Legal Business

Coronavirus measures pay off for Reed Smith as revenue tops $1.3bn while profit soars 

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Financial results 2020/21 Reed Smith

Despite starting the financial year by reducing partner drawings in response to the pandemic  as well as other cost-cutting measures, Reed Smith has unveiled a respectable set of results that saw global revenue rise to over $1.3bn.

Overall revenue increased 5% from last year’s $1.25bn to $1.31bn this time around, while revenue per lawyer jumped 4% from $778,000 to $811,000. However there was a striking 16% uptick in profit per equity partner (PEP) from $1.3m to $1.5m which, combined with the firm’s 48 lateral partner hires in 2020, underlined the robustness of the results.  

Reed Smith global managing partner Sandy Thomas told Legal Business that London-specific financials were flat on last year, but emphasised ‘London’s capabilities, resources and contribution to the firm’s overall performance was incredible’. He added: ‘The baseline performance of the firm is built on our expertise in key sectors. With that in mind, the relevance of London is huge.’

Among London’s headline contributions in the past year, disputes partner Peter Hardy advised on one of the very first fully virtual trials in April, in a $530m multijurisdictional Commercial Court dispute. In other key mandates globally, in the US the firm advised Microsoft on its buyout of telecoms business Metaswitch Networks.

The firm can certainly be forgiven for being overcautious when the pandemic hit a year ago, but even in context the firm’s 40% reduction in monthly drawings for equity partners and 15% cut for fixed share partners seemed particularly austere.  This was in addition to other austerity measures, including pay cuts for lawyers and staff, reductions in working hours, furlough and redundancies.

Thomas commented: ‘We did what was best for Reed Smith at the time, rather than stick our fingers in the air and follow the industry. We were among one of the first firms to go fully remote, across all our global geographies. I didn’t account for the speed at which the firm successfully pulled together.’

Thomas concluded: ‘I feel optimistic for 2021. Our global transactional pipeline looks very good, and there’s already a high level of contentious work in all our regions. But time will tell.’

Tom.baker@legalbusiness.co.uk

Legal Business

Legal Business Awards 2020 – TMT Team of the Year

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Legal Business Awards 2020 Reed SmithRPC

The entries have been assessed, the shortlists have been drawn up and our panel of general counsel judges have had their say: we are now delighted to reveal the winner of TMT Team of the Year for the 2020 Legal Business Awards.

The winner of this category has demonstrated market-leading commercial or regulatory expertise through its advice on a specific, IP, technology or media case or transaction.

 

 

Sponsored by

Winner – RPC

RPC’s TMT team, led by partners Mark Crichard and Charles Buckworth, advised LINK on the hugely-complex tender process for outsourcing all telecoms and technical infrastructure that sit behind its network (as well as the provision of settlement services) – a network that handles more than three billion transactions annually.

This was high-stakes, bet-the-company work. The tender requirement followed a mandate from the Payment Systems Regulator (PSR) that LINK run a competitive process for all its underlying switching and settlement technology and services, to ensure sufficient competition. Get it wrong and not only could that spell the end for LINK, but it could also create havoc for business and consumers.

RPC had to plan, construct and execute a competitive process that closely mirrored a public procurement, with all the stringent controls, processes and requirements for transparency and equality of treatment. This created a far-more challenging proposition in what was already a huge technology outsourcing.

RPC collaborated with LINK to draft contracts and run full, parallel negotiations with shortlisted bidders – while satisfying and reporting on complex regulatory requirements, many of which had never been translated into contract requirements before. In a standard outsourcing you typically only need to satisfy the client. But here, RPC had to meet competing demands of LINK’s regulators and obtain approval by over 35 stakeholders, including LINK’s card-issuing and acquirer members.

LINK had a regulatory obligation to complete the process on time or risk sanction by the PSR – so the clock was always ticking. Given the number of stakeholders – several outside the UK – and the novel elements to the deal, working closely as a team was critical. RPC helped LINK deliver the deal on time, to budget, against an extremely challenging schedule and intrusive regulatory oversight.

In the words of John Howells, LINK CEO: ‘We couldn’t have had better support from RPC in what was a critical and complex transaction. They really understood the commercial and regulatory drivers, delivering a service that was clear, commercial, focused and well-managed. What’s more, they were all a pleasure to deal with – good humoured to the end.’

Highly commended – Reed Smith

A Reed Smith team led by Michael Skrein achieved a unanimous Supreme Court win for BT and EE in a case concerning the allocation of cost liability for implementing orders for ISPs to block access to counterfeit websites.

