It had to come. Among the Global London leaders interviewed in last year’s report, there was an inevitable consensus that the frothy post-Covid conditions that created a phenomenally successful 2021 would cool noticeably through 2022 and tougher times would lie ahead. However, while the predictions have been proven correct, the mood among the leading US firms in London is far from pessimistic.
Tamara Box, EMEA managing partner at Reed Smith, says of her own firm’s City office: ‘The mood is positive, not least following on from another strong year for the office in 2022. While we have seen a slowdown in transactional activity, there is still plenty to keep the litigators busy this year. Well-hedged firms are being kept busy advising clients on how to navigate the disruption caused by economic downturn, tremors in the financial markets and the Russia/Ukraine war.’
Gus Black, the London-based co-chair of Dechert’s global financial services group and a member of its policy committee, adds: ‘Obviously, we’ve seen an evolution coming off the unsustainable run in 2021 and recent global geopolitical events, some cooling in the deal space, but there is still a fair amount going on, though a lot of people are struggling to price deals. There is still a lot of activity in the litigation group and a lot going on in the fund formation space.’
Ed Poulton, London managing partner of Baker McKenzie, sums up the past few years. ‘Law firms went through a period of big uncertainty when Covid hit, and clients, law firms, everyone, was waiting to see what would happen. That was followed by a record year in terms of transactions. Law firms benefited financially on top of that because costs were significantly cut. Now we are seeing a slight cooling of transactional activity and a return of some of the costs firms had in pre-Covid times. But the London market continues to be very resilient and highly active, and still one of the markets clients really want to come to.’
‘We are full service and multi-jurisdictional. If there is a boom in one jurisdiction or one practice area, we perhaps don’t benefit as much as some firms, but if that practice area cools down, we are very well hedged.’
Ed Poulton, Baker McKenzie
Despite widespread reports of a slowdown in transactional activity – particularly in the banner practices of capital markets and, notably, private equity – this hasn’t resulted in a cooling of the ambition of the major US players in London. These may clearly be more austere times, but it is also a time of opportunism and law firms continue to invest in talent. Headcount among the 50 Global London firms is up 9% overall, almost twice the rate recorded in our 2022 report. While this growth rate does not match the 15% growth between 2017 and 2018, it is still proof that the recovery from the Covid years continues at pace.
Reports of private equity’s demise are also somewhat overstated. A good illustration of this – and the opportunistic approach adopted by some Global London firms – is Milbank’s acquisition of the London office of Anglo-Scottish firm Dickson Minto, a team comprising seven partners and 20 associates. Milbank’s global head of corporate, Norbert Rieger, said at the time of the announcement in December: ‘The addition of this team will significantly add to our ability to act for clients around the globe on private equity related transactions. It is a logical next step after our expansion in the PE space in the US, Germany, and Asia.’
Meanwhile, partner headcount is up a more sedate 5% to 2,361 and partner hires have barely moved – just a handful more partners joined Global London firms in 2022 than in the previous year. This is surpassed by the volume of promotions to partner, which is up 7% in total to 165 – an indication that offering associates a route to partnership remains a key factor in the ongoing tussle for talent.
However, Box notes: ‘The peak of the talent war may have passed as client demand for legal services has dipped from the heights of 2021. However, good talent will always be sought after and so it’s important for us to remain attractive in a competitive market both for recruitment and retention. Some of the dislocation in the markets currently could also present opportunities to invest in the talent we know we need for the future.’
Back to opportunism again. The point is taken up by Mayer Brown’s London managing partner Dominic Griffiths, who stresses the need to grow, but not for growth’s sake. ‘The plan for growth is to continue to make excellent lateral hires, particularly in corporate and private equity.
I don’t intend to grow and to have a strategy that just involves getting bigger. I don’t think that is a particularly strong strategy in the market as it is at the moment. We just want to raise the bar with regard to the areas in which we still have gaps to fill.’
Poulton also comments: ‘Part of the reason for the war for talent, if you look at the generation of people firms are having war over, they had their training contracts in 2008-09 when law firms cut their numbers in the wake of the global financial crisis. It is hard to tell, but the feeling is that things have cooled, headlines have died down. A year ago, that was all that was being reported. When I speak to other managing partners, it is not the top issue on the agenda.’
