Freshfields: Kings of Europe

Freshfields Bruckhaus Deringer

has come out top of the first ever financial survey of European law firms.

The Lawyer Euro100, to be published in full next month, reveals that Clifford Chance has been knocked off the top of a revenues table for the first time in four years.

Of Freshfields’ total global turnover of £800m, 91 per cent, or £730m, is generated from its European businesses. Clifford Chance, with more substantial operations in the US, turned over £681m – 70 per cent of its global figure of £978m.

Freshfields’ strong position in The Lawyer Euro100 is largely attributable to its 2001 merger with Bruckhaus Westrick Heller Lober, which delivered it critical mass in the most important jurisdiction on the Continent.

For outgoing chief executive Alan Peck, Freshfields’ German mergers – first with Cologne firm Deringer Tessin and then with the giant Bruckhaus – were his biggest achievements.

“Germany was such a bloody great headache in 1996,” he said, “but we had to be there and had to be good there. We’ve been lucky, or clever, with the deals we’ve done.”

In 2002-03, Freshfields’ global turnover was up 8 per cent to £800m, and much of that was powered by its European business. The Freshfields merger with Bruckhaus Westrick Heller Lober in 2000 was a real merger of equals, as last year’s financials showed.

Germany pulled off an astonishingly good performance: total revenue in London was £330m, while Germany turned over some £230m. (It should be noted that this German revenue is legacy Bruckhaus and also includes Austria and Central Europe, which accounts for some £25m.) Uniquely among Anglo-German firms, profitability and turnover in the key area of corporate was virtually identical in London and Germany for 2002-03, with both generating some £110m in fees.

Although the UK firms dominate The Lawyer Euro100 in revenues (see table on pages 4 and 5), the results demonstrate just how much progress the US firms have made. No fewer than nine US-heritage firms make it into the top 50. (For ease of reference, those firms with historical headquarters or the majority of their business in the US are classified as US firms for our tables.)

Weil Gotshal & Manges has been a massive success story. Its turnover in Europe has leapt over the last two years. In 2002, much of the growth came from London, where turnover jumped 15.9 per cent. In 2003, growth was fuelled by the Continent; it merged with Paris M&A boutique Serra Leavy & Cazals and overall turnover in Europe rose to £84m.

But it is not just the Weil Gotshals and the Shearman & Sterlings that are thriving in Europe. Sidley Austin Brown & Wood has achieved its placing – 90 in the table but eighth in revenue per lawyer (RPL) – almost entirely through its London office; its fledgling outposts in Brussels and Geneva barely contributed to the top line in 2003.

Two more unfashionable US firms also make it into the list: McDermott Will & Emery (£34m) and Hogan & Hartson (£36.4m).
They pipped firms such as Gibson Dunn & Crutcher (£24.2m), Covington & Burling (£19m) and Milbank Tweed Hadley & McCloy (£20m), to name but three examples. Furthermore, McDermott’s figures will be considerably higher next year following its merger with Carnelutti.

The RPL table shows the extent of US penetration of the top end of the market. Never before has there been so much documentary evidence showing that, while the UK firms take the prize for volume, the US firms take the prize for value. Those figures show starkly that Skadden Arps Slate Meagher & Flom and Sullivan & Cromwell really have converted those M&A deals tables placings into cash, with the highest RPL in Europe, at £562,000 and £523,000 respectively. Only Hengeler Mueller and Slaughter and May come close. (Gleiss Lutz’s high RPL figure is partly attributable to its very low leverage.)

This does not tell the whole story. The Lawyer Euro100 does not include French M&A boutique Bredin Prat, for example, which turned over £26.2m last year with RPL at £452,000.

Profitability can easily be manipulated by cutting the number of equity partners. We doubt that any reader of The Lawyer will be surprised to see three Italian firms – Gianni Origoni Grippo & Partners, Bonelli Erede Pappalardo and Studio Legale Chiomenti – heading the table of profitability given the leverage ratios in Italy.
That profits figure is only an average; the name partners in these corporate boutiques are understood to earn more than five times the average that The Lawyer Euro100 has printed. Add to that the fact that some of Europe’s biggest deals were in Italy last year, and there is no doubt that Bonelli Erede, Gianni Origoni and Chiomenti had bumper years.

Figures taken from most recent financial year. US and Continental firms tend to have calendar years; UK firms May-April. Flags on pages 4-5 denote country of origin or dominant revenue centre. German figures partly sourced with thanks to Juve.

Ranked by revenue per lawyer
Firm Euro RPL (£K)
1 Skadden Arps 562
2 Sullivan & Cromwell 523
3 Hengeler Mueller 520
4 Slaughter and May 510
5 Gleiss Lutz 489
6 Freshfields 482
7 Sidley Austin Brown & Wood 381
8= Linklaters 371
8= Shearman & Sterling 371
10= Macfarlanes 367
10= CMS Cameron McKenna 367
12 Allen & Overy 366
13 Watson Farley & Williams 352
14= Weil Gotshal & Manges 350
14= SJ Berwin 350
16 Haarmann Hemmelrath 347
17 Clifford Chance 339
18 Lovells 326
19 Dewey Ballantine 321
20 Ashurst 318

Ranked by profits per equity partner
Firm Global PEP (£K)
1 Gianni Origoni 1,400
2 Bonelli Erede 1,050
3 Chiomenti 1,050
4 Sullivan & Cromwell 1,010
5 Skadden Arps 898
6 Cleary Gottlieb 849
7 Weil Gotshal & Manges 840
8 Hengeler Mueller 834
9 Slaughter and May 819
10 Macfarlanes 773
11 Shearman & Sterling 767
12 Herbert Smith 748
13 Linklaters 734
14 Latham & Watkins 716
15 Freshfields 700
16 Allen & Overy 675
17 Dewey Ballantine 655
18 Clifford Chance 644
19 Lovells 644
20 McDermott Will & Emery 621

Ranked by revenue per partner
Firm Euro rpp (£K)
1 Skadden Arps 3.15
2 Sullivan & Cromwell 2.20
3 Slaughter and May 2.06
4 Chiomenti 2.05
5 Allen & Overy 1.68
6= Freshfields 1.64
6= Shearman & Sterling 1.64
8= Linklaters 1.55
8= Dewey Ballantine 1.55
10 Weil Gotshal & Manges 1.53
11= Cleary Gottlieb 1.50
11= Loyens & Loeff 1.50
13= Clifford Chance 1.47
13= Hengeler Mueller 1.47
15 Ashurst 1.39
16 Herbert Smith 1.28
17 Gianni Origoni 1.27
18 Landwell France 1.25
19 Baker & McKenzie 1.24
20 Bonelli Erede 1.23