This was a four-year legal battle that culminated in a ground-breaking unanimous 5-0 verdict by the Supreme Court judges. It overturned the Court of Appeal (which upheld the High Court), holding that luxury brands such as Cartier, and not the ISPs, must foot the bill for the costs of implementing orders for the ISPs to block access to counterfeit websites. Given the huge ramifications for intellectual property rights on the internet, this seminal case was watched closely all over the world.

Other nominations

Bristows

Leveraging its lengthy history and expertise in IP and technology, the firm was engaged by Genomics England, the body behind the 100,000 Genome Project, to help develop its PanelApp online tool.

Eversheds Sutherland

Succeeding through a competitive pitch to Orange Business Services, the firm advised the client on the development of its Information and Communications Technology Legal Certification Programme.

Gowling WLG

In a high-stakes patent dispute, involving only the second successful use of an Arrow Declaration, the firm represented GlaxoSmithKline in the High Court against Vectura, the UK-based drug formulation company.

Pinsent Masons

In a landmark case, the firm successfully represented ZyXEL Communications in patent proceedings involving the alleged infringement of two standard essential patents used in broadband technology.

Legal Business

Coronavirus latest: Reed Smith to limit partner drawings as firms start to bunker in for the crisis

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Reed Smith

Reed Smith has ringfenced a portion of its cash reserves against partner distributions as a means to mitigate the impact of the unfolding Covid-19 crisis. 

The new contingency measures will include every office at the firm, with global managing partner Sandy Thomas (pictured) informing the firm’s global partnership in a conference call last week. Monthly drawings will be reduced by 40% for full equity partners and 15% for fixed share partners. 

The measures are set to last for five months for equity partners and three months for fixed share partners. Despite belt-tightening at the most senior level, associates will still receive their bonuses as originally planned.  

Regarding the measures, a spokesperson said: ‘Reed Smith is performing on plan through the first three months of 2020. Many of our practices are exceptionally busy right now. At the same time, we know businesses around the world are bracing for the short-term and potential long-term economic impacts of Covid-19, and we are taking a fiscally conservative yet responsible approach. Our leadership is taking a cautious approach and has made the decision to slow partner cash distributions in the near term as a precaution. We think this is a prudent choice as we look ahead to uncertainty in global events.’ 

Meanwhile, Linklaters has confirmed that it is currently considering whether to delay or reduce quarterly profit distribution. The firm has said it is only considering measures at this stage but should it go ahead, it will be the first of the City elite to make such a move, with more mitigation measures expected in the coming weeks.

Pinsent Masons is another firm thought to be considering a reduction in partner cash distributions. The firm’s senior partner, Richard Foley, said following yesterday’s (30 March) announcement of the firm’s latest promotion round: ‘Ordinarily around this time of year, we make a quarterly distribution to our partners. Whether we will do so, and if so, in what amount will depend upon how events unfold over the coming days and weeks.’

The full extent of the business impact on legal remains to be seen. Listed firms have been among those to feel the crisis more acutely, with Knights recently making pay cuts and warning of redundancies. 

thomas.alan@legalbusiness.co.uk 

Legal Business

Steady global growth for Reed Smith outpaces a subdued year in the City

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Financial results 2019/20 Reed Smith

Reed Smith produced a comparatively muted showing in the City last year, with global revenues seeing the more meaningful gains.

London saw revenue creep up 3.3% from $208.2m to $215m as global turnover almost doubled the City’s growth rate with an increase of 6% to $1.247bn, compared to 5% growth last year. Firmwide profit per equity partner was up almost 5%, reaching $1.32m compared to $1.26m last year.

Meanwhile, the firm’s total lawyer count in the City was up 4.4% to 314. The headcount increase partly explains the minor 1.3% dip in revenue per lawyer (RPL) in London to $684,000 while global RPL saw a slight 2.3% uptick to $778,000.

‘We had a terrific 2019, all the key metrics are the highest on record,’ Reed Smith global managing partner Sandy Thomas told Legal Business. ‘We’re a diverse and hedged business so it was a balanced contribution across the firm.’

Overall headcount at the firm was up just under 4%, with 1602 lawyers currently at the firm compared to 1544 in 2018. Reed Smith also started 2020 in an expansionist mood, opening its fifth European office in Brussels following the hire of five partners to its corporate group.

