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Will the champagne corks pop today at Freshfields when it's confirmed as the world's most profitable firm? Probably not.
There's no doubt that making £432m profit is a good result in anyone's book, but deeper digging reveals a few things. As Jomati's Tony Williams puts it: "The figures suggest Freshfields hasn't got its gearing model right."
In other words, the figures published today in The Lawyer Global 100 underline why Freshfields has launched its radical restructuring to oust up to 50 underperforming partners from the equity.
But that's not to underplay an outstanding result. Three core factors contributed to its success. Its obvious corporate muscle means it was always going to make a bundle in the current climate. And geography has played a part too. Freshfields' Spanish and German offices in particular have had strong years, while the latter's gearing, with a substantially lower partner-to-associate ratio than the market average married to a highly remunerative practice, actually lends itself to a high profit margin.
But the primary reason Freshfields beat every firm in the world on pure profit is because it has more equity partners than any other firm (well, apart from Baker & McKenzie, but as we all know Bakers the franchise is a law unto itself).
Last year Freshfields had a whopping 521 equity partners. Next year, as we reported last week (23 October), that figure is likely to be considerably lower. The firm is looking to chop up to 50 partners from the equity and this should have a dramatic effect on the firm's position in the PEP table.
A Freshfields insider confirmed that the market would see "a bit of a change in the mix" over the next year as increasing numbers of lawyers are paid salaries rather than being remunerated out of the profit pool. "It will change the metrics," he added, "but we'd still expect a strong gross margin."
Freshfields is not about to turn itself into DLA Piper overnight. Even if it chopped all 50 partners, it would still be 90 per cent equity. Compare that with DLA Piper's 29 per cent.
Freshfields will also be keen to hang on to its healthy profit margin ranking. Last year it was fifth in the world with 49 per cent. It's expecting a drop, but to no more than 40 per cent. Which, coincidentally, would be the same as Linklaters'.