Freshfields Bruckhaus Deringer

UK 200 RESULTS 2010

Freshfields Bruckhaus Deringer began to share the pain of its peers in 2009-10 after putting in a stellar performance in 2008-09. Turnover at the magic circle firm dropped by 11 per cent, from £1.29bn to £1.14bn, while net profit fell marginally, from £603m to £589m.

While the firm’s average profit per equity partner (PEP) figure fell by 3 per cent, from £1.44m to £1.41m, it is still some way ahead of Allen & Overy’s (A&O) £1.05m and Clifford Chance’s £933,000 and it ­continues to best closest rival Linklaters’ £1.21m.

Geographically, London’s contribution to firmwide revenue continued to fall, down from 35 per cent in 2008-09 (£460m) to 33 per cent (£426m). Europe now accounts for around 50 per cent of revenue, with the German practice proving particularly strong in the past year. Choice mandates on which German partners advised included acting for Porsche on its merger with Volkswagen, advising a joint venture ­led by Australian company Industry Funds Management on its acquisition of German energy company 50Hertz Transmission and usurping Shearman & ­Sterling to represent Daimler on its tie-up with Renault and Nissan. Corporate remains Freshfields’ largest practice group, generating 35 per cent, or £399m, of total ­revenue. Litigation accounted for 22 per cent, finance 20 per cent and real estate 4 per cent. The remainder came from competition and tax.

The firm continued to build its US litigation practice, which launched in January 2009, with the hire of Bank of America’s former deputy general counsel and director of litigation David Onorato and partners Marshall Fishman, Timothy Coleman and Walter ­Stuart. They joined from Kramer Levin Naftalis & Frankel, Dewey & LeBoeuf and Vinson & Elkins respectively.

Elsewhere the firm upped its partnership promotions to 18 (the figure was 14 in 2008-09), relocated London bank­ing head David Winfield to Hong Kong as Asia head of finance and hired A&O ­senior energy partner Alan Rae Smith.

It was not all good news on the people front, though. High-profile banking partners Maurice Allen and Mike Goetz left the firm after just a year to set up the UK arm of US firm Ropes & Gray, while Herbert Smith poached pensions partner Dan Schaffer.

The firm saw headcount fall significantly during the year. In 2008-09 it had 5,038 staff, but this fell by 8 per cent to 4,653 in 2009-10. In the same period its fee-earner headcount dropped by 4 per cent and its qualified lawyer headcount declined by 5 per cent, while partner numbers remained static at 444.

Of the 444 partners, 419 are in the equity. Those at the bottom of the firm’s 12-year lockstep were awarded a profit share of £627,000, while those at the top took home £1.5m. With the lockstep running from 20 to 50 points, this means the value of one lockstep point was £31,350, down from £32,900 the year before. It is estimated that the 25 non-equity partners received an average pay packet of £420,000.

Strengths
Freshfields’ management, including chief executive Ted Burke and joint senior partner Konstantin Mettenheimer, continue to steer the firm expertly through exceptionally tricky markets while maintaining a collegiate culture within the partnership. The firm remains a corporate powerhouse, winning mandate after mandate opposite arch-rival and corporate trailblazer Linklaters.

Weaknesses
While Freshfields’ financial performance and client record are outstanding, its biggest concerns over the coming years concern people issues and work-life balance. Its obsession with keeping both the partnership and the leverage ratio lean means it is the most vulnerable of the big four to charges of beasting associates. And its tendency to take on laterals only from what partners consider to be comparator firms may in the end be shortsighted.

UK 200 RESULTS 2009

Freshfields Bruckhaus Deringer had another excellent year in 2008-09, maintaining its record average profit per equity partner (PEP) figure and posting a turnover rise while most of its peers suffered.

At the year-end turnover stood at £1.29bn, putting the firm just £11m behind new UK 200 leader Linklaters and representing a rise of 9 per cent on last year. Since May 1999 the firm's turnover has risen by £1bn, an increase of 348 per cent.

In terms of profits, the firm's PEP figure dipped marginally from £1.48m in 2007-08 to £1.44m in 2008-09, with the equity spread remaining broadly unchanged at £659,000 to £1.65m.

The firm, which has 27 fixed-share partners in addition to 417 equity partners, operates a 12-year lockstep that runs from 20 to 50 points. In the 2008-09 financial year the value of one lockstep point was £32,900, up from £32,800 the previous year.

Total remuneration to all classes of partners was an estimated £615m in the last financial year, meaning fixed-share partners were collectively paid around £12m. That translates to an average payment of around £400,000.

Over the course of the year there was very little bad news for Freshfields. Although the firm was the first to cut associate pay bands, the move turned out to be a good one. The City followed suit and Freshfields even gained kudos for being the first mover.

And while the firm was the first of the magic circle to make redundancies, the fact that it laid off just four real estate associates was considerably overshadowed by the mass restructurings undertaken by all three of its magic circle counterparts.

The flow of good news seemed to be never ending. On the strategic front, Freshfields launched a New York litigation practice with the hire of highly respected partners from Covington & Burling and Willkie Farr & Gallagher at a time when Clifford Chance’s stateside litigation group was suffering departure after departure.

While the financial year was lamentably tough for transactional lawyers, Freshfields landed mandate after mandate on some of the highest-profile deals in the market. Although the firm did miss out on a number of panel pitches – Legal & General among them – it acted on the administrations of Woolworths, a succession of rights issues from the likes of Wolseley and British Land, and was at the Bank of England’s side when industry bailout packages were formulated.

On the litigation front, the firm scored a major victory for client Tesco in the Competition Appeals Tribunal and managed to secure a high-profile gagging order against The Guardian when the newspaper posted internal Barclays Bank documents on its website.

The corporate practice remains the largest generator of revenue across the firm, accounting for 35 per cent (£450m) of total turnover in the last financial year. The finance practice accounted for 20 per cent (£257m), litigation for 18 per cent (£232m) and real estate 4 per cent (£52m).

Geographically, London now accounts for 35 per cent of the firm, generating £450m of revenues in the past financial year. Germany accounted for around 30 per cent of total revenue last year, Asia for 10 per cent and the US 5 per cent.