Global London overview – Sharks in the fish pond

In last year’s Global London overview, attention focused on three non-UK firms with more than 400 lawyers in the City. Now, the 500-lawyer barrier has been broken by Baker McKenzie and two rivals are not far behind. Many US firms are achieving London headcount and revenue growth that is leaving worldwide performance for 2018 – which in itself has been strong overall – trailing in its wake.

Global London firms now have more than 7,000 lawyers in the City, 61% more than in 2008, the year Lehman collapsed. But the Global London top 50 in 2019 is again polarised by either dramatic expansion or significant decline – few firms have remained static.

Indicating a greater divide between the top and bottom of the table, the top ten made 55 of the 119 Global London partner hires in 2018, or 46% of the total, while the bottom ten have been far more conservative, recruiting only 11, or 9%, of the new partners.

On the back of a 26% increase in lawyer headcount in London, Bakers becomes the first Global London firm to break the 500-lawyer barrier and tops the table for the first time since 2015. In contrast, only Dentons, Bakers and White & Case had more than 400 lawyers in London in 2017 – a group that has expanded to a top five that now includes Latham & Watkins and new entrant, post-merger, Bryan Cave Leighton Paisner (BCLP).

On the face of it, Global London lawyer headcount has taken a dramatic 15% leap to 7,150 from last year’s 6,212, although this figure has been significantly inflated by the tie-up of St Louis-bred Bryan Cave and the UK’s Berwin Leighton Paisner, adding almost 500 lawyers to the total. Without this addition, total headcount growth would have been far more conservative – at around 7% – but this is still much greater than the 3% headcount growth recorded in our 2018 report.

‘The secret? Keep the costs low, work very hard and collect.’
Richard East, Quinn Emanuel

The inclusion of BCLP in the table also pushed smaller firms out, meaning the average size of a Global London firm is up 15% from 124 to 143 lawyers. While the averages are inflated by the new addition, there is no doubt that the Global London firm of 2019 is larger and packs a more powerful bite than ever.

Partner headcount among the top 50 also broke 2,000, up 17% on the 1,721 recorded last year. The market saw 119 partners hired at the top 50 international firms in 2018, with the 18% decrease from 145 in 2017 showing that swelling partner ranks were increasingly thanks to lawyers climbing the greasy pole internally as firms come of age in the City. Partner promotions soared 33% from 82 in 2017 to 109 minted in 2018, with top-ten firms White & Case, Reed Smith and Kirkland & Ellis leading the charge – each making up ten or more associates to partner in their last promotion round.

White & Case’s approach has been striking, driven by an inexorable hiring drive underpinning its ambition to challenge the Magic Circle in London. The New York-bred firm racked up 13 partner hires to make it one of two firms to recruit in the double digits, with Bakers the other, adding ten to its partnership through hires. It was no surprise that White & Case also made up the most lawyers, promoting 13 in its latest round, representing 11% of its total London partnership and nearly double the seven it promoted in the previous round.

Also at the top end, Kirkland has again set a blistering pace, increasing headcount by 28%, one factor being a ten-partner round of City promotions as part of a sizeable 122-strong global investment. The marquee hires of David Higgins from Freshfields Bruckhaus Deringer and Nicola Dagg from Allen & Overy (a move that marked its first foray into intellectual property litigation in the UK) did not hurt either.

And if there was any doubt about Kirkland’s intentions in the City, the hire of Adrian Maguire to follow in the footsteps of his former colleague Higgins has made them clear (see the M&A focus). The increase in headcount over the last five years has been striking, with Kirkland bolstering lawyer numbers by 139% since 2013 – the only firm in the top ten to have achieved that kind of headcount growth. Outside the top ten, mid-table firms Quinn Emanuel Urquhart & Sullivan, Morrison & Foerster and Vinson & Elkins all added significantly to their City headcount during 2018.

