared to $380m last year. The figures are once again boosted by the firm’s involvement in a plethora of mega-deals across 2019, including acting on EQT Partners and the Abu Dhabi Investment Authority’s acquisition of Galderma from Nestle for $10.1bn (see ‘Deals of the year’, below).

‘If you had told our partners years ago we’d achieve results like this by 2019, they would have been very sceptical.’
Oliver Brettle, White & Case

Tactical retreats

Not every firm has moved ahead in a double march. In the 2019 Global London report, three US firms in the top 50 saw a double-digit decline in fee-earners, while four firms made such retreats this time around.

Squire Patton Boggs has dropped the most, 13% down on last year. However, the firm’s managing partner in London, Jane Haxby, insists the firm’s imminent office move will see a return to growth: ‘We are definitely looking at growth in the right areas in London. That office gives us capacity to do that. We are very invested in London.’

Greenberg Traurig, meanwhile, could not sustain its 15% push in 2018, instead dropping by 11% over the course of 2019. However, the firm began 2020 in brisk fashion, hiring disputes partners Mohammed Khamisa QC and Masoud Zabeti from Mishcon de Reya. ‘This year we would like to build more of a litigation franchise as we have a massive litigation business in the US,’ says vice-chair Paul Maher. ‘Our business model is to find the right people; it doesn’t matter where. We find the right people that are right for the business.’

Debevoise & Plimpton completes the list of those dropping headcount significantly in the City, shrinking 10%, but that did not stop the firm hiking revenues in London, albeit at a slower pace than the firm globally. In the City, revenue was up 9% to $152m, compared to a 13% increase to break $1bn firmwide. Most surprisingly, White & Case was among the group of have-nots for 2019, as the firm shrank 9% in London over 2019 to 415 fee-earners. Moreover, the firm looked beyond London strategically over the last year, with promotions in the City dropping by ten as other jurisdictions were prioritised. The uncharacteristic bypassing of London would be matched later by a similarly uncharacteristic financial decline. Following a turbulent start to the previous year, City turnover dropped almost 4%, while global income slowed.

‘We are definitely looking at growth in the right areas in London. That office gives us capacity to do that. We are very invested in London.’
Jane Haxby, Squire Patton Boggs

Refelcts White & Case executive committee member Oliver Brettle: ‘It was a year of two halves. The first half was challenging with uncertainties around Brexit. The pound went down then up again – that was an additional headwind.’ However, he stressed that the firm’s active second half of the year has continued into 2020, giving White & Case its ‘busiest ever’ January. Alongside Latham and Kirkland, White & Case has been a key pacesetter in London in recent years, with the past year’s performance in London seen as a blip. Says Brettle: ‘The last five years has been a story of consistent growth. If you had told our partners years ago we’d achieve results like this by the end of 2019, they would have been very sceptical.’

More worlds to conquer

Their vast resources have seen Global London firms expand their English-qualified ranks to 6,423, an increase of 11% on last year. And while it has been received wisdom that the expansion of far more profitable US firms is a clear and present threat for the large UK-bred firms like the Magic Circle, there are signs that pacy, mid-tier firms are also in their crosshairs.

The spike in US firms hiring from the UK mid-market could yet emerge as a trend, despite so far largely being confined to technology and life sciences. In July 2019, Goodwin set the tone by hiring a technology and life sciences quartet from Taylor Wessing, comprising partners Malcolm Bates, David Mardle, Tim Worden and Adrian Rainey.

‘We want to be a significant player in technology, life sciences, real estate, private equity, financial industry and complex litigation,’ comments Rob Insolia, global chair at Goodwin. ‘When we look at London and the EU, we view those markets together.’

The move mirrors the firm’s business in the US, where tech and private equity has proved a happy marriage. ‘It’s interesting the path Goodwin has taken. It’s an entirely different model than everyone else,’ says one private equity partner at a US counterpart in the City. ‘It’s more well-trodden in the US but pretty unique in London. It will be interesting to see how it will develop.’

‘We want to be a significant player in technology, life sciences, real estate, private equity, financial industry and complex litigation. When we look at London and the EU, we view those markets together.’
Rob Insolia, Goodwin Procter

Cooley and Latham have also seen opportunities in the UK to leverage their stateside experience acting for emerging and established tech-driven companies in the US. Latham also targeted Taylor Wessing, hiring its head of technology, media and communications Mike Turner, who joined alongside Bird & Bird corporate partner Shing Lo.