‘In 2019 in the spring we opened up for business in Dallas. We’re up to 32 lawyers there and it’s exceeded even our most optimistic expectations,’ Thomas added. ‘We’ve been in Brussels a month and it’s very deliberate when we have an expansion. Right now we are focused on integrating these capabilities in our new markets.’

Late last year the firm also made good on plans to secure an alternative business structure licence from the Solicitors Regulation Authority, though denied the move was part of a play to pursue an initial public offering.

thomas.alan@legalease.co.uk

Legal Business

Late to the party: Reed Smith hires partners from five firms for Brussels launch

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Strategic recruitment Reed Smith

Reed Smith has opened its fifth European office in Brussels, following the hire of five partners to the firm’s corporate group.

The partners all come from different firms, and will be joined by two associates and one counsel. The partners focus on competition/antitrust, with Brussels long being a hub for international firms’ competition work.

‘It could easily be argued we should have been in Brussels previously,’ Reed Smith’s managing partner for Europe & Middle East Tamara Box told Legal Business. ‘But realistically you have to follow client demand, and the demand has been for more presence in competition and antitrust but also regulatory and trade.’

The partners include EU competition lawyers Christian Filippitsch (formerly of Norton Rose Fulbright), Geert Goeteyn (formerly of Shearman & Sterling) and Isabelle Rahman (formerly of Sheppard Mullin); trade remedy and investigations lawyer Yves Melin (formerly of Steptoe & Johnson); and EU regulatory lawyer Wim Vandenberghe (formerly of Deloitte Legal). The firm will now focus on hiring associates to support the new partners.

Reed Smith opened its first European office in Paris in 2005, while the latest launch prior to the Brussels office was in Frankfurt in 2015. The firm now counts five offices in Europe and 30 globally.

The launch comes with competition law set to be reshaped in light of Brexit, as the UK’s leaving of the bloc takes the country out of the European Commission’s competition directorate’s jurisdiction.

Since the referendum, US tech leader Cooley, London intellectual property and technology specialist Bristows, Macfarlanes and Wall Street firm Sullivan & Cromwell have all opened in Brussels. Others, meanwhile, have expanded their local competition practices in the city. The renewed focus comes as several rulings from the European Commission in recent years have propelled competition law up the agenda, such as the veto to the merger between German and French train manufacturers Siemens and Alstom, and multibillion-euro fines on tech giant Google.

‘Brexit is just one of the things, there is also Trump and it’s all going in the same direction,’ Melin added. ‘International trade is becoming more difficult, entering the European market is becoming more difficult. The current environment is actually strengthening the European Union, it’s making Brussels more significant.’

For more on the Brussels legal market, read ‘Letter from… Brussels’

thomas.alan@legalease.co.uk

Legal Business

‘Not a chance’: Reed Smith rules out a listing as it lands ABS licence approval

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Innovation Reed Smith

Reed Smith has made good on its plans to secure an alternative business structure (ABS) licence from the Solicitors Regulation Authority (SRA), but has ruled out the move will be part of a process to pursue an initial public offering (IPO).

The change in regulatory status also allows the firm to be owned or managed by those without legal qualifications, with Reed Smith eyeing a widened provision of service beyond conventional law. The change in structure will not change the firm’s limited liability partnership status, which includes a single partnership and profit pool in the UK, France, Greece, UAE and China.

‘We’ve been trying to get to this stage for some time,’ Reed Smith European and Middle East managing partner Tamara Box (pictured) told Legal Business. ‘We kept coming across opportunities we liked but they would have required an ABS. Part of that is the talent acquisition.’

Obtaining an ABS licence is often the groundwork before moving to towards alternative ways to raise capital, with Gordon Dadds, Keystone and DWF among those who opted to list on the stock market in recent years. Law firms were first enabled to convert to an ABS after the introduction of the Legal Services Act in 2007. In the US, individuals without legal qualification can only be partners in Washington D.C. while the push to allow for ABS models throughout the wider country continues. Part of the delay in Reed Smith securing an ABS licence was aligning the structure with a potential post-Brexit regulatory landscape, according to Box.

Financially Reed Smith has overseen an indifferent year according the firm’s most recent LLP accounts, with turnover across the majority of its non-US offices crawling forward 1%, while operating profit fell almost 5%.

‘Everyone wants to focus on an IPO, but we’re very much an LLP in mindset, so it’s off the cards, there’s not a chance,’ said Box. ‘Collaborating with a client or specific partner is something I could see happening, but there’s nothing on the table right now.’

thomas.alan@legalbusiness.co.uk

Legal Business

SRA drops sexual harassment inquiry into former Reed Smith partner

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Legal regulation Reed Smith

The Solicitors Regulation Authority (SRA) has dropped an investigation into a former Reed Smith partner who was dismissed from the firm over a complaint of sexual harassment.

