Hogan Lovells news, updates and analysis | Page 2 of 20

As the financial reporting season kicks off once more, Hogan Lovells has today (22 February) reported a 7% drop in revenue to $2.43bn as PEP fell 8% to $2.28m.

This represents a $174m reduction to the firm’s top line and looks likely to set the mood for many Global 100 players as market forces continue to take their toll. The results mark a disruption to Hogan Lovells’ purple patch, following on from last year’s 13% revenue increase to $2.61bn and eye-catching 26% hike in PEP to $2.48m, as well as a solid showing on a three-year track.

UK revenue was $464m, down 13%, from $534m last year. Of this, $449m was generated out of London and $15m from Birmingham. The UK accounted for 19% of the firm’s total revenue compared to 21% last year.

The breakdown of revenues by region held steady, with the Americas accounting for 48% of income this year, compared with 49% in 2021/22, while EMEA’s share of turnover increased from 45% to 46%. Asia-Pacific, meanwhile, accounted for the remaining 6%, on a par with last year.

Despite widespread talk of an overall slowdown in transactions, the proportion of revenue generated by corporate and finance work dropped by only 2%, to 40%. The disputes practice was stable at 28%, while global regulatory and intellectual property, media and technology (IPMT) increased from 30% to 32%.

Speaking to Legal Business, chief executive Miguel Zaldivar (pictured) maintained that this performance was still strong: ‘This was actually our second-best year ever. Last year was a record year for us. Every star aligned, and we pushed forward and had great opportunities. This year is better than 2020 in terms of both revenue and profits.’

Deputy chief executive Michael Davison added: ‘It’s a bit like saying, sure, you hit your personal best last time, but on this race you missed it. Is that a problem? It’s still a very good result.’

Zaldivar noted that headwinds were particularly fierce in corporate work. ‘There was a slowdown in M&A and capital markets, that hit all firms in similar ways,’ he said.

Global financial instability also saw revenues when reported in Sterling increase from £1.9bn to nearly £2bn. ‘The main driver was currency’,’Zaldivar explained. ‘The British pound suffered a correction during the fiscal year.’

In the face of these external shocks, Zaldivar and Davison argued that the results show resilience, as well as stability in headcount. Said Zaldivar: ‘Some firms saw partner attrition. We didn’t.’ In fact, the firm announced the promotion of 38 new partners and 77 new counsel, which Zaldivar said was the largest class of partners ever promoted, up 40% from the 27 announced in 2022. These included the largest proportion of female partner promotions in the firm’s history, at 58%.

A list of standout mandates included advising Duke Realty Corporation on its combination with logistics real estate company Prologis, valued at $23bn. In UK M&A, the firm advised Shaftesbury in its all-share merger with Capital & Counties Properties, creating a combined portfolio valued at $5bn.

Davison said that the firm intends to continue with its sector-focused strategy: ‘When we’re looking to expand, we need to think about where our clients want us to be through the prism of our industry focus.’

‘Energy is going to really carry the day for us in 2023’, added Zaldivar, pointing to the increasing prominence of the sector in the context of both the ongoing energy transition and heightened concerns about energy security raised by Russia’s invasion of Ukraine.

Commenting on the US strategy, Zaldivar said: ‘We have what we call four engines. One is in Washington DC, and the others are in the EMEA market. But there are three markets where we’re working very hard to grow, and those are Texas, New York, and California. Our desire is to achieve greater scale, particularly in New York, where we aim to build a fifth engine. In New York, our main focus is financial institutions. In California it’s tech. And then in Texas it’s a combination of energy and life sciences.’

Neither Zaldivar nor Davison would be drawn on the rumours of an upcoming merger with Shearman & Sterling that persist in the market.

alexander.ryan@legalbusiness.co.uk

Taking the helm of a global law firm is no small feat at the best of times, much less so amid a global pandemic. However Hogan Lovells’ chief executive Miguel Zaldivar and his deputy Michael Davison, who assumed their roles last summer, had cause for cheer as the pair revealed a solid set of financial results, including a 31% surge in profit per equity partner (PEP) to $1.97m from $1.5m in 2019.

Global revenue grew a more sedate 3% to $2.3bn in 2020 compared with $2.25bn the previous year and revenue per lawyer (RPL) rose 4% to $884,000 from $850,000.  Geographical performance has been broadly in line with last year’s output, with the Americas accounting for roughly 49% of total billings, EMEA 45% and Asia-Pacific 6%.
Practice-wise, corporate and finance brought in 41% of total billings; global regulatory and intellectual property, media and technology (IPMT) generated 31%; and litigation, arbitration and employment 28%.

Speaking to Legal Business, Zaldivar (pictured) noted: ‘The highlight of the year for me has been the new management team transitioning in the middle of the pandemic. We have hit the ground running and the firm has had its highest revenue and profit in history. The credit for that goes to the partnership.’

Explaining the substantial PEP increase, he said: ‘We are not an outlier in achieving double-digit PEP growth, many other firms have done this too. The main contributor was not a drop in equity partners. In 2020 we introduced a floor on compensation for some partners to act as protection to them without a financial risk to the firm. We decided that would be prudent, given the fluctuation in the market, and that has had the effect of increasing PEP.’

He praised Davison and teams around the world for their impressive financial discipline. ‘Our lawyers are doing timesheets daily and sending bills out every month. Clients have paid and cashflows have been positive and healthy. Michael has been the enforcer of the rules!’

