Streamlined firms emerge from ashes of annus horribilis
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A year after the eye of the storm, The Lawyer can reveal how the top UK firms have redrawn their partnerships
Just over a year after Lehman Brothers collapsed, a picture has emerged of how the partnerships of the UK’s top 10 firms have been reshaped.
Of the group of City firms surveyed, Clifford Chance has seen the greatest number of departures: since 1 May 62 partners have left the firm, according to filings made with Companies House.
Although a number of these individuals may have retired or left for personal reasons, some left as a result of a major restructuring programme, which saw around 130 people move on.
A senior Clifford Chance source said that the firm was in better shape as a result.
“We believe the measures we took will take the firm to the right size going forward,” he said. “London activity levels are very much improved from the position we were at a year ago - for example in corporate we’re currently advising Kraft on the Cadbury bid and our restructuring practice is extremely busy, but we can’t pretend that we’re as busy across the firm as we’d like to be.”
The 72 LLP member resignation round at Clifford Chance was over three times the size of Linklaters’ 23 and more than at Allen & Overy (A&O). This was despite both competitors carrying out much larger restructuring programmes than Clifford Chance. Linklaters targeted 270 jobs in a programme that is believed to be ongoing, while A&O lost around 450 staff, 247 based in the UK.
The total number of partner resignations at Freshfields Bruckhaus Deringer - the only magic circle firm not to have had a substantial redundancy programme - was much lower at 14.
Across the magic circle the corporate and finance practices have seen the most reductions, with real estate departments less affected.
However, a spokesperson for Clifford Chance argued that it was too early to conclude which practices will emerge the leanest in terms of partner numbers.
“We expect a 15 per cent reduction in the size of the partnership over the course of the 2009-10 financial year,” she said. “Our anticipation is that it will be pretty much across the board in terms of practice areas.”
Another factor determining which practice areas have been the worst hit is the prior size of the group in question. At Eversheds fewer partners have resigned from real estate than from finance (nine in the former, three in the latter), for example.
Eversheds managing partner Lee Ranson said: “We had the largest real estate practice in Europe. In terms of the wider impact on real estate, it doesn’t surprise me that they’re focused in that area. Finance stayed relatively busy; a central part of the strategic plan has been to increase critical mass there - we’re still looking at recruiting there.”
A number of those who have resigned from the UK LLPs have remained partners at the firms in questions, but have moved to other jurisdictions. This was the case for Lovells private equity partner Stephanie Keen, who moved to Singapore, and Herbert Smith disputes partner Stuart Paterson, who relocated to Dubai. They have not been included.
Both these partners are thought to have moved for strategic reasons, but Addleshaw Goddard LLP expert Richard Linsell said he expected the number of partners resigning from UK LLPs to increase in the coming months. “With the 50 per cent tax-rate changes coming in April, we’re expecting to see more requests from partners looking to work abroad,” he said.
The data also points to a gap between the number of partners who have resigned and the number of reported job losses since the start of the downturn.
Dawsons Solicitors head of employment Jo Keddie said: “Through the growing number of partners for whom we’ve acted over the past 12 months, it’s clear that a number of magic circle and mid-sized firms are continuing to consider the removal of equity and fixed-share partners.
“And a number of firms don’t put these figures in the public domain. Invariably it’s the case that the departure terms are kept confidential between the parties. Firms will continue to manage partners out. I think it’s unlikely that the tide will turn before the end of the financial year.”
Additional reporting by Gavriel Hollander and James Swift
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Readers' comments (11)
Statto | 30-Nov-2009 11:30 am
why have you compared H1 figures with full year for 2008-09?
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Anonymous | 30-Nov-2009 11:55 am
I think it is even worse than your chart, in fact I know it is. My firm is there and we can't be alone in making the very best of half year results. Just wait till accounts are filed and I bet you'll see how most, if not all, these firms were less than truthful in revenues. They likely pulled every accounting trick available to bolster the numbers.
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Richard B | 30-Nov-2009 4:55 pm
Eh? What? Since when are these firms the UK Top Ten? By your own tables (UK 200, 2009), Slaughter and May and DLA Piper would be in the Top Ten by turnover, and Simmons & Simmons would beat CMS Cameron McKenna by some margin. If you're going to pick and choose (I suspect LLP firms, from a rush-view), then at least define your parameters at the outset.
And what are you comparing the H1 figures with? H1 of 2008-09? Or H2 (ie the immediately-prior period)? And why don't you correlate the figures with the number of partner departures at each firm (and PEP)?
Add to this the number of 'n/a' results in the relevant table and a lack of meaningful analysis and you have a set of figures which may make a nice table but is of relatively little real value to anyone, besides a certain vicarious interest.
C'mon Lawyer, you can do much better than this!
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Ashley Balls | 30-Nov-2009 7:02 pm
Reducing partner numbers is a little more than a palliative care solution. The core problem is a business model that delivered so many partners in the first place; especially when a large proportion of them are unable to generate income that exceeds thier true fixed costs. The result is top heavy operations providing services at unnecessarily high prices. In this environment it is little surprise that commercial cleints feel alienated and want more for less - who wouldn't?
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Anonymous | 30-Nov-2009 7:19 pm
I would be very interested to hear of Ashurst definition of job losses. If it is anything to do with people leaving the organisation against their will, add a 0 to the stated figure and you may be closer to the truth!
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Mr G Shoots | 30-Nov-2009 8:21 pm
@ anonymous, 11:55am
Interesting. I would say the opposite - the table misses out on just how much things have improved in the last couple of months. My firm is also on that list, and our full year figures are going to be pretty good (if things continue on the current path). Revenue will be up and, more importantly, profit will be massively better than 08/09.
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Harry | 1-Dec-2009 9:53 am
@Richard B
I assume this is because the figures (as it states in table) are based on LLP filings with Companies House. Slaughters and Simmons aren't LLPs. DLA has a different structure, you'll probably find that's why.
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Anonymous | 1-Dec-2009 12:23 pm
Some medium sized LLPs/firms getting rid of so called under achieving partners (in a panic to reduce costs) are removing a swathe of expertise and gravitas within their firm. Why? Panicing managing partners (with no fee targets) are worried about losing their own substantial drawings and are making rash short term decisions. And who holds them to account for their erroneous decisions? Not shareholders - to quote Ball's 'business model' analogy. Noone!
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mary | 2-Dec-2009 11:18 am
If firms have to put all this information in their LLP filings, which obviously anyone can access at Companies House, then why don't they just come out and say exactly what they are doing in the first place? It seems archaic that firms still hide behind their sacred partnerships when in reality they are massive businesses. It doesn't make sense for them to pretend they are trying to protect the identities of the people who are shoved out (their beloved partners) when they refuse to be specific about how many partners have gone from which departments. If Cliffod Chance, for example, had just said x partners have gone from corporate and y from finance most people would accept that and think good on them for being so honest. No one really cares about who exactly they are, unless perhaps you'relooking to hire a former CC partner. Being secretive makes you think there's something to hide, and that certainly makes me want to look up their LLP filings to try to work out what that is.
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Dirt | 2-Dec-2009 12:21 pm
So when salaried partners leave does that count as an llp resignation? Or does it only count equity partner resignations?
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