Herbert Smith

UK 200 RESULTS 2010

Herbert Smith was one of only three firms in the UK top 10 to report an increase in turnover in 2009-10, albeit the rise was a modest 1.3 per cent to £449.9m.

It also recovered from a disappointing 21 per cent slump in net profit in 2008-09 to post a 1.3 per cent rise to £117.2m, while average profit per equity partner (PEP) also rose, by 2 per cent, from £845,000 to £862,000.

The firm continues to maintain an unrivalled reputation for litigation – it was named Litigation Team of the Year for the second year running at The Lawyer Awards 2010 – yet corporate remains its highest-earning practice. It brought in £199.8m in turnover last year, although that figure was down slightly on the previous year’s £202m.

While the UK makes up 62 per cent of total turnover, much of the firm’s investment has been

in its overseas operations, strengthening offices in Moscow, Hong Kong, Dubai and Spain. The ­majority of the redundancies at Herbies came in 2008-09, when 84 staff were let go in London. The firm avoided making similar cuts this time.

Finance is now the fastest-growing area in the firm and its strategy of targeting major banks is paying off. It is now on the panels of RBS, Lloyds Banking Group and BNP Paribas. It has also seen a high volume of restructuring work, including the Oilexco North Sea insolvency and the Yell ­restructuring project.

Strengths
Litigation was up by 10 per cent on last year, accounting for some £171m of fee income. Herbert Smith has worked on some of the biggest deals around, including transport group Arriva’s prospective takeover by Deutsche Bahn. It also represented the underwriters on Prudential’s cancelled $21bn (£13.44bn) rights issue as part of its ultimately failed

bid to acquire American International Group’s Asian insurance arm AIA.

Weaknesses

Herbies suffered a series of defections from its Paris office during the year, including that of international banking and finance head Georges Dirani, who left to become general counsel at BNP Paribas. This trend needs to be addressed

UK 200 RESULTS 2009

After years of being one of the most London-centric of all the City majors, Herbert Smith has more recently been seeing the wisdom of going international.

At the six-month stage of the 2008-09 financial year the firm was up 10 per cent in revenue, but the second half of the financial year during the depth of the global financial crisis was saved by a strong performance from Herbert Smith’s overseas offices. It was also helped, of course, by the exchange rate.

In the end worldwide billings reached £444.03m, a 5 per cent increase from the previous year’s £421.8m.

London remained the biggest generator of revenue by some way, although UK income dipped from £326.47m to £305.76m.

Even Herbert Smith’s legendary litigation practice – which won Litigation Team of the Year at The Lawyer Awards for its work on the mega-case that was Buncefield – did not manage to overtake corporate. Litigation brought in £161m, up from £152m while corporate was up from £186m to £202m – an astonishingly strong rise in a year where most firms saw their corporate revenues plummet.

Overseas figures were boosted by the exchange rate, but nevertheless showed healthy increases. Asia generated £67m, up 31 per cent from last year’s figure of £51.04m. Europe – including Russia – also recorded a significant rise in revenue, from £39.22m to £58m, although at 130 lawyers, Paris is the most dominant international office. Moscow has doubled in size in two years.

On this showing, and with further integration with alliance firms Gleiss Lutz and Stibbe stalling, it is small wonder that Herbert Smith continued to invest in its overseas practice. It has since launched in Spain, a key European market where it had hitherto stalled. But with no hopes of firming up any kind of alliance with Cuatrecasas, and perhaps emboldened by its belated success in Russia and Asia, Herbert Smith this year decided to go it alone in Spain.

Total net profit was down 21 per cent per cent from £147.2m to £115.7m. However, margin dropped and with slightly fewer equity partners – 137 compared with the previous year’s 142 – average profit per equity partner dropped 18.4 per cent from £1.036m to £845,000, in the lower end of a £806,000 to £916,000 prediction given by the firm at the beginning of the financial reporting season.

Although Herbies made 84 redundancies in London, the year-end headcount figure rose from 2,235 staff to 2,433, with the total number of fee-earners rising from 1,324 to 1,398. This was partly because the end of the past financial year for Herbert Smith was in March 2008 (the firm has since changed its year-end to April), when the firm was still recruiting.

The 85 total redundancies – all in London – addressed the dive in attrition rates, but the figures demonstrate that Herbert Smith is still growing, outside London, at least. Much of the growth was in Moscow, as previously stated, and particularly in the Middle East; the latter has doubled in revenues.