The allegation came to light last November, with the matter reported to have involved the sexual harassment of a junior female trainee, while the unnamed London-based partner was dismissed from the firm in late 2017.

An SRA spokesperson said today (22 August): ‘We have looked at all the available information and decided to close the matter with no further action. If further information is made available, we can look again at the issues.’

It is not known when exactly Reed Smith reported the matter to the SRA as the firm initially declined to comment last year on whether or not it had referred the matter on.

A Reed Smith spokesperson said today: ‘It would not be appropriate to comment save to say that we are committed to providing a positive and professional workplace for all our people.  The safety and well-being of all of our colleagues are hugely important to us and we will always take swift and appropriate action where that is needed.’

Incidentally, Reed Smith is one of the few major law firms to have a female leader in the shape of finance rainmaker Tamara Box, who serves as its European managing partner.

The matter follows several uncomfortable #MeToo developments in the legal profession, with Baker McKenzie, Latham & Watkins, Dentons and Herbert Smith Freehills among those last year embroiled in complaints of inappropriate behaviour by partners. Last month, the SRA decided to refer Baker McKenzie and its former London head Gary Senior for prosecution to the Solicitors Disciplinary Tribunal (SDT) after its investigation found he had ‘behaved in an inappropriate manner’ and ‘sought to initiate intimate activity’ with a junior member of staff in 2012.

anna.cole-bailey@legalbusiness.co.uk

Legal Business

The comeback kid: Return to form as Reed Smith hikes London revenue 18% to $222m

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Financial results 2018/19 Reed Smith

Reed Smith has bolstered City revenue by 18% to $222m amid a reversal of fortune which has seen global revenue rise for the second year running after a disappointing spell.

Global turnover increased 5% to $1.17bn after the Pittsburgh-bred firm last year bounced back following two consecutive years of decline, increasing its top line by 4% to $1.12bn in 2017.

The figures for 2018/19 show a 7% uptick in profit per equity partner (PEP) to $1.26m from $1.17m last year. Revenue per lawyer saw a 5% increase to $761k while overall lawyer headcount inched forward by 0.4%.

‘There’s been a variety of factors at work in the last year, the key one is we have been carrying out sophisticated matters and our lawyers are working hard,’ Reed Smith global managing partner Sandy Thomas told Legal Business. ‘We’re growing now because we had a strategy and a plan in place, and some of the investments we made from three or four years ago have now come online.’

There was a balanced contribution towards growth from all practice areas, according to Thomas, though the firm’s transactional practice enjoyed a standout year while the disputes practice gained momentum throughout 2018. The investment in a 50-strong team from King & Wood Mallesons in 2017 for its London, Frankfurt, Paris and Munich offices has also started to make returns for the firm.

However the year was not without its drawbacks. A #MeToo episode emerged at Reed Smith late last year when a partner was dismissed following a complaint of sexual harassment.

Thomas was also keen to stress the success of the firm’s Leeds efficiency hub. Launched in April last year, the low cost legal services centre was modelled on its successful centre in Pittsburgh.

‘We have significant momentum going into 2019,’ Thomas concluded. ‘There’s a pipeline full of important matters.’

thomas.alan@legalease.co.uk

Legal Business

Latest #MeToo episode emerges as Reed Smith dismisses partner following complaint

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Gender diversity Reed Smith

Reed Smith has dismissed a partner in its London office after a complaint of sexual harassment, it has emerged. Originally reported on RollonFriday, the unnamed partner was accused of sexually harassing a junior female trainee, though the nature of the incident has not been clarified.

The episode has just emerged but the partner was dismissed in late 2017. In a statement, Reed Smith commented: ‘As soon as we became aware of this incident, which took place over a year ago, we took swift and appropriate action. The safety and well-being of all of our colleagues matter greatly to us, and we are committed to providing a positive and professional workplace for all our people.’

The firm did not confirm whether the matter had been reported to the Solicitors Regulation Authority (SRA), however, a spokesman for Reed Smith said the firm took ‘all appropriate action’. Incidentally, Reed Smith is one of the few major law firms to have a female leader in the shape of finance rainmaker Tamara Box, who serves as its European managing partner.

