By Aled Griffiths
Germans provide salutary lesson of how to do business in a downturn
12 October 2009
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12 May 2008
Despite German lawyers’ fears about how their businesses might be affected by the recession, the overall picture is one of robustly managed firms that have learnt how to do business during a downturn, a 2009 survey by German legal magazine Juve has shown.
That said, the picture is made more complicated by the leading practices having different financial years. The offices of UK law firms suffered badly due to their May to April business year, losing on average 8 per cent of revenue over the year. While Ashurst, Clifford Chance and SJ Berwin faced the full brunt of the recession, the US and German firms with January to December business years had half a year of good business before the deals dried up.
But even the German-based partners at UK firms saw a year that was for the most part less dramatic than for those at the London offices. Nearly all of the UK firms were in fact bolstered by German practices less reliant on financial institutions and based more broadly in the industrial economy. Add to that the strength of the euro and German lawyers are walking a lot taller when they visit their London cousins than they were a few years ago.
Linklaters’ turnover dipped due to it disposing of its relatively large Cologne office, but revenue per lawyer (RPL) stayed relatively steady at e642,000 (£592,300), which is still almost 10 per cent more than the firm’s worldwide average. Freshfields Germany brings in 15 per cent more per lawyer than its worldwide average, and that after a year when the German RPL was 8 per cent less than last year’s.
But the top performer in the German market was undoubtedly Shearman & Sterling, which broke the e1m RPL mark for the first time. Shorn of its less broad-based Mannheim office, the corporate team around Georg Thoma continued to bring in major deals, such as the sale of Dresdner Bank by insurance group Allianz. It even managed to increase its turnover figure with fewer personnel, with the younger generation around worldwide corporate co-head Harald Selzner coming into its own. Selzner himself advised the German government on the rescue of car manufacturer Opel.
It was ex-Shearman lawyer Rolf Koerfer who also helped Allen & Overy (A&O) to achieve strong figures. A&O was the only UK firm to post strongly improved results - a 16.2 per cent rise in RPL, taking the figure to just over e700,000. By contrast, Freshfields’ RPL fell by 8 per cent and Clifford Chance’s by 12 per cent.
This means that, for the first time in history, A&O is in spitting distance of Freshfields in RPL terms, although A&O was helped in 2008-09 by Koerfer’s role in Schaeffler’s hostile takeover of Continental. Koerfer has now left A&O to return to Oppenhoff & Partner, the Linklaters spin-off in Cologne. But A&O still has the biggest finance practice in Frankfurt and, with Neil Weiand, it has one of the premier debt finance stars in the market, who will continue to work on the Schaeffler-Continental refinancing.
Herbert Smith alliance firm Gleiss Lutz is nowadays a corporate-driven, full-service firm, but remains broad-based enough to be well-hedged for a recession. The firm’s 15 per cent rise in turnover was a particularly strong result, coming on the back of heavy investment in graduates. The traditionally conservatively managed firm has seen its leverage increase by 17 per cent over the past year. No other leading firm (other than Shearman due to the loss of partner-heavy practices) can come anywhere near that.
With a revenue per equity partner figure of just short of e2m and a miserly cost base (in a good year it hovers around 40 per cent), that means healthy profits for
The best-known independent German firm, Hengeler Mueller, had a more difficult year, with turnover and RPL stagnating. Although it has now overtaken Clifford Chance to become the second-highest-grossing firm in Germany, there is speculation that it will be difficult for Hengeler to improve productivity.
That said, the firm retains a chronically under-estimated partnership. Some partners admit that they were concerned about the firm’s market position at the beginning of 2009, not least since its eternal benchmark rival Freshfields seemed to be hogging all the best deals. But, unnoticed by most competitors, and in stark contrast to its best friend Slaughter and May, Hengeler has built up a large financing practice over the past few years, and with Johannes Tieves it has one of the most active finance lawyers in the market.
Aled Griffiths is editorial director at Juve