‘We are always looking for regulatory lawyers. But we don’t go off on a frolic, hiring a big team for something we don’t already have global strength in.’
Mike Goetz, Ropes & Gray

Despite making no London partner hires in 2018 and promoting only two associates in the latest round, Quinn Emanuel grew headcount 33% in 2018 and is also among the five Global London firms to have grown the most in the last five years, increasing fee-earner count 152% since 2013. As City revenue for 2018 topped £83.6m and profit surged 13% to £59.3m, the disputes heavyweight has moved beyond its aggressive lateral hiring phase as it established itself in London and has more recently been focused on sweating its assets.

Says Richard East, Quinn Emanuel’s London co-managing partner: ‘Last year was essentially about the same people working harder and generating more business. The secret? Keep the costs low, work very hard for the client and collect.’

Working hard and sweating the assets is a recurring theme for many Global London firms, evident as 2018 financial results emerged from US firms in recent weeks. Many firms, while performing well globally, are seeing their London branches outstrip firm-wide performance by a significant margin. Sidley Austin’s City branch grew at a faster pace than the firm globally as it announced one of its best financial performances since the banking crisis, with firmwide revenue up 9% to $2.2bn from $2.04bn but London revenue rising 14% from £85.7m to £97.5m. Paul Hastings also achieved 14% revenue growth to $91.2m in the City to beat its global growth figure of 9%.

Elsewhere, Milbank had a hiring spree to thank for its pace-setting 25% uptick in City turnover, reaching $156m from $125m. This compares to the global results, where Milbank passed the $1bn mark in gross revenue for the first time, reaching $1.034bn after a 13% increase during 2018. Reed Smith bolstered City revenue by 18% to $223m against 5% revenue growth firm-wide, while King & Spalding notched 12% growth in the UK to $48.3m compared with a 9% global increase to $1.26bn from $1.14bn.

Cooley’s London branch recorded another year of double-digit revenue growth as its top line grew 16% to $66.7m, four years after its launch. For the second year in a row, the City office outpaced the West Coast firm’s global revenue growth, as the latter rose 14% from $1.07bn to $1.23bn. Morrison & Foerster’s City base grew revenue 25% to £30.9m even as the firm’s global turnover dropped 2% (see Focus: Morrison & Foerster).

‘Since the 2009 recession, management has been focused on making sure we’re prepared.’
Melissa Butler, White & Case

But the standout London performances came from Akin Gump Strauss Hauer & Feld and Goodwin Procter. Akin Gump recorded a 28% City revenue hike to $123.5m, up from $96.2m, standing out against the more muted firm-wide revenue uptick of 3% from $1.04bn to $1.07bn. But Goodwin beat them all with a striking 58% growth in London from $42.3m to $66.8m, which came as Goodwin’s global turnover rose 16% to $1.2bn.

Meanwhile, White & Case, which has been in a rich vein of form in recent years, saw City revenue hit $350m – equal to 17% of the global business.

The have-nots

On the other side of the coin, three established US brands in London saw headcount drop by a double-digit percentage rate. Cadwalader, Wickersham & Taft fared the worst with a 17% drop after achieving a 9% increase in 2017, while Sullivan & Cromwell experienced an even more dramatic decline in headcount than the 11% of last year, dropping 14% in 2018.

Around a dozen lawyers left Cadwalader in 2018, including a four-partner restructuring team led by highly-rated global financial restructuring co-chair Yushan Ng, to Milbank. His marquee clients include brand name sponsors Oaktree Capital Management, KKR, Centerbridge Partners and The Blackstone Group. It also lost head of loan portfolios, debt and trading Louisa Watt to Brown Rudnick. In the face of those exits, Gregory Petrick, Cadwalader’s London managing partner, is bullish, despite London revenue falling 13% to $43.1m under the weight of departing partners.

‘We are in an aggressive growth mode and the London office is right at the centre of that. We are taking space at 100 Bishopsgate with room for 130-150 lawyers and are moving in next year.’

In the City, the emphasis remains on emulating Cadwalader’s historic Wall Street strength in finance, with the hire of fund finance partner Samantha Hutchinson from Dentons in 2018 and real estate finance partner Duncan Hubbard in January this year from Norton Rose Fulbright reflecting that. Three of the five latest global partner promotions were in the City, another show of support for London.

