Top international firms in London: American pie and chips
14 April 2014 | By Lucy Burton
1 April 2014
9 December 2013
25 April 2014
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19 May 2014
While some US firms had a rougher ride in this year’s survey, the West Coasters have found London a home from home
The financial data by which the top 30 international firms in London are ranked paints the past year – and indeed the previous five – as a time of extremes. Some of the biggest risers in revenue terms in previous years, such as Quinn Emanuel Urquhart & Sullivan and Bingham McCutchen, saw UK revenue shrink in 2013. Quinn Emanuel dropped off this year’s list altogether.
The year-on-year revenue list also highlights some big changes at the top. Baker & McKenzie ’s three-year run at the head of the table has ended, with the firm’s UK revenue falling for the first time since 2008. Latham & Watkins now sits on top, with UK revenue hitting an all-time high of $210.6m. That revenue figure, £128.5m when converted to sterling, puts Latham’s London office ahead of some of the UK’s largest law firms by revenue.
- Top ten international lateral hirers
- Slow progress on gender diversity
- Female partners at international firms
- RPL: focus on high-end work pays off
- Top 30 international firms by revenue per lawyer (RPL)
- RPP: smaller firms subject to fluctuation
- Top 30 international firms by revenue per partner (RPP)
- RPP: the risers and fallers from 2012-2013
- M&A legal advisers by number of deals with announced Uk involvement (2007-2013)
- Latham rules by taking the hire ground
If Latham’s London office were mapped onto The Lawyer UK 200 Annual Report it would beat most of the top 100 by revenue in 2013, making it to number 24 on the list. Latham’s London office is larger in revenue terms than Wragge & Co (£120.5m), Macfarlanes (£114.6m) and Osborne Clarke (£112.8m).
Latham’s revenue rise represents a considerable recovery from its performance in 2009, when cost-cutting saw the firm cull 190 associates and 250 paralegal and support staff globally. In London, 15 employees lost their jobs.
The Lawyer’s figures show that West Coast firms have outperformed many of the other US practices in London. It is the start of a new era for this group, with Paul Hastings returning to the Top 30 after a five-year hiatus. The firm’s UK revenue grew by 24 per cent in 2013, from $34m to $42m, helped by the recruitment of senior lawyers including Weil capital markets head James Cole and King & Wood Mallesons SJ Berwin real estate partner David Ryland.
Los Angeles-headquartered Gibson Dunn & Crutcher , number 22 on the list when ranked by UK revenue, has the third-highest revenue per lawyer (RPL) figure in the table, at $1.3m (see below).
RPL, one of the more reliable indicators of a firm’s place in the market pecking order thanks to its simplicity (total revenue divided by the number of lawyers who produced it), points to the success Gibson Dunn has enjoyed in winning high-end litigation work in the UK to complement its corporate practice.
Another West Coast firm, San Francisco’s Morrison & Foerster (MoFo ), returns to the Top 30 with UK revenue at a five-year high of $39 .1m. Although the firm just about scrapes in at number 30 in the main UK revenue table, its RPL (at $820,000) for 2013 is higher than White & Case , Jones Day and Bakers .
The firm stepped up its activity in the City last year, increasing its number of UK-qualified lawyers and taking on Dentons’ former co-chief executive Howard Morris in November.
MoFo’s role advising a roster of HMV’s supplier creditors last January (led by City litigation partner Jonathan Wheeler) was a standout deal for the London office. According to Reuters’ deals data MoFo sits alongside elite US firms Skadden Arps Slate Meagher & Flom and Simpson Thacher & Bartlett when ranked by deal volume with a UK target since 2007. That places it at number 15 of US advisers in the list, and 47th in total, with the firm advising on 39 M&A deals, worth $13.5bn, involving UK targets during this period.
In total, the West Coast firms in this year’s Top 30 table – Gibson Dunn, Paul Hastings, MoFo and Latham – saw UK revenue rise by 41 per cent during 2013.
Investment in personnel has been a key feature of the international Top 30 in recent years. Partner headcount across the group has increased by 26 per cent since 2009, from 991 to 1,250 – a rise mirrored by the increase in total revenue, which has gone up by 23 per cent, from $2.5bn to $3.08bn.
According to The Lawyer’s estimates, the biggest revenue-riser during this period is Kirkland & Ellis , where total revenue is thought to have risen by 98 per cent from $80.8m to $160m over the years.
Simpson Thacher is next biggest, posting an estimated rise of 91 per cent from $52.5m to $100.5m.
Other big risers include Covington & Burling , with a UK revenue increase of 53 per cent, to $59.9m, and an increase in lawyer headcount of 38 per cent. Shearman & Sterling is next with UK revenue growth of 49 per cent, closely followed by Dechert (46 per cent), Latham (39 per cent), Reed Smith (35 per cent) and Weil (34 per cent). In comparison, global revenue at the magic circle has grown by 26 per cent during the same period.