Another noticeable shift is the practice areas that firms have hired into over the past year; while corporate (which includes private equity and equity capital markets) still dominates, accounting for 41% of all hires across the 50 Global London firms, up from 35% last year, the proportion of finance hires has increased from 23% to 28%, while disputes hires are down to 11% from 18%. Expect this to change again in 2023 as the disputes market picks up and transactional work continues to slow down.
Size isn’t everything
While the Global London report historically has ranked 50 non-UK firms by lawyer headcount in London, this year our main table is slightly different. To add a qualitative element to the report, we have teamed up with The Legal 500 to rank firms not only on size, but also their performance in London in the UK guide.
A new column in the table shows the percentage of tier one rankings that each firm has in the London Solicitors section of The Legal 500 UK. We decided to focus on tier one rankings only to identify elite performance, not to reward the ubiquity of some large firms that are ranked across a broad spectrum of practice areas and sector groups (for a more detailed breakdown of the performance of US firms in the UK guide, see Ben Wheway’s analysis). Therefore, the firms were ranked in size order and then tier one Legal 500 performance. Half of the firms did not have any tier rankings and are just ranked on size alone. The firms’ Global London ranking is their aggregate score for size and Legal 500 top-tier rankings.
‘2021 was an incredibly busy year, for the firm globally and in London as well. I suspect it will be a while before we see that level of busyness across the industry in any market.’
Justin Stock, Cooley
In truth, there is no significant difference between the amalgamated score and a table that ranks firms according to the number of lawyers. However, some interesting differences appear in our new table. Baker McKenzie, Kirkland and Latham are ranked joint first, because while Kirkland has comfortably the greatest percentage of tier one rankings (38% of all its rankings in London), it has fewer London lawyers than arch-rival Latham. Bakers falls somewhere between the two for both size and Legal 500 rankings, so has the same aggregate score.
Bakers’ percentage of tier one rankings in The Legal 500 – 26% – is evidence that it can hold its own in the City and while it may not be regarded as the same elite force as Latham or Kirkland in highly competitive practice areas such as private equity or restructuring, it has proven that longevity and a breadth of service offering have benefits. London accounts for 10% of the firm’s global revenue, and is up 10% to $278m.
A glance at some of Bakers’ tier one rankings in the UK Legal 500 – commercial contracts, contentious trusts and probate, corporate governance, employment, and IT and telecoms (among others) – demonstrates the value of a quality offering in some lucrative areas.
However, Poulton points out that the firm is fully capable of taking a role on high-profile corporate deals, citing the demerger of Haleon from GSK last year as a prime example. ‘It was a huge deal involving multiple jurisdictions, and kept 100 of our lawyers busy around the world for four years,’ he says. ‘It was a great success all round – led by corporate partner Jane Hobson, who is very active in life sciences.’
He continues: ‘Our growth strategy is focused on continuing to do what we do well, being very focused on our transactional practice – M&A, private equity, growing leveraged finance. We’re very alive to the fact that growth in our transactional offering drives growth across the office. For every partner you bring into the transactional practice, you need to be able to support that with a top-tier employment team, etc. The trick is making sure that a bit like a body builder, you don’t just end up with massive biceps.’
He concludes that the recent run of hyper expansion among some US firms in London cannot last. ‘We will see firms that have been growing very fast, shrink a little. We are full service and multi-jurisdictional. If there is a boom in one jurisdiction or one practice area, we perhaps don’t benefit as much as some firms, but if that practice area cools down, we are very well hedged.’
‘It’s no longer that the US firms are coming, it’s that the US firms are here. Not all – only a small group of them – are competing head-to-head with the Magic Circle firms.’ Ali Nikpay, Gibson Dunn
Simpson Thacher, unsurprisingly, is another firm punching above its weight in terms of quality. Ranked 12th in London on lawyer headcount only, it appears in sixth place in our rebooted table thanks to top-tier rankings in the Legal 500 for acquisition finance, high-yield and private funds work – a 27% tier one return on all its London Legal 500 rankings. The firm’s success in London is reflected in its financial performance (see table, ‘Global London: City revenues’, below), with its $378m turnover the equivalent of 17% of the firm’s revenue, and up 14% on the previous year. Debevoise, Willkie, Quinn Emanuel, Vinson & Elkins and WilmerHale are also firms punching above their weight in Global London thanks to strong Legal 500 performances.