Shearman & Sterling had a slow year, sustaining a 12% headcount drop. Despite London being Shearman’s second-largest office after New York, the decline was the result of concentrating investment on the States in 2018 with the launch of offices in Austin and Houston. Its stated ambition is to bounce back in the City with hires in leveraged finance and mid-market private equity and M&A, with a focus on energy, tech and life sciences. It was a mixed bag on the lateral front, with the high-yield team losing Apostolos Gkoutzinis to Milbank in January but winning back Ward McKimm from Freshfields in July. The firm also added Tim Sheddick from Bakers to its corporate practice.

‘Progress with clients and mandate wins has built real excitement. We have a deep pool of talent, rather than one person saying: “It’s mine.”’
Will Rosen, Ropes & Gray

Elsewhere, chances of an immediate recovery from a 4% headcount drop in 2018 for Squire Patton Boggs look slim. The practice has this year alone lost six partners and a growing number of fee-earners to Crowell & Moring’s redoubled efforts in London. In the space of a couple of months at the start of this year, Squires lost energy partner Robin Baillie, banking and debt finance partner Andrew Knight, litigation partner Laurence Winston, and insolvency partners Cathryn Williams and Paul Muscutt to Crowell, as well as its former City head Robert Weekes. Crowell is a firm to watch for the 2020 report, while Squires also saw 15 other lawyers leave for Morgan, Lewis & Bockius in February.

Meanwhile, Simpson Thacher & Bartlett and Ropes & Gray have pulled off a slight return, following 2017 when they were hit by a 21% and 13% decline in fee-earners respectively. The 1% growth apiece is noteworthy on the back of such sharp downsizing in 2017. Similarly, a five-year view shows that conservative Simpson Thacher has grown headcount 43% since 2013, not least with the trophy hire of Clifford Chance (CC) deal star Amy Mahon last November. Meanwhile, Ropes has swelled fee-earner numbers by 125% since 2013.

Ropes’ London co-head Mike Goetz is optimistic. ‘It’s no secret that last year was a year of consolidation. There were good things and difficulties.’ One such difficulty was the firm axing four restructuring and real estate partners in what was described as a ‘night of the long knives’. But Goetz insists the move was not a sign of retrenchment in London but instead a refocus on its sweet spot of asset managers, hedge funds, credit funds and direct investors.

‘We want to grow private equity, finance and funds-related restructuring. Like everyone, we are always looking for regulatory lawyers. But we don’t go off on a frolic, hiring a big team for something we don’t already have global strength in. We want to build our healthcare practice a little further, but those partners are harder to come by. There’s more need for them as regulation increases.’

Success in the lateral market in 2018 included the hires of CC white-collar crime partner Judith Seddon to co-lead its anti-corruption and international risk practice, litigation partner Rosemarie Paul from Akin Gump and finance partner Carol Van der Vorst from Goldman Sachs.

Will Rosen, co-head of London, is upbeat. ‘The progress we’ve made with clients and mandate wins has built a real sense of excitement. We have a deep pool of talent, rather than one person saying: “It’s mine.” We are hungry to keep going. The sense of ambition with the team is tangible.’

Different strokes

The number of English-qualified lawyers among the top 50 has grown 15% to 5,809, more than double the 7% pace of growth in 2017 when there were 5,071, although the addition of legacy Berwin Leighton Paisner and its ranks of UK-qualified lawyers will have pushed the balance more keenly in favour of homegrown talent. However, non-UK qualified lawyers have seen a 20% increase to 1,341. Clearly firms are keen on a diversified practice, sector and geography-wise, to deal with an imminent downturn, and the restructuring and contentious opportunities this is likely to yield. Disputes remains high on the wish list of many London managing partners for recruitment and some are seeing recent investments already pay dividends.

Says Sunil Gadhia, disputes partner at Cleary Gottlieb Steen & Hamilton: ‘Lively areas for the firm have been M&A, antitrust and disputes – those are the standout areas. Disputes has been busier this year.’

‘We have received more questions from our clients in the last month about what happens in a no-deal scenario.’
Mary Kuusisto, Proskauer Rose

Gadhia points to the rare lateral Cleary made in November 2017 of litigator James Norris-Jones from Herbert Smith Freehills, who joined in April 2018. ‘He has been incredibly busy from day one. It was a strategic decision to grow English disputes, complemented by the promotion to partner of James Brady, and it is good to see that go to plan.’

Alexander Msimang, London managing partner at Vinson & Elkins, reflects on his office’s 25% growth: ‘We have had a number of new joiners and promotions, including partners and also plenty of good associates joining and coming up through the ranks. There are lots of new faces – it’s an energetic place to be.’ The firm is looking to bolster those figures further to invest in leveraged finance and private equity as a priority, as well as disputes.

Mayer Brown hired Norton Rose Fulbright partners Sam Eastwood and Jason Hungerford in 2018, and added DLA Piper duo Michael Fiddy and Amy Jacks earlier this year. Sally Davies, senior partner of the London office, says the aim is to keep building through partner hires, especially from the associate ranks of other successful Global London firms. ‘The area where I hope I can make the biggest difference at the moment is talent retention. London is so competitive as a market. We have been focused on identifying really successful senior associate-level talent at other firms where it is too hard to make partner. Our strategy is to grow our London office with particular focus on finance and banking, private equity, global investigations, international litigation and arbitration.’

Melissa Butler, White & Case’s London executive partner, says it may be time to buckle up for a difficult period ahead, despite the striking run her own firm has experienced of late. ‘We are mindful of predictions around another recession and we are planning for economic volatility. I feel it will be successful because our counter-cyclical practices are a hedge to Brexit. We are realistic but positive. Since the 2009 recession, management has been focused on making sure we’re prepared.’

Charlie Geffen at Gibson Dunn & Crutcher in London says a strong regulatory offering is essential and points to the hire of Sacha Harber-Kelly, a former senior prosecutor and case controller from the Serious Fraud Office – a good move given the firm’s white-collar strength in the US and strong links between US and UK regulators.

However, for the successful firms there is still the promise of jam tomorrow. Proskauer Rose’s London office has expanded 223% in the last five years. London head Mary Kuusisto’s optimism reflects the entrepreneurialism that will distinguish the better international firms from sleepier peers in the US and in London, seeing opportunities in the challenges.

‘We have received more questions from our clients in the last month about what happens in a no-deal scenario. Alternative asset managers have raised money that they have to spend in the next three-to-five years. We represent a significant part of the mid-market: those firms are here, their money needs to be deployed and they are not going away.’ LB

nathalie.tidman@legalease.co.uk

Legal Business would like to thank Mayer Brown for its sponsorship of the Global London report.

Global London: Top ten firms by confirmed London revenue

Firm	London revenue 2018	Change on previous year	Global revenue	Change on previous year
Kirkland & Ellis	$380m*	27%	$3.76bn	19%
Latham & Watkins	$375m*	20%	$3.386m	11%
White & Case	$350m	7%	$2.05bn	14%
Baker McKenzie	$288m*	19%	$2.9bn	9%
Reed Smith	$223m	18%	$1.17bn	5%
Shearman & Sterling	$198.7m*	4%	$955.5m	4%
Milbank	$156m	25%	$1.034bn	13%
Debevoise & Plimpton	$139.4m	24%	$929.3m	13%
Sidley Austin	$130.3m**	19%	$2.2bn	9%
Akin Gump Strauss Hauer & Feld	$123.5m	28%	$1.07bn	3%

(Baker McKenzie’s financial year ran to 30 June 2018)

*Estimate – no London financial information provided by the firm
**Based on average exchange rate for 2018 of $1.3363 per £1

Proportion of international and UK-qualified lawyers

Global London total headcount 2009-18

Partner hires

Breakdown of all lateral hires by practice area

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

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

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