The last bastion remains public M&A, where the City elite has a formidable, but not impregnable, bulwark against aggressive US advances. But here too there has been significant encroachment. In October, Weil, Gotshal & Manges made a headline-grabbing move in securing Linklaters M&A star David Avery-Gee, with the firm looking to support office managing partner Mike Francies on wider corporate work. Allen & Overy also suffered losses, with corporate partners Simon Toms and George Knighton quitting shortly after its failed merger talks with O’Melveny & Myers to join Skadden, Arps, Slate, Meagher & Flom. The start of this year has begun in similar fashion, with Freshfields Bruckhaus Deringer losing M&A rising star Sam Newhouse to Latham’s sustained recruitment push.

‘The quote goes that when it comes to a big public M&A deals, plcs will go to the Magic Circle,’ says one former Magic Circle partner. ‘But all that really means is when a plc is subject to a bid, it will go to its existing corporate advisers.’

Others have likewise pointed out that the Magic Circle’s grip on M&A is restricted to bid defences. Latham and White & Case are frequently cited as having the most overt ambitions on UK plcs, while many other Global London players maintain it is not a strategic priority in the short term.

Though much attention is given to private equity and corporate, US firms are proving similarly bullish in contentious practices. ‘It’s going exactly the same in disputes as it is everywhere else,’ says East. ‘There are parallels between disputes and private equity. It’s not the institution, it’s the partner that defines which firm is used. When you’re building a practice, it’s about the individual.’

‘It’s not the institution, it’s the partner that defines which firm is used. When you’re building a practice, it’s about the individual.’
Richard East, Quinn Emanuel

While Quinn’s model continues to be unique among US firms, other more conventionally-built offices have also enjoyed good years off the back of disputes work. King & Spalding is one example, having upped its revenues 15%, considerably outstripping its 6% growth globally. ‘Disputes is our largest group. The team is busy working across lots of cases,’ says City head Thomas Sprange QC. ‘Corporate also had a good year. White collar is a relatively new practice and that’s been busy across a couple of very big but very private investigations.’

Into the breach

When Legal Business began interviewing for this year’s report, the mood among over 30 partners and City heads at US firms was optimistic. Few cited Brexit as a concern, most felt London was in a good place and the second half of 2019 provided many with confidence after a sedate start. Meanwhile, firms such as Reed Smith and BCLP made significant moves in Brussels and Paris respectively in early 2020, highlighting the continued importance of continental Europe.

However, the optimism soon turned to anxiety as coronavirus manifested itself as a far greater threat than many anticipated. The wave of disruption began when Bakers was forced to temporarily close its London office, while Latham cancelled its New York partner conference amid fears of the virus taking hold among its lawyers and staff.

‘I am really pleased with the progress we made in 2019 and we are not going to stop here. We have a fantastic bench at the moment.’
Peter Burrell, Willkie Farr & Gallagher

Alongside the health concerns, economic fears have already proved justified. Global stock markets suffered their worst sell off in early March since the 2008/09 financial crisis. Such disruption was not widely predicted and comes amid otherwise good conditions for international firms in the City. In particular, many believe the drought of initial public offerings on the London Stock Exchange was set to end this year.

Willkie’s London managing partner Peter Burrell seemingly epitomises the mood among the leading US brands: ‘I am really pleased with the progress we made in 2019 and we are not going to stop here. We will follow the footprint of the firm and continue to grow – organically and laterals in all key areas. We have a fantastic bench at the moment.’ While wider events are surely going to lead to a period of reflection in the City, a widening group of US advisers look sure to continue their medium-term advance in the Square Mile. LB

thomas.alan@legalease.co.uk

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Global London: Top ten London firms by confirmed city revenue

Firm	London revenue 2019	Changes on previous year	Global revenue	Change on previous year
Latham & Watkins	$450m*	18%	$3.77bn	11%
Kirkland & Ellis	$425m*	12%	$4.15bn	10%
White & Case	$337m	4%	$2.18bn	6%
Baker McKenzie	$307m	7%	$2.92bn	1%
Reed Smith	$224m	1%	$1.25bn	6%
Shearman & Sterling	$203m*	2%	$968m	1%
Milbank	$171m	10%	$1.07bn	3%
Debevoise & Plimpton	$151.7m	8%	$1.05bn	13%
Quinn Emanuel Urquhart & Sullivan	$128.4m**	15%	TBC	TBC
Sidley Austin	$125.7m	-4%	$2.34bn	6%

* Estimate – no London financial information provided by the firm
** Based on average exchange rate for 2019 of $1.2768

Proportion of international and UK-qualified lawyers

Global London: Partnership promotions

Global London total headcount 2010-19

Fastest-changing London offices by headcount – one-year view

Breakdown of all lateral hires by practice area

Partner hires

Global London: Law of averages

Average number of lawyers
Top 50: 149 lawyers
Top ten: 370 lawyers

Average number of partners
Top 50: 41 partners
Top ten: 102 partners

Average partnership promotions in latest round

Fastest-changing London offices by headcount – five-year view