However, others have barely moved in the table, typically because they have a lot of tier two or lower rankings but little or nothing in the top tiers in their core practice areas. This includes two of the standout performers globally and in London in recent years, Goodwin (which holds its place in the Global London table with just 7% of top-tier rankings) and Paul Hastings, which has not recorded any tier one rankings despite an excellent track record in London.
Like several firms, our US Law Firm of the Year, Cooley, has roughly maintained its position in the table, despite an absence of top-tier rankings in London. When Cooley opened its London office in January 2015, its objective was to replicate the success of the firm’s well-established position in the US as a pre-eminent law firm for the tech and life sciences industries, advising startups through to global giants on all their legal needs, and their investors. The office quickly became a ‘go to’ player in the City for tech and life sciences. However, it was always going to be difficult to maintain the momentum the firm built up in a record-breaking 2021.
Says London managing partner Justin Stock: ‘2021 was an incredibly busy year, for the firm globally and in London as well. Our revenue increase was significant compared to the previous year, without adding a large amount of new personnel. I suspect it will be a while before we see that level of busyness across the industry in any market. But, fortunately, last year continued to be busy on several fronts. Capital markets was the obvious area that slowed down massively in 2022, almost to a standstill, in both the UK and the US.’
Gibson Dunn is the fastest-growing firm year-on-year, with London headcount up 29%. Lateral hires in 2022 included three from Global London rivals: private equity specialist Isabel Berger from Sidley, and technology partners Joel Harrison and Alison Beal from Milbank. According to Ali Nikpay, co-partner in charge of the firm’s London office, the spike in headcount is not speculative: ‘We are not a firm that randomly hires people for the sake of growth. Our expansion is built on years of steady growth to achieve a critical mass. The spike in our hiring over the past 18 months is a direct result of reaching that critical mass which led to a surge in client demand.’
Adds fellow London head and disputes partner Penny Madden KC: ‘We’ve had a recent focus on building out our transactional platform, which is now where we want it to be. It’s now a question of cementing that into an integrated, collaborative culture, which is very much our DNA. We will return to an approach of taking partners incrementally and opportunistically. The aim is to be nimble and to adapt to the market’s needs, and making sure our disputes and transactions platform continues to be the best.’
Sidley is the second-fastest growing firm this year in terms of headcount (see case study). Tom Thesing, London managing partner, says: ‘We haven’t announced our annual results yet, but our growth in London the last ten years has been quite steady and we are pleased with the way the business has grown. What will success look like? It’s really going to be more of the same, to continue to build our business across all of the different areas in which we excel.’
Proskauer is also one of the five fastest-growing firms on a five-year track; 21% year on year and 108% since 2017. In revenue terms, the London office accounts for 11% of the firm’s turnover and is up to $132.2m, an increase of 6%.
According to Mary Kuusisto, the firm’s London lead, when the firm opened in London in 2007, it came with the view that while it was doing very well in particular sectors in the US, it was not able to serve its clients adequately because it did not have a presence in London.
‘We opened up with the idea of having three legs to the stool, and we still focus primarily on those, all in the area of asset management. The three areas of the practice are fund formation, private equity M&A, and private credit transactions. We’re in our client’s entire lifecycle, from raising the money to spending the money. Our strategy has served us well so far. We’re not going to say that we would never change it, but right now we’d be looking to continue to build on those three pillars.’
Of the firms that have struggled over the past five years, Shearman & Sterling is the standout example with its problems well documented. The 5% dip in headcount tells only half the story: expect to see a more dramatic drop recorded for 2023, considering the number of exits around the time merger discussions with Hogan Lovells were suspended earlier this year.
London is ours
The overarching sentiment is that although 2022 saw conditions calm down a little, London is very much the playground of the US firms right now. Says Nikpay: ‘The time for international firms has come. For years people have been predicting that the US firms are coming. The US firms that came did well but didn’t really move the needle. Things have changed in the last few years and we’ve seen a big spike. It’s no longer that the US firms are coming, it’s that the US firms are here. Not all – only a small group of them – are competing head-to-head with the Magic Circle firms, but those that are, are making big inroads and we are certainly among that group.’
There are more significant developments too, none more so than Cravath announcing the launch of an English law practice through the hire of partner duo Philip Stopford and Korey Fevzi from Shearman. Though Cravath has maintained an office in London since 1973, it has never fielded a team of English law practitioners. Its decision to do so now leaves Paul Weiss as the only US firm in the London market without English law capabilities.
