A global profitability drive by Freshfields Bruckhaus Deringer is putting its smaller practice groups such as IP and employment “at risk” and leading to larger numbers of equity partners relegated to the “second tier” of its lockstep, according to insiders.
Managing partner David Aitman created a second tier lockstep ladder running from 10 to 30 points to sit alongside the standard 17.5 to 50 point lockstep in 2013.
Only a “very small percentage” of underperforming partners were brought down to the lesser lockstep, said a source, though added this number has increased dramatically in the last year.
One partner said the news was “all part of the strategy of competing with US firms” and added “more partners in Continental Europe and the US” will be affected by the second-tier push.
“Freshfields is gearing up for increasing profitability out of the US, which has been relatively weak in the past. This is definitely not just specific to London,” said a source.
The profit pressure put on partners is already understood to have impacted the firm’s IP practice, which was split into the corporate and litigation teams in 2015.
One source said the employment team is the next practice to “feel the pressure” of what has been previously deemed an “administrative reorganisation” of the practice groups.
Freshfields’ German offering has also faced cuts this year as the firm revealed it was consolidating its Cologne and Düsseldorf offices late last year.
A greater percentage of the equity relegated to the reduced points lockstep system could lead to exits from the firm in the UK and Europe, said one former partner.
Freshfields has already witnessed a number of exits since it launched the profitability drive including telecoms, media and technology co-head Frank Miller who left for Shearman & Sterling and financial restructuring partner Ian Wallace, now at White & Case.
One partner said a 30-point lockstep at Freshfields “is still nothing to be sniffed at”, though added it was a “bit rich to put increasing numbers of partners into tier two after breaking lockstep for people like Ward McKimm”.
Freshfields increased its lockstep ladder last June to attract high yield star McKimm from Kirkland & Ellis in London.
The hire was understood to result in McKimm being paid up to £1m more than the current top of equity (£1.63m) offered to UK partners.
The firm has previously broken its lockstep on just one occasion, to hire Fried Frank Harris Shriver & Jacobson capital markets partner Valerie Ford Jacob in New York in late 2014, The Lawyer understands.