But it has not all been plain sailing, as Davison admits. ‘We will look back on this as a uniquely challenging situation. We continued to operate but in a very different way and supported each other through, but it has not been easy.’ He pointed to a voluntary redundancy scheme that saw business services staff cut in the US and UK as a cost-saving measure.

The pair provided a long list of standout matters for the year, including in corporate and finance, advising Marvell Technology on its $9bn acquisition of Inphi and acting for Arm, the UK-headquartered multinational semiconductor and software design company of SoftBank , in its $40bn acquisition by NVIDIA.

The firm acted for ENRC on high-profile claims against the Serious Fraud Office and its former legal advisers and secured a major win for Uber on regaining its London licence and right to continue operating in London.
Looking ahead, Zaldivar insists the firm will continue to invest in the engines of London, Washington DC and Germany, as well as in the Paris office.

It is clear that, under new leadership, The US and Asia businesses will remain at the forefront of the firm’s ambitions. Concluded Zaldivar: ‘In the US we are challenging the partnership to be more successful in New York, California and Texas. We have to grow in the US. We plan to grow organically in Shanghai, Beijing and Hong Kong, adding more corporate lawyers. We want to be stronger in China. That is the future of Hogan Lovells.’

nathalie.tidman@legalease.co.uk

Hogan Lovells has posted its strongest financial performance since its transatlantic union a decade ago, with turnover rising 6% and solid year-on-year growth in all key metrics.

Revenue in 2019 came in at $2.246bn, profits per equity partner (PEP) was up 9% to just over $1.5m despite the firm growing its equity ranks by 13 to 536, while revenue per lawyer (RPL) rose 6% to $850,000 as total headcount grew marginally to 2,642.

The results announced today (21 February) make for a nice farewell gift for chief executive Steve Immelt (pictured) and his deputy David Hudd as the duo prepare to step down at the end of June after six years.

Speaking to Legal Business, Immelt described the performance as ‘The result of what we have been working on since we came on in 2014: get our business running better, focus on profits, go to market with a view to be working on our clients’ most complex matters.’

Turnover at the firm’s 500-lawyer London office also made a big jump in 2019, growing 10% to £332.6m compared to a much slower 3% rise the previous year and accounting for a fifth of Hogan Lovells’ total billings.

‘The performance comes from consistency across the piece – strong corporate transactions, busy period for our litigation practices – and strong discipline in getting our bills out and collecting,’ said UK and Africa managing partner Susan Bright, pointing to strong performances in financial services, TMT and life sciences.

Under Immelt and Hudd’s watch, Hogan Lovells has hiked global revenue 26% and PEP 24%, a notable improvement on the firm’s previous run, when turnover and partner profits rose by just 7% and 9% between the 2010 merger and 2014.

While performance remained sluggish in 2014 and 2015, turnover has increased its pace of growth since 2016. But it wasn’t until 2019 that partner profits caught up, although the 8% rise in PEP to $1.38m in 2018 was largely due to a 6% drop in the number of equity partners.

‘There was not one thing in 2019 that suddenly moved the needle, there was a lot of good business across the entire platform,’ Immelt said. ‘I feel pretty good about 2019 as an indicator of what our direction is now and what we can do moving forward.’

He spoke of a challenging start to 2019 on the corporate side, with ‘a lot of stop and starting as everybody was trying to figure out when a recession was going to hit or expansion was going to stop’. But the second half was much better as the year ‘ended with a sense that the sail may be continuing for a while’.

Among the mandates handled by the corporate practice, which accounted for 29% of the firm’s billings in 2019 compared to 31% the previous year, Immelt noted the $4bn merger between Industrial Property Trust and Prologis: ‘It reflects a cross-border collaboration where the relationship began in the US and ended up with a very significant mandate executed in Europe.’

The firm’s flagship contentious practices matched corporate this year at 29% of billings, with cases including a Court of Appeal victory for PrivatBank in a $1.9bn fraud case against its former shareholders. Immelt also pointed to the firm’s work for Equifax, handling ‘one of the largest data breaches in US history’: ‘We were brought in for both the regulatory aspects and the following litigation.’

The regulatory practice increased its weight within the firm, accounting for 19% of turnover compared to 16% in 2018, while finance brought in 13% and IP, media and technology the remaining 10%.

The firm continued to bill around half of its revenue out of America, with Europe contributing 43% and Asia 7%.

Hogan Lovells’ strong financial results come despite a three-partner private equity team moving to Paul Hastings, including City practice head Ed Harris and despite its South African merger partner splitting from the firm]. The firm responded with 40 lateral hires in 2019, and Bright said it was now looking to rebuild its London PE practice and grow its UK corporate ranks.

As they prepare to hand over to US-based Miguel Zaldivar and London’s Michael Davison respectively, Immelt and Hudd described a more integrated firm better known for cross-border activity than in 2014. ‘There is a very strong platform, both Miguel and Michael have been part of that story and will take the firm to the next level,’ Hudd said.

Immelt admitted that the firm still needs to build a stronger practice in New York, where it only fields 150 lawyers, and revealed Zaldivar was relocating to Manhattan to lead the efforts. California was also a priority, he added, and the firm needs to ‘figure out what’s going to happen in Asia’: ‘China is going to have a leading role in the world, and law firms need to have a strong China practice – and that’s not just Hong Kong.’

marco.cillario@legalease.co.uk

For more on the challenges ahead for Hogan Lovells’ new chief, see ‘Miguel who?’