Expect the table to change again in 2024, with Wilson Sonsini, among others, bursting onto the scene. The Silicon Valley powerhouse originally launched its London office in August 2018 with one US partner and a handful of professional staff. Through a potent hiring spree in the past couple of years, it now has 37 London-based US, UK and dual-qualified lawyers — including 10 partners. Over half of the current team has joined the London office (either from one of its US offices or as a lateral) since the beginning of 2022.
Says Daniel Glazer, managing partner of its London office: ‘Our most active area has been transatlantic corporate transactions for UK and other European technology companies. In 2021-22 we were company counsel on 17 financing representations for UK/EU tech companies at unicorn valuations. Bloomberg ranked us as number one in 2022 by volume of UK mid-market M&A deals. Most of these transactions involved our representation of a UK/EU tech company opposite a US investor, buyer or target.’
He adds: ‘Wilson Sonsini has deep roots in Silicon Valley, and our decision to open in London – similar to our decision to open in many other cities outside Silicon Valley over the past several decades – was driven by market demand for the unique mix of legal and strategic business-related advice that has always been a hallmark of Silicon Valley. The London tech ecosystem has grown exponentially since the 2010 launch of the UK government’s Tech City initiative, such that in tech, the US-UK dynamic is not just the special relationship – it’s the essential relationship. There are more unicorn tech companies in the UK than anywhere else in Europe, and most of those companies have raised capital from US venture and growth capital investors. Since launching in London in 2018, we’ve heard from the market loud and clear that UK/EU tech companies want an integrated US-UK service offering that is free from any friction created by choice of governing law, time zones, or differing market norms and expectations.’
And it is this adaptability and opportunistic expansion that will hold certain Global London firms in good stead. Says Hamid Yunis, London managing partner of McDermott Will & Emery: ‘Firms that have the size, resource and breadth will continue to do well and they should be able to manage changes in the market one way or another. In addition, firms that are sharply focused on a particular sector or specialism generally have been doing well over the last couple of years, although there remains the threat of a slowdown in a particular sector affecting them adversely. Transactional, PE and funds work has been an obvious engine of activity in the London market, while we have also seen high demand in healthcare, more recently corporate restructuring and special situations, and in sectors such as energy and technology.
‘These are obviously challenging times and those with greater diversity in their offerings, including counter-cyclical practices or those capable of adapting, will be more confident. There are some indications that transactional activity levels will increase as the year goes on, but it remains to be seen whether the latter part of Q2 and Q3 will deliver those results.’
Tom Sprange KC, London managing partner of King & Spalding, is confident of the resilience of US firms in London, despite seeing City revenue drop 6% from $62m to $58.2m: ‘I’ve seen a few bad times in London, but what has always surprised me is the resilience of the legal market, and of London as a city. Even after something like the 2008 crash, there’s always a need for lots of lawyers. Lawyers are very adaptable and very innovative. Clients will always have some sort of need, and whatever that need is, lawyers will make sure it gets met. If you’re a really smart, hardworking lawyer, just because one thing you do starts to go quiet doesn’t mean that you can’t work on something else.’
Legal Business would like to thank Mayer Brown for its sponsorship of the Global London report.
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Global London: City revenues
Below is declared London turnover of selected Global London firms for 2022. Firms have declared London revenue in £. Where they have declared in $, a HMRC average annual exchange rate of $1=£0.8003 has been applied.
| Firm | London revenue 2022 | % of global revenue | London RPL (£k) |
|---|---|---|---|
| Simpson Thacher | £302.5m | 17% | £1543k |
| Baker McKenzie | £277.96m | 10% | £494k |
| Dentons | £260.4m | 11% | £659k |
| Sidley | £151.9m | 5% | £717k |
| Quinn Emanuel Urquhart & Sullivan | £133.6m | 10% | £1363k |
| Goodwin | £133.4m | 8% | £570k |
| Akin Gump | £112.4m | 11% | £739k |
| Proskauer | £105.8m | 11% | £808k |
| Willkie Farr & Gallagher | £83.3m | 8% | £617k |
| Orrick | £71.9m | 6% | £599k |
| McDermott Will & Emery | £69m | 5% | £758k |
| Fragomen | £67.4m | 10% | £642k |
| King & Spalding | £58.2m | 4% | £797k |
| Steptoe & Johnson | £15.1m | 4% | £378k |
| Womble Bond Dickinson | £13.7m | 4% | £214k |
| Armstrong Teasdale | £10.5m | 7% | £228k |