In the top 10, Latham and Kirkland & Ellis saw the biggest five-year increases in UK partner numbers. The number of partners at Latham increased by 33 per cent between 2009 and 2013, from 39 to 52, while Kirkland’s UK partner headcount increased by 70 per cent, from 27 to 46, in the same period, making it one of the City’s most aggressive lateral hirers.
However, for most of our Top 30, 2009 was characterised by declining revenues and profits. A total of 21 firms saw revenues fall that year, with revenue among the top 10 falling by 12 per cent. This compares with just seven firms experiencing a UK revenue dip in 2013, with revenue among the top 10 rising by 85 per cent compared with the year before (The Lawyer believes it significantly underestimated Kirkland’s 2012 UK revenue figure, leading to revised estimates and a 30 per cent increase for 2013).
According to our estimates the biggest revenue drop between 2009 and 2013 among those still in the Top 30 is at Sullivan & Cromwell . The firm has seen an estimated 20 per cent drop in UK revenue during this time, with lawyer numbers falling by 13 per cent, from 75 to 65.
The investment in personnel is now also beginning to be seen at the junior end of the market. Davis Polk & Wardwell , Milbank Tweed Hadley & McCloy and Gibson Dunn have underscored their commitment to organic growth in London in the past 12 months by launching trainee schemes.
Previously the exclusive preserve of US-qualified lawyers, Davis Polk (which only took on its first UK-qualified lawyer in 2012) now offers one of the highest-paid trainee schemes in the UK legal market,
rivalling Bingham McCutchen and Latham with a newly qualified salary of £100,000.
Likewise, Milbank offered top-end rates when it launched a trainee scheme with just three associates last year. Its starting salary of £42,000 for first-year trainees matches that of Bingham, Kirkland and Weil.
Gibson Dunn will welcome its first cohort of trainees in 2015. The West Coast firm will offer a £45,000 first-year rate and “not less” than £50,000 the following year, with NQs paid £92,000 in 2013. This does not include bonuses or benefits, the latter including a professional development allowance and travel insurance.
The decision to invest in a UK training programme highlights the fact that the London offices of the largest international firms are entering a period of growth. For several years Milbank has grown faster in London than in its domestic heartland, with the office’s UK lawyer headcount up by 61 per cent since 2009, from 44 to 71, and UK partnership headcount up by 33 per cent to a
total of 20.
US firms’ investment in London has meant they have dominated the international Top 30 listing for years. However, American firms no longer have a monopoly on the upper reaches of the table.
Australia-listed Slater & Gordon is included in this year’s list at number 20, with a UK revenue of $65.1m. It has focused on building up its UK arm since entering the market in January 2012 through the merger with insurance firm Russell Jones & Walker.
Slater & Gordon’s goal is to become the leading consumer firm in the UK – a promise that has been followed up with five mergers in the past 12 months.
Additional reporting by Matt Byrne and Catrin Griffiths
Slow progress on gender diversity
International firms in London continue to be dominated by men, with women representing just 17.6 per cent of UK partners in the top 30.
Our female partners table shows that it is the ‘less-American’ or ‘hybrid’ firms – those that market themselves as global or were created as a result of transatlantic mergers – that attract a higher proportion of female partners.
In total, 63 per cent of the top 30 had five or fewer female partners in 2013, a year in which total partner headcount grew by an estimated 8 per cent. West Coast firms such as Gibson Dunn, Paul Hastings, Latham & Watkins and Morrison & Foerster had a slightly higher proportion of female partners than the US elite, though only marginally – women made up just 7.1 per cent of MoFo’s UK partnership in 2013.
Elsewhere, Debevoise & Plimpton , applauded for its diversity in the US, had two female partners out of 19 in the UK in 2013, while Skadden Arps Slate Meagher & Flom recorded two out of a UK total of 30.
The firm with the highest proportion of female partners in the UK was Bingham McCutchen, where eight of 21 partners in London were women. One of the firm’s highest-profile female litigation partners, Natasha Harrison, left to lead Boies Schiller & Flexner’s first non-US office at the end of last year.
US firms in London still have fewer female partners than their UK counterparts. Across The Lawyer’s UK 200 firms, women made up 18.6 per cent of all partners in 2013 – almost the same proportion as 2011/12, when the figure was 18.7 per cent.
That said, the 17.6 per cent headline figure shows a slight movement on the 16 per cent reported in 2012, when sources pointed to a male-dominated lateral hiring market as one of the barriers to gender diversity.
RPL: focus on high-end work pays off
Reorder this year’s top 30 list by revenue per lawyer (RPL) and the ranking takes on a radically different appearance.
In total, 14 firms had an RPL of at least $1m in 2013. Baker & McKenzie, Latham & Watkins and White & Case no longer feature in the top three. Latham does appear in the top 10, with an RPL of $1.03m, but the $570,000 generated by Bakers and $800,000 at White & Case is dwarfed by Skadden’s $1.52m, Sullivan & Cromwell’s $1.48m and Gibson Dunn’s $1.3m.
These RPL figures underline the different strategies adopted by firms at the bottom and top ends of the list. Most of the top firms in London by RPL are more compact than those lower down the scale. They are more likely to focus on high-end corporate and finance work than full-service, often lower margin, matters.
The top 10 firms on the RPL table had 839 qualified UK lawyers between them last year, 99 per cent less than the bottom 10, which had a total of 2,420, appearing to confirm this targeted approach.
Bakers had a UK-qualified headcount of 360 last year (of whom 82 were partners) and White & Case had 258 UK lawyers (68 partners). Skadden had just 106 (30 partners), Sullivan & Cromwell 65 (17 partners) and Gibson Dunn 47 (18 partners).
Many of the firms with high RPL figures will target high-end litigation work. Gibson Dunn and WilmerHale, for example, nestle in among the elite in the top 10. Both keep qualified lawyer headcount low by offering temporary positions, with WilmerHale’s London office relying on a rolling placement programme for arbitration work and Gibson Dunn reliant on the use of contract lawyers and paralegals for major litigation matters.
Given the countercyclical nature of these cases, RPL can also point to fluctuations in workload. Litigation powerhouse Quinn Emanuel Urquhart & Sullivan, which sat at the top of the RPL table in 2012, with $1.8m, is a case in point. If the firm was in this year’s top 30 on total London revenue it would have dropped 18 places on the RPL table, down by 46 per cent to $961,000.
RPP: smaller firms subject to fluctuation
Our rankings according to revenue per partner (RPP) among top US firms in London show consistency. Unlike profit per equity partner, this is not a volatile metric. However, the smaller the office, the more liable it is to be affected by one-off annual changes.
Litigation outrider Quinn Emanuel, which came second in the RPP table last year at $5.7m after a strong year of cases such as Deripaska , drops out of the top 30 altogether this year.
Quinn’s appearance in the top five skewed the RPP figures for the 2012 financial year. The Lawyer’s research shows that white-shoe firms consistently report the strongest RPP figures.
These firms tend not to be full-service practices in London but focused rather on corporate, finance and restructuring.
As last year, the entry price to the top five was $5m per partner. Skadden Arps Slate Meagher & Flom, Sullivan & Cromwell and Davis Polk comfortably inhabited the top five last year and continue to do so, but this year they are joined by Simpson Thacher (sixth in 2012), which replaces Quinn Emanuel in the top bracket.
Debevoise & Plimpton (eighth) Wilmer Hale (ninth) and Weil, Gotshal & Manges (tenth) all posted broadly similar figures to the previous year. Accordingly, they maintain their position in the lower half of the top ten. The biggest riser is Shearman & Sterling, eleventh in the table last year with an RPP figure of $4m. In 2012 its RPP rose to $4.5m on the back of a strong year in finance, in particular.
Of the top firms, RPP tends to be highest at those that have small London partnerships: Davis Polk’s UK presence numbers nine partners, Simpson Thacher & Bartlett’s 15 and Sullivan & Cromwell’s 17. If this trajectory continues Shearman will inch towards the Skadden model; both have 30 partners in London and larger cross-practice benches than the other Wall Street firms in the top ten.
On these figures, Latham & Watkins is somewhat lagging its competitors. It has the highest total revenue in London but this is because it has the highest number of partners of any non-merged US firm in the UK, at 52. Its RPP inched up from $3.8m to $3.9m, allowing it to rise two places in the table, to eleventh.
RPP: the risers and fallers from 2012-2013
Shearman & Sterling
Debevoise & Plimpton
White & Case
Latham rules by taking the hire ground
Earmarking London for growth with a strategy powered by laterals, has worked wonders for Latham & Watkins. City revenue has grown by 40 per cent, from $150m to $210m, since 2008.
Latham’s London office revenue of £128.5m is now higher than the majority of the firms in The Lawyer UK 200 , while the total number of lawyers in its London office grew from 202 to 205, 54 of whom are partners.
Last year Latham increased its UK-qualified headcount by 15 per cent, from 148 to 171. Its UK revenue per lawyer figure of $1.03m and revenue per partner figure of $3.9m put it squarely at the top end of the London market.
The strengthening financials and increased bench strength followed an aggressive spurt of lateral hiring.
Demonstrating its buying power in the Big Smoke, Latham hired Clifford Chance ’s former private equity head David Walker – the magic circle firm’s Carlyle relationship partner – in April last year. His defection was followed by the move of Clifford Chance private equity partners Tom Evans and, most recently, Kem Ihenacho. Of eight private equity partner exits from Clifford Chance in recent years, four have ended up at Latham.