The UK200 2011
Clifford Chance’s year was characterised by two themes: a financial bounceback and a gust of international expansion.
Turnover (£m): 1,219
Average PEP: 1,005
Equity spread (£k): 495-1,240
Profit margin (%): 31
RPL (£k): 494
It was a marked change in gear following two years of consolidation and the painful internal restructuring of 2008-09, which allowed the firm to take a cost of £108m out of the business.
Although revenue saw an increase of 1.8 per cent, from £1.12bn to £1.22bn, it was a figure that caused some management disappointment. However, a continued grip on total costs (£838m, a marginal fall from the previous year’s £847m) allowed the margin to inch up from 29 to 31 per cent.
The good news for the firm was that turnover growth did not come from the increased number of bodies, but from greater productivity following the restructure (and the decision to unfreeze associate pay bands bespeaks a certain confidence in medium-term growth).
At £2.2m, average revenue per partner is now higher than Clifford Chance’s previous record of £2.1m in 2007-08. Partner numbers have fallen for two years running: from a high of 637 in 2008-09 total partners dipped to 562 in 2009-10 (following the firm’s restructure) and 552 in 2010-11, although equity partner numbers rose slightly, from 372 to 379 in 2010-11. Clifford Chance now has 68.7 per cent of its partners in the equity.
The investment in equity partners did not adversely affect average profit per equity partner (PEP), however, which rose by 7.7 per cent, from £933,000 to £1.01m – the first time PEP has breached £1m since 2007-08. With the majority of partners on between 80 and 100 units, most Clifford Chance partners are on more than £1m, with plateau partners making £1.24m. The firm operates three theoretical ladders of pay, with the vast majority of partners on ladder two. Ladder one, which has lower rungs, has been adopted by a couple of Central Europe offices, while ladder three, which allows superpoints, has not been put into practice. The perennial question of partner pay raised its head again last year, considering the departures from the funds practice:
Jason Glover quit for Simpson Thacher & Bartlett in 2010 and four more partners resigned to join Weil Gotshal & Manges in 2011.
Once again banking and capital markets were the engine of the firm: they combined to bring in £524m of revenue, a 7.8 per cent increase from 2009-10. Surprisingly, litigation was up by just 1.9 per cent, from £179.5m to £183m, while corporate rose by 5 per cent to £365m.
With lockup down to 14 weeks, no debt and some £50m in the bank, Clifford Chance’s move to increase the level of partner capital early in the financial year was not one born of crisis but prudence; plateau partners now put in an average of £200,000.
While much of David Childs’ reign can be caricatured as an obsession with costs, the Clifford Chance management appears to be entering a more imaginative era.
Former senior partner Stuart Popham may have secured his reputation as the highest-profile globetrotter in the legal profession, but new senior partner Malcolm Sweeting is a vocal champion of international investment, having pushed for the office opening in Turkey announced in April. Certainly, growth in London has effectively stalled, with a minimal uplift of 1 per cent to £430m. Most marked is Clifford Chance’s assault on Asia: the firm is targeting revenue of £250m from the region by 2014 and it produced 12 of the 23 partner promotions in May 2011. In 2010-11 Asia grew
by 16 per cent to £145m, a figure that does not include the acquisition of Sydney-based Chang Pistilli & Simmons and Perth-based Cochrane Lishman Carson Luscombe, which with a total of 14 partners is a considerably more manageable proposition than the mooted acquisition of Mallesons Stephen Jaques in late 2008. However, the story was slightly less rosy in India, where Clifford Chance finaly ditched its relationship with AZB & Partners.
Elsewhere, the Middle East, now an independent profit centre rather than tacked on to London, saw a growth of 17 per cent to £37m. Clifford Chance added to its offices in Abu Dhabi, Dubai and Saudi Arabia (the latter exists through a cooperation agreement with Saudi firm Al-Jadaan and Partners Law Firm) with a World Cup-friendly opening in Qatar, announced in January 2011. It also opened in Casablanca and has plans for a Korea launch.