18 April 2011 | By Andrew Pugh
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Latest revenue figures for the top 30 global law firms in the capital reveal a remarkable reversal of fortune, says Andrew Pugh
Of the 27 firms in this year’s listing of the top international firms in the City that also featured in 2009’s list, all but six saw their revenues rise in 2010. By contrast, in 2009 21 of the top 30 firms saw a year-on-year fall in fee income in the UK.
The latest figures have come as a surprise to many.
“It does slightly surprise me,” says Jomati Consultants principal Tony Williams. “It means they’re capturing a higher market share at a time when there aren’t many deals around.
“This is obviously something they’ll be really pleased with - it means their networks are delivering. It could also mean that US clients are a bit more confident than others.”
The best performer in London in 2010 was Kirkland & Ellis, which saw a 22.5 per cent hike in revenue to $98.9m (£60.5m). In addition to its highly regarded private equity team, the restructuring practice also enjoyed a good year in 2010, advising on the billion-dollar restructurings of Almatis, Gala Coral, Reader’s Digest, European Directories and Japan Airlines.
Kirkland’s boost came after a difficult 2009, when the dearth of private equity activity contributed to a 7.1 per cent revenue drop in the City.
It was a different case at Latham & Watkins which, unlike almost all its US competitors, saw revenue remain consistent in 2009.
It also did well in 2010, up 9 per cent on revenue.
“We felt that 2010 was a great year considering the economic environment we’re in - it certainly felt like a better year than 2009,” says London partner Bill Voge, a member of the firm’s executive committee.
Latham’s strategy shows the wisdom of not putting all your eggs in one basket. Voge puts the firm’s London success down to the diversity of its practice areas and clients. He feels that rivals such as Weil Gotshal & Manges have suffered as a result of being too focused on areas such as private equity.
As well as seeing an uptick in transactional work, Latham’s counter-cyclical practices performed extremely well, and the firm continues to be seen as a market leader in high-yield work.
“There were eight or nine deals that really carried us,” says Voge. These deals included a major liquefied natural gas project in Papua New Guinea in which Voge was closely involved, as well as advising private equity giant CVC Capital Partners on its acquisition of Swiss telecoms operator TDC for £2.1bn.
Another international firm that bounced back in 2010 was Baker & McKenzie. London revenue fell by almost a quarter in 2009, but in 2010 the firm saw a 3.3 per cent rise to $190.5m, overtaking US rival White & Case.
“It was a particularly good year for the transactional practice,” says London managing partner Gary Senior. “In London we have a much stronger transactional practice than people realise.”
Commentators agree, with one headhunter telling The Lawyer: “It’s a firm that nobody quite knows how to pigeonhole, but I think they’ve developed extremely well, almost under the radar.”
Although Senior wants to further strengthen the firm’s transactional capability, its conservative hiring policy means a glut of new arrivals is highly unlikely.
“We’re very keen to grow in corporate and banking,” he says. “We are, however, fairly fussy when it comes to hiring. We’re very sensitive to the cultural fit. We’d like to hire more but it depends on us finding the right candidates.”
Commenting on the general improvement among US firms in 2010, Senior points to the return of transactional work in the latter half of the year, as well as the cost-cutting measures introduced in 2008 and 2009 paying dividends.
But it has not all been good news for the US elite in London, with several firms suffering a drop in turnover: Dechert, Dewey & LeBouef, Jones Day, McDermott Will & Emery, Orrick Herrington & Sutcliffe, Weil and White & Case.
White & Case witnessed one of the biggest drops. After a torrid 2009 in which turnover fell by 19 per cent from $245.9m to $197m, in 2010 it saw another fall - this time, however, it was only a decline of 6.6 per cent to $184m.
Orrick’s merger talks - first with SJ Berwin and then Akin Gump Strauss Hauer & Feld - appear have taken their toll, with the firm’s revenue dropping by 10.4 per cent to $36.3m.
One firm seemingly unaffected by merger talks is Mayer Brown. Despite the distraction of its on-off discussions with SJ Berwin the firm posted a revenue rise of more than 15 per cent.
Among the new entrants to the top 30 list is pan-European outfit Salans, which becomes the first non-US firm to break into the table.
Although the London office is full-service, the most lucrative practice areas at the firm are corporate, banking, dispute resolution and arbitration, insolvency and restructuring, and employment.
The UK now accounts for 13 per cent of the firm’s total e196.5m (£173.1m) turnover.
Evidence of its UK strength in corporate came last year when it advised Sahaviriya Steel Industries on its asset acquisition of the steel production facilities in Redcar, Teeside. The client picked up-and-coming partner Zarko Iankov.
Iankov was born in Bulgaria, qualified as a lawyer in England and Wales, and speaks fluent Russian.
“He’s a perfect fit and typical of the type of people we have in London - well-equipped to deal with international matters,” says London managing partner Howard Cohen.
“As a firm we’re relatively young. We’re a first-generation firm that’s grown relatively quickly. As we go into 2011 we need to keep a close eye on the market, but I think that from a London perspective we need to grow and focus on building up a critical mass in key areas.
“Against that background, we’re looking at corporate, particularly private equity, as well as banking and finance, dispute resolution and employment.”
With the world’s markets beginning to recover from the global financial crisis, international law firms in London are certainly starting to return to form, and there are many reasons to be optimistic about 2011’s results.