The matter is the latest uncomfortable development for the legal profession, with Baker McKenzie, Latham & Watkins, Dentons and Herbert Smith Freehills (HSF) among those this year embroiled in complaints of inappropriate behaviour by partners. Intense scrutiny is also being placed on the use of non-disclosure agreements (NDAs) with Magic Circle firm Allen & Overy being questioned by MPs in March in relation to the NDA used to silence Zelda Perkins after allegations of sexual assault by her former boss, film producer Harvey Weinstein.

thomas.alan@legalbusiness.co.uk

Legal Business

Revolving doors: Morrison & Foerster makes City move as Fieldfisher and Reed Smith develop international practices

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Strategic recruitment FieldfisherMorrison & FoersterReed Smith

US player Morrison & Foerster emerged as the only firm to make a significant lateral hire in the City last week, while Fieldfisher bolstered its new Luxembourg office and Reed Smith made a triple hire in the Middle East at the expense of Pinsent Masons.

MoFo strengthened its London finance practice with the hire of Benoit Lavigne from Ropes & Gray where he was a partner, focusing primarily on leveraged finance, acquisition finance and special situations lending. The hire is MoFo’s third London office hire of 2018, as the firm strengthened with additions from Clifford Chance and Jones Day earlier this year.

Managing partner for Europe Paul Friedman said: ‘Benoit is highly regarded in finance circles in London, and his cross-border experience will continue to enhance our ability to support our clients with their growing global finance needs.’

Elsewhere in the UK, regional firm Coffin Mew boosted its practice in Thames Valley with the hires of Tim Watkins from Hadef & Partners and Derek Walsh from Thrings. Watkins joins Coffin Mew’s international corporate transactions practice, bringing with him experience in cross border acquisitions and high-profile commercial projects, including the establishment of Abu Dhabi’s national airline, Etihad Airways.

Walsh, meanwhile, will now head up the firm’s agricultural and rural business practice, having previously spent 12 years as an agricultural specialist at Things where he focused on representing farmers and rural businesses on contract disputes.

In Europe, Fieldfisher set about enhancing its Luxembourg offering with two fresh hires to the newly-launched office. Jean-Luc Dascotte has been appointed as a tax partner, joining from Brussels-based tax firm Tiberghien where he acted as managing partner in Luxembourg.

Accompanying Dascotte will be corporate partner Richard Ledain Santiago who joins from Allen & Overy, where he acted for a range of local and international clients in areas of M&A, joint ventures and structured finance. Both hires have been long-expected at Fieldfisher, with local managing partner Ingrid Dubourdieu previously being the only partner at the new office.

Dubourdieu said: ‘This is the latest stage in our rapidly progressing plan to enhance the range and versatility of our Luxembourg office by adding further specialisms. Luxembourg’s tax market has gone through tremendous changes over the last 24 months that affect all corporates and it is our view that further changes flowing from new EU legislation and Brexit will increase opportunities for law firms like Fieldfisher.’

Meanwhile across the border in France, DWF set about establishing a new IP practice with the hire of litigation partner Simon Christiaën from Lazareff Le Bars where he led the IP litigation and dispute resolution department.

Christiaën boasts 25 years of experience in the IP field, with a particular focus on judicial action and arbitration, previously advising on infringement and IP issues for industrial manufacturers and distributors. At DWF, Christiaën will work closely with litigation partner Florence Karila and corporate partner Anne-Sylvie Vassenaix-Paxton.

Meanwhile, Reed Smith completed the international recruitment round, making a triple hire in the Middle East, including two new recruits from Pinsent Masons. Sachin Kerur, Michelle Nelson and Shourav Lahiri all join, as Reed Smith sets about improving its international arbitration and construction and projects sectors in the region.

Kerur had previously been Pinsent Masons’ head of the Middle East region, and will now assume the role of office managing partner for Reed Smith in Dubai and Abu Dhabi, bringing with him experience advising regional governments and the private sector on a series of infrastructure projects across the Middle East and India.

Nelson also joins Reed Smith from Pinsent Masons, where she specialised in international arbitration and high-value infrastructure projects, while Lahiri joins from his own firm in Asia, having also spent time at Pinsent Masons as partner.

Reed Smith managing partner for Europe and the Middle East Tamara Box lauded the hires, saying: ‘Sachin and Michelle are highly regarded in the region, and we are thrilled to have them join us. They have worked closely with Shourav for many years and together this team will be a real boost to our Middle East offering and represents a game-changer in the local legal market.’

thomas.alan@legalbusiness.co.uk