Freshfields Bruckhaus Deringer PEP surges 39 per cent
Freshfields Bruckhaus Deringer PEP surges 39 per cent" />Freshfields Bruckhaus Deringer has seen a 39 per cent rocket in average profit per equity partner (PEP), with partners now taking home an average of £1.44m. Total turnover has jumped 19.5 per cent, to hit £1.18bn.
While the magic circle firm broke the £1m PEP barrier in the 2006-07 financial year, hitting £1.03m, this is the first time its turnover has breached the £1bn mark. Last year turnover stood at £986m at the end of April.
Freshfields chief executive Ted Burke said the strong performance was driven largely by strength in Freshfields’ emerging markets offices.
He added: “We have been fortunate to have worked on many great projects for our clients over the last year or so and have benefited, until recently, from strong markets.”
However Burke warned that expectations for the coming year are that performance will drop off.
“Law firms tend to lag behind the broader markets and a significant part of our results are attributable to the robust business environment of the first half of 2007,” he admitted.
“The current market challenges are affecting us all, and we will continue to stay close to our clients as we navigate our way through the next period.”
Freshfields is the second magic circle firm to announce its financial results for the year to the end of April. Last week Clifford Chance announced an 11 per cent turnover increase and 13 per cent rise in PEP, bringing the figures to £1.33bn and £1.15m respectively (The Lawyer, 29 May 2008).
For more on Freshfields' results and those of other top firms, see our Top of the PEPs 2008 blog here
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Readers' comments (11)
City partner | 2-Jun-2008 3:16 pm
Freshfields PEP
Call me a cynic, but has the fact that Freshfields PEP has gone up 39 per cent got anything to with getting rid of 100 equity partners?
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Anonymous | 2-Jun-2008 3:26 pm
Remember...
...that if you take the exchange rate from last year, then the percentage increase on turnover is only around 9-10 %.
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Anonymous | 2-Jun-2008 3:59 pm
Freshfields
Very impressive results, especially when you consider that Freshfields don't massage their numbers by making a huge chunk of their partnership non-equity like some of the other usual suspects (Herbert Smith and CC being the worst offenders!).
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Interested Party | 2-Jun-2008 4:15 pm
Cynic or not
Of course the cut in equity partners has had an effect, and this argument would be very valid if the percentage was high but the PEP figure low. What's more, the profit margin is much more impressive than that at CC. I don't think any City partner could deny that a PEP of 1.4 million is pretty impressive.
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Anonymous | 2-Jun-2008 4:45 pm
Exchange rate complications
These numbers are seriously tricksy given the drop of sterling against the euro and FBD's proportionately much higher relative euro income than, say, CC due to its size in Germany.
An 'average' German partner would have taken home €1.514m last year at the then prevailing exchange rate. This year he will take home €1.800m. That's an 18% increase. That is not to be sniffed at but it is a lot lower than 40%!
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City partner | 2-Jun-2008 5:10 pm
average and top equity
Although exchange rates have made a big difference the key factor is keeping equity tight. Freshfields has made far too few partners up over the last few years as well as shedding large numbers. This is a difficult model to sustain. When more of the numbers come out ,compare the top of the equity with the average and you will see a smaller difference for Freshfields than other magic circle firms. This points to problems ahead.
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Anonymous | 3-Jun-2008 9:54 am
Flawed figures - why not standardise them?
Would it be too much to ask for the ridiculous figure of profits per equity partner to be done away with? The discussion on this board shows just how utterly meaningless such a figure is.
Any firm can boost their PEP simply by de-equitising hordes of partners or making up lots but leaving them salaried. If you're going to bother having a one-stop figure for comparison purposes, you may as well have revenue per partner (which was the direction you very sensibly started moving in last year).
Unless you have a standardised measure which actually shows how much business each partner has brought in, you might as well not bother. If someone is a partner, they should be included in the firm's headline figures. If the law firms aren't prepared to do that themselves, perhaps the legal press should?
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US Associate | 3-Jun-2008 10:03 am
Don't be green
Freshfields may well have reduced the number of partners, but it still has a leverage of 4:1, that is twice, e.g., Herbert Smith, which is more like 8:1 and better than most if not all of the top UK firms. Therefore there are no tricks here, just one hell of a profit-making powerhouse.
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John Bull | 3-Jun-2008 10:35 am
Britannien uber alles!
Regardless of discussion of exchange rates and de-equitised partners, the fact remains that for Freshfields' remaining partners, that's one mighty PEP, beating the likes of Davis Polk, Debevoise, Kirkland, Latham, Skadden and Weil as well as most City or German competition. In your face Uncle Sam!
But at risk of sounding crass(er), what I really want to know is whether partners at Britain's Slaughter and May are going to beat those at America's Wachtell Lipton Rosen & Katz. Patriotism takes varied and strange forms...
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The apprentice | 3-Jun-2008 3:26 pm
Partners make the money
So to recap, the partners are making nigh on £1.5m, but they had to sack hundreds of support staff as an economy measure. And will the partners will be handing out a big bonus to the workers?
No, I thought not.
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