It is 2025 and the view from the nominal head office of the leading City law firm remains as uncertain as it has for the last 15 years. Not that there hasn’t been progress at what would once have been called a Magic Circle firm. With revenues of £2.5bn, the firm now generates only 30% of its income from the UK. That isn’t much more than it earns from its US practice, which was bolstered four years ago by a takeover of an AmLaw 200 practice, and the decision to reshape its executive and partnership to put London and New York at its heart. The notion that it needed to become a true Anglo-American institution was a culture shock but few seriously question it now.
The old lockstep is long gone – top earners in London, New York and Asia earn five times that of junior partners or those working in less profitable jurisdictions and there are two gateways to negotiate, though it’s still a long way from eat-what-you-kill. Profit per equity partner at £1.9m isn’t that much higher than a decade before but top earners take home well over £3m a year.
The spoils are shared by fewer individuals. Though there are 400 equity partners, the firm employs 9,000 staff now. A third of its 3,500 associates sit outside its partnership track structure, while the firm employs over 1,000 para-professionals in fee-earning roles.
2,000 staff sit in three centralised global hubs – the largest of which is a 1,000-strong operation in the UK regions, home to a bewildering array of back-office functions, process development teams and the support for half a dozen client-facing and fee-earning ventures. The office dwarfs its City arm. The firm overhauled its structure to take outside investment in two joint venture businesses, including its separately branded contract lawyer and project management arm, which now generates over £100m a year. The cost of much work has plunged; banks and corporates get the majority of their matters handled fixed fee or via retainers. In-house teams started shrinking five years ago as the cost of external counsel for volume work dropped. GCs don’t seem much happier though, despite the lower bills.
The firm remains a second-tier player in the world’s largest legal market – though partners at least console themselves that its US practice is no longer an industry joke.
The firm retains 5% of its profits annually to back investment, though debate rages over whether it should follow several smaller rivals to take outside investment.
Despite being one of the world’s largest legal service providers and a leading force in Europe – its position can feel strangely precarious. Accountancy-tied legal networks have continued to make ground and in one case acquired one of the most feted alternative providers, which already earns more than £700m a year.
Despite the hard-won progress in the US, the firm remains a second-tier player in the world’s largest legal market – though partners at least console themselves that its US practice is no longer an industry joke. Still, US rivals seem unassailable in comparison, though sizeable American firms have continued to collapse occasionally. The firm is more global, of course, though the partial opening of China’s market to foreign firms hasn’t really pleased anyone.
At least the lateral hiring merry-go-round has slowed. It is accepted that the firm will lose a quota of good partners every year – usually to US firms but sometimes now to a widening band of alternative providers – but the firm’s client relationship programme and institutional scale does what it was designed to. The march of technology continues – so far much less destructively than predicted but who knows in future?
True, business is good – the demand for law is robust as ever across the globe – but plenty in the industry wonder: when will the dust finally settle?
alex.novarese